Legislature(1999 - 2000)
05/12/1999 02:42 PM JUD
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
SB 163-TRUSTS AND TRUSTEES STEVE NOYE, Director of, and lobbyist for, the Alaska Trust Company, made the following comments. SB 163 contains corrections to the Alaska Trust Act. Most of the corrections have been taken from the Uniform Trust Act, and deal with modification and termination of trusts. The issue of most concern to committee members is the requirement to inform beneficiaries of the trust's registration. The Uniform Trust Act addresses that issue by stating "the result of this limitation is that the information need not be furnished to beneficiaries with remote, remainder interests." That is why the term "current beneficiaries" was used to distinguish that beneficiaries who are immediately to receive funds must be notified. Beneficiaries with remote, remainder interests are any people that may receive funds in the future, i.e. children, grandchildren, great-grandchildren. If minors were required to be informed, the court could appoint a guardian ad litem to represent the minor for up to 21 years, at the expense of the trust. SENATOR DONLEY noted he disagrees with the concept that the requirement to notify future beneficiaries of trusts should be eliminated. He said he believes they deserve to be notified unless they are specifically excluded from notification in the trust document. Number 065 MR. NOYE said to Senator Donley the crux of the matter is how a trustee could go about notifying people who have not yet been born. SENATOR DONLEY remarked SB 163 changes current law which has been in existence for quite awhile. He asked when it was last changed. MR. NOYE said the law has not been changed, however when the Legislature enacted the Alaska Trust Act, the lifetime of a trust was affected by the elimination of the rule against perpetuities, which, in Alaska, was 90 years. CHAIRMAN TAYLOR clarified that under the old Alaska Trust Act, the trustee had to locate beneficiaries because it applied to 90 years plus lives in being. The grantor had to specify who those lives in being were to make the trust valid or it would fail in less time. Usually, a grantor would name the youngest grandchild to maximize the trust's duration; the trust could exist for 90 years after the youngest grandchild's death. Now, with the abolishment of the rule against perpetuities, the trust can last forever. SENATOR DONLEY noted he has no problem with SB 162, SB 165 and SB 166, but his concerns about SB 163 remain. He suggested putting SB 163 aside. CHAIRMAN TAYLOR agreed and announced SB 162 to be up for discussion. He informed committee members a proposed committee substitute had been prepared and explained the changes as follows. On page 2, language on lines 22-25 was rewritten for the purpose of clarification. SENATOR ELLIS moved to adopt the proposed committee substitute (work draft Bannister, 5/12/99) as the working document of the committee. There being no objection, the motion carried. Number 135 RICH HOMPESCH, a Fairbanks attorney, explained the language on page 2, which also appears on page 3, lines 1-3, was rewritten because it said, "a general power of appointment is invalid unless...." The new language clarifies that under existing law, powers of appointment that were created after January 1, 1996, up until the passage of this bill, cannot be changed. CHAIRMAN TAYLOR noted that provision applies to the window of opportunity in which trusts were created during that time period. MR. HOMPESCH indicated the same change appears on page 2, lines 12- 13. SENATOR DONLEY asked for a brief description of the contents of CSSB 162(JUD). MR. HOMPESCH stated prior to the Alaska Trust Act, Alaska law limited the duration of a trust to a life in being plus 21 years, which was eventually changed to 90 years. The Alaska Trust Act provides that if a trustee pays the income or principal to a living person when the trust is created, the duration can be forever. This bill eliminates the requirement that the income or principal be paid out to a living person when the trust is created before the trust can be perpetual so that charitable lead trusts, in which the income of the trust is paid to a charitable organization rather than a live person, can exist in perpetuity. Number 197 SENATOR ELLIS moved CSSB 162(JUD) from committee with individual recommendations. There being no objection, the motion carried.