Legislature(1999 - 2000)
03/06/2000 01:56 PM JUD
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
SB 163-TRUSTS AND TRUSTEES CHAIRMAN TAYLOR asked if SB 163 effects the ability of a beneficiary from finding out about their interest. MR. DOUGLAS BLATTMACHR, Alaska Trust Company, explained that SB 163 allows the settlor to decide if they would like to limit notice to beneficiaries who are not entitled to a distribution or who have not received a distribution for a period of time no longer than [indisc] after their death or after becoming incapacitated. This was done because a number of people who are setting up trusts are doing them early in time because of the special advantages they provide, and they do not want their young children to know they are a beneficiary of trust. MR. BLATTMACHR commented Alaska is unique in that it requires the trustee to notify beneficiaries when a trust is set up. This bill still provides the notification requirement if the grantor or settlor does not ask to hold off for a period of time. After the settlor dies or becomes incapacitated, the trustee has to notify the beneficiaries. Beneficiaries have to be notified if they receive a distribution or are entitled to a distribution. This bill is only for a beneficiary not receiving a distribution or not currently receiving a distribution. CHAIRMAN TAYLOR asked where in the bill is it provided that the limiting factor is disability or death of the grantor or principal of the trust and what is the trigger for notification? MR. BLATTMACHR stated in section 1, subsection (b) the language says: The exemption may not exceed in duration the shorter of the settlor's lifetime or a judicial determination of the settlor's incapacity. This gives the settlor some privacy while letting him take advantage of the tax laws and benefits. CHAIRMAN TAYLOR asked if there is anything else in the legislation that precludes notification to a vested beneficiary. MR. BLATTMACHR responded no, if a person is a vested beneficiary receiving distributions or is entitled to a mandatory distribution of income on an annual basis, they have to be notified. Number 1439 SENATOR DONLEY asked Mr. Blattmachr to elaborate on his last response commenting that even if an individual is not entitled to an annual distribution or guaranteed a final distribution, if the settlor dies or there is a judicial determination of incapacity-- notice is required. MR. BLATTMACHR responded yes, even if the grantor said "don't notify my beneficiaries," if a beneficiary received a distribution or if the trust said a distribution had to be made on an annual basis, the beneficiary would still have to be notified at that time. SENATOR DONLEY stated his concern is that once the settlor's lifetime has ended or there is a judicial determination of the settlor's incapacity, that even if the settlor specifically asked that the beneficiary not be notified, the law still requires the beneficiary be notified. MR. BLATTMACHR responded that is correct. CHAIRMAN TAYLOR clarified further that even if the document says to never notify the beneficiary, even after they are dead, the beneficiary will still be notified. MR. BLATTMACHR said they are bound by the original statute to notify beneficiaries. No notification can only be granted during the lifetime of the grantor, notification is automatic after a death. SENATOR DONLEY asked for Mr. Blattmachr to elaborate on the rest of the bill. Number 1275 MR. BLATTMACHR indicated the bill allows for judicial modification of trusts if the original intent of the trust cannot be accomplished or if tax laws change so they are able to either terminate or modify the document. This allows the beneficiary to go to court and say this trust no longer accomplishes the purpose that was set forth or it does not accomplish the tax purpose because of a change in law, allowing the judge to either modify or terminate the document. MR. DICK THWAITES, Alaska Trust Company, stated there is one other change in CSSB 163, section 2 that says, or by a written document after the trust is created, that some people in the trust industry are concerned about. Individuals that are appointed as trustees for their "good friend" very often do not know of the requirement to notify the trustees. It is thought that a written document, after the trust is created, should be sufficient notice to defer the notification requirement until death or legal determination of incapacity so that when the grantor dies, whether or not there is a determination or notice, the corporate trustee must notify the beneficiaries of their present or future interest. CHAIRMAN TAYLOR asked if this is just to confirm the requirement for existing trusts. MR. THWAITES responded yes, the language was added because it is thought to be an oversight. It is suspected that more than half of the trusts in Alaska exist with non-professional trustees who are not notifying beneficiaries--this needs to be clarified. CHAIRMAN TAYLOR noted the clarification is that someone will notify people at some point. MR THWAITES stated it permits the person creating the trust to have protection while leaving the basic statute in tact, which is that notification must be given in all cases except where this specific limited circumstance arises. Number 1121 SENATOR DONLEY expressed his concern with the language in section 2 that reads: or by a written document after the trust is created, relieve the trustee from the duty to provide notification or information to a beneficiary in accordance with AS 13.36.080(b). MR. THWAITES stated that AS 13.36.080(b) is limited to the trustor's lifetime or his judicial incompetency. SENATOR DONLEY noted that the language in AS 13.36.080(b), in accordance, could be interpreted as relief from the requirements of notification. The language should clearly state that a person has to comply with the requirements. CHAIRMAN TAYLOR suggested the words in accordance with should be replaced with subject to. SENATOR DONLEY moved to replace the wording in section 2, line 12, in accordance with to subject to. There being no objection, the motion carried. SENATOR DONLEY moved CSSB 163 as amended from committee with individual recommendations. There being no objections, the motion carried.