Legislature(2001 - 2002)

03/19/2001 01:44 PM JUD

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                  HB 34-RULE AGAINST PERPETUITIES                                                                           
REPRESENTATIVE  LESIL MCGRUIRE,  sponsor  of HB 34:   Thank you  Mr.                                                            
Chairman,  members of  the committee.   Appreciate  your taking  the                                                            
time  to hear  this in  such a  timely manner.    Briefly, a  little                                                            
background  that I'm  sure most  of you  are aware  of.  Alaska  has                                                            
become  one of the  most forward  thinking trust  states.  Our  1997                                                            
trust  act, which  many of  you here  in this  room participated  in                                                            
drafting,  has  placed  us  right  beside Delaware   as one  of  the                                                            
premiere states  to invest in trusts.  In light of  that fact, those                                                            
laws need  to be carefully  scrutinized and  revised as changes  are                                                            
made,  primarily  through  court  interpretations  of  laws.    What                                                            
happened is that  the original trust act was drafted  with sort of a                                                            
broad brush and  the basic idea was to create a trust  industry here                                                            
in the state of  Alaska.  The sideboards put on it  were that it had                                                            
to be an Alaska  trust company, and  accordingly Alaskan  jobs would                                                            
be created.  Those  corporations obviously pay corporate  income tax                                                            
and property  tax.  But there  were a few  areas that the  specifics                                                            
fell by the way side.                                                                                                           
Last  year, your  body  passed on  to  us SB  162, which  the  house                                                            
concurred with  and was signed by the governor, which  addressed the                                                            
first deficiency  that was discovered.  That deficiency  essentially                                                            
was that  there was  a tax  consequence  when you wanted  to give  a                                                            
special power  of appointment if you  wanted to use a special  power                                                            
of appointment to create  a successive special power of appointment.                                                            
It sounds  like  rather technical  language  and it  is but it's  an                                                            
important  distinction  that  needed  to  be made  in  our  statutes                                                            
because the  consequences  would have been  rather dramatic  had our                                                            
court  interpreted  our law.   It  created a  problem  known as  the                                                            
Delaware Tax Trap,  and if you notice in your bill  packet, there is                                                            
an article  on that Delaware  Tax Trap.   But essentially it's  this                                                            
notion that if  you use that special power of appointment  to create                                                            
a  successive  power of  appointment  there  will be  immediate  tax                                                            
consequence  in the form  of an estate tax  from the federal  level.                                                            
Clearly  that was  not the  intent of  this legislature  in  passing                                                            
that, and  it was an oversight  in very technical  language.   So SB
162 was  supported unanimously  in both bodies  and by the  governor                                                            
and passed on.                                                                                                                  
The bill that  is before you today,  HB 34, is an effort  to correct                                                            
another technical  problem that was  discovered in the bill.   And I                                                            
think one of  the best ways that I  could explain it would  be, it's                                                            
the statute as  it reads, describes 'fruit.'  If a  court were to go                                                            
in and discuss  apples versus oranges, and specifics  about oranges,                                                            
there may be a  problem.  In other words, again, too  big of a brush                                                            
stroke  was  used   in  creating  this  particular   section  and  a                                                            
distinction  wasn't  fettered  out  between  presently  exercisable                                                             
general powers  and those  of testamentary  general powers.   As you                                                            
well know,  all three of you, presently  exercisable general  powers                                                            
are those  that  can be exercised  within  your life  time -  inter-                                                            
vivous - and testamentary  general powers are only those powers that                                                            
can be exercised  upon your death through your will.   The bill that                                                            
I have before you doesn't  change any policy; the policy has already                                                            
been adopted  and enacted  by the legislature.   What it does  is it                                                            
cleans  up the language  to effectuate  the  purpose that's  already                                                            
been passed.   And in doing that,  it looks at the distinction  that                                                            
courts have  made between presently  exercisable general  powers and                                                            
testamentary  general powers.   And  what it does,  is it says  that                                                            
they  vest at  different  points  in time  based  on how  the  court                                                            
interprets  them.  A presently exercisable  general power  is viewed                                                            
as complete  ownership and therefore  it's viewed as vesting  at the                                                            
time of its creation.   So the first part of the bill makes it clear                                                            
that,  yes it  will  vest,  and it  will  vest at  the  time of  the                                                            
creation  of the  new  appointment  power  and that's  according  to                                                            
everything  that we have learned from  the way the courts  interpret                                                            
it, but we're  going to assign it  a period of 1,000 years.   So for                                                            
all intensive  purposes it  will continue on  into perpetuity.   For                                                            
all intensive  purposes it abolishes the rule against  perpetuities,                                                            
a 1,000  years  is a  long time.   But  it creates  a very  specific                                                            
vesting point.   Contrasted with section  (c), which states  that if                                                            
it's  a testamentary  power  of  appointment  or a  successive  non-                                                            
general  power that it  will vest,  but it will  go back to,  it's a                                                            
relation-back  concept,  it will  go  back to  the creation  of  the                                                            
original  document,  and the  vesting period  will then  be a  1,000                                                            
years from  that point.   It sounds really  complicated but  I think                                                            
you all understand it very  well and certainly had an opportunity to                                                            
