Legislature(1999 - 2000)

05/12/1999 02:42 PM JUD

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
txt
                   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.                                                                 

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