look at  SB 162 last year,  which got at  the original problem,  the                                                            
original  Delaware Tax  Trap  problem, and  this is  just a  further                                                            
effort  to ensure  that we  don't create  tax consequences  for  the                                                            
trusts that  have been created to  avoid them.  And with  that, I'll                                                            
take any questions.                                                                                                             
Number 487                                                                                                                      
SENATOR COWDERY:   On the top of page  3, where it starts  'at least                                                            
30  years' and  there's  some other  things  - on  page  2, can  you                                                            
explain that [indisc.] that's [indisc.] the purpose of that.                                                                    
REPRESENTATIVE  MCGUIRE:  Senator  Cowdery, top of page three,  line                                                            
SENATOR COWDERY:  Yeah.                                                                                                         
REPRESENTATIVE  MCGUIRE:  What that is actually, if  you look at it,                                                            
is clean-up language.   The second section, all of section three, is                                                            
legitimately clean-up  language and it was designed  to make it more                                                            
specific.   The  language  of, 'after  every  power,'  we added  'of                                                            
alienation'  even though it  could have been  implied that it  was a                                                            
power of alienation.  And  then at the point where we say 'after the                                                            
death  of the  individual alive  at the  time of  creation,'  that's                                                            
language  that is  actually pulled  from -  if you  look on page  2,                                                            
starting at line 13, that  language in section 1 is already there so                                                            
it's an effort  to put that language back into section  4 so that it                                                            
is very  clear.   All  of section  3 has  absolutely  no new  effect                                                            
whatsoever, it's  merely a matter of cleaning it up,  language wise,                                                            
so that it is  very clear about what power you're  talking about and                                                            
at what point that power will vest.                                                                                             
SENATOR COWDERY:  Thank you.                                                                                                    
Number 481                                                                                                                      
SENATOR THERRIAULT:  The  retroactive provision, April 22 - was that                                                            
the effective date of SB 162?                                                                                                   
REPRESENTATIVE  MCGUIRE:  Yes it is.  And to clarify,  obviously the                                                            
purpose  of that is  so that those  folks who  created trusts  won't                                                            
have unpleasant  consequences  if something is  ruled on so  it will                                                            
date back to our last year's bill.                                                                                              
Number 612                                                                                                                      
CHAIRMAN  TAYLOR:  Representative  McGuire  I really appreciate  you                                                            
bringing  this before us  because I started  this process with  this                                                            
committee  about five years  ago, I think.   And Representative  Joe                                                            
Ryan worked  with  us out of  the house  to bring  several of  these                                                            
pieces over  also.  I think we're  talking of at least six  or seven                                                            
bills.   And  our purpose,  as you  stated,  was to  make Alaska  an                                                            
attractive  state or venue  for the residents  of a trust.   And the                                                            
overall purpose  was not only to provide  people with that  benefit,                                                            
but to  enhance  those businesses  within  the state  that would  be                                                            
guiding and  directing those trusts.   My frustration has  been that                                                            
we have  seen  a small  amount of  investment occurring  within  the                                                            
state with  a couple of banks that  have worked hard at recruiting,                                                             
if you  will, people  to transfer  their trusts  into this state  so                                                            
those reserve  funds and other things - investment  portfolios would                                                            
be available  and  we would  have some  additional jobs  out of  it.                                                            
Tragically,  this   administration  has  failed  to   enforce  those                                                            
provisions  that are really left up  to the Department of  Commerce,                                                            
Banking  and Securities,  to enforce,  and  that as  far as I  know,                                                            
nobody has  been going in through  this administration and  actually                                                            
auditing some of these  financial institutions in the state that are                                                            
really very actively involved  in this process.  But all of the work                                                            
is being done  through their main  branch, which is located  in Iowa                                                            
or Kansas or some  darn place.  And we've seen hundreds  of millions                                                            
of dollars flowing into  those banks down there and bootstrapping it                                                            
off of banks  up here as  if they had a head  office up here.   They                                                            
don't.  I guess my only  inquiry was going to be to you, have you or                                                            
your staff had a chance to really look into that?                                                                               
REPRESENTATIVE  MCGUIRE:    Chairman  Taylor,  actually it's  not  a                                                            
problem  that  has  been  brought  to my  attention  prior  to  this                                                            
committee hearing.  But  it's certainly something that we could look                                                            
into.  Obviously  I'm aware of the true success stories  that Alaska                                                            
USA, credit union  trust companies, and the Key banks  and those, so                                                            
I wasn't  aware of that  problem but its  certainly something  I can                                                            
look into.                                                                                                                      
CHAIRMAN  TAYLOR:    Well  there  were  those  who  wished  to  take                                                            
advantage of the  law and - but to do it without locating  a primary                                                            
or a head  office in this  state, and without  any enforcement  from                                                            
banking  and securities,  under the  provisions that  we passed,  it                                                            
means  that  if you've  got  a large  multi-national  kind  of  bank                                                            
sitting  down south  someplace,  where you  write it  up as if  it's                                                            
going through  Alaska, and then you  can do all these transactions,                                                             
but the money  ends up lodged in your bank down there  and there are                                                            
no jobs or benefits that come up here out of it.                                                                                
I'm aware of the  success stories and I'm very pleased  that we were                                                            
able to do  this for the various banking  institutions.   In fact, I                                                            
was visited  while on the Kenai one  time by one of the top  bankers                                                            
on the World Bank  that happened to be there fishing,  and looked me                                                            
up  because  he  wanted  to  say  thanks  on  behalf  of  people  he                                                            
represented because of  the hundreds of millions of dollars they had                                                            
been able  to place  in trust within  the state  of Alaska.   He was                                                            
primarily working through  the National Bank of Alaska at that time.                                                            
But no, there  have been some real  successes here.  What  I foresee                                                            
is, probably  a constant  dribble  of, for the  next several  years,                                                            
clean-up  bills  like this  because  every time  the  tax courts  or                                                            
someone else makes a decision  interpreting one of these provisions,                                                            
then we  end up with whatever  the name of  the case is coming  down                                                            
the pike,  and then  we have to  rewrite our  legislation around  to                                                            
close off  a loop hole  that some  other court has  now found.   And                                                            
that's, I think, part of  the reason we're here today, is because of                                                            
that.  But  if you'd help  me a little bit  in looking into  some of                                                            
that stuff,  I'd sure  appreciate  it.  It  would be  nice to  get a                                                            
response  back from  banking and  securities and  also the  attorney                                                            
generals  office on  the enforcements  provisions  and what  they're                                                            
doing about them.                                                                                                               
I have  no other questions,  just wanted to  thank you for  bringing                                                            
the bill forward                                                                                                                
Number 898                                                                                                                      
SENATOR THERRIAULT:   Mr.  Chairman, just before  we take any  final                                                            
vote  on this,  I did  just  want to  disclose  that my  wife is  an                                                            
attorney.   She does  work in the  area of tax  avoidance and  trust                                                            
creation.  I have  no idea whether she has created  any trust within                                                            
this window that's  impacted by the retroactive section  of the bill                                                            
or not but I did just want to give a general disclosure on that.                                                                
CHAIRMAN  TAYLOR:     We  do  have  two  witnesses   to  testify  on                                                            
teleconference.   The first I turn  to is Dana Olson.  Ms.  Olson is                                                            
in Mat-Su.  Can you hear me Miss Olson.                                                                                         
MS. DANA OLSON:   Yea I can.  I wanted to come before  you today and                                                            
become more  educated, and  to get a better  understanding  how your                                                            
bill on rules  against perpetuities addresses property  and property                                                            
interests that  have been either futuristic  interests or  have been                                                            
considered  futuristic interests.   I've listened  with interest  so                                                            
far  but  you  really  haven't  mentioned   how  the  definition  of                                                            
alienation  would  effectively  relate  the  property  and  property                                                            
interests.  As  you know, property cannot be made  on a case-by-case                                                            
basis;  it has  to have some  definition  in order  to be  property.                                                            
Otherwise,  you are  simply eroding  our 14th  amendment right,  the                                                            
right to own  property.  I have a  couple of interesting  situations                                                            
concerning  futuristic  interests.    And  there  again I  lack  the                                                            
understanding of your bill  on how this will affect me.  One of them                                                            
- alienation  - there  is no definition  that I  could find  in your                                                            
bill on property  interests.  And it can be by affect,  I give you a                                                            
scenario  of a 1984  Chase Agricultural  Homestead  Lottery  whereby                                                            
effect I'm  being, my property is  being alienated by environmental                                                             
court precedent.   This court precedent  now is being considered  at                                                            
the SIP level of which  the petitioner wants to eliminate the effect                                                            
of the court  precedent and have a  SIP revision.  I have  a problem                                                            
with  that,  being  held  to a  standard  of  which  the  petitioner                                                            
established,  and  then  not providing  me  a  means to  be  treated                                                            
equally under  the law.  So I would have to ask that  this committee                                                            
consider  the effect and  perhaps maybe even  insert that the  Chase                                                            
Agricultural  Homestead  Lottery,  if the  petitioner  who sets  the                                                            
standard, is  going to want the standard  changed that we  have some                                                            
I have a problem with the  date, the retroactive date, because there                                                            
again, it appears  to be in the state's best interest  to change the                                                            
standard and there is no rationalization why I should be exempt.                                                                
I  want  to bring  up  also  RS  2477  because  it's  alienation  on                                                            
property.   At  some point  it  was a  futuristic  interest.   There                                                            
again,  there is no  definition on  alienation but  your date  would                                                            
seem to suggest that you  will be creating different classifications                                                            
of RS 247 claims  because it will be used as a defense  claim to any                                                            
asserted retroactive back-to-back  date that their property interest                                                            
alienation.   It will give them an  unequal opportunity to  assert a                                                            
defense  claim, which  I would  not  be able  to.  So  I guess  that                                                            
basically - I  would like to see a definition of what  alienation is                                                            
as it relates  to property  interest.  Also  alienation of,  have to                                                            
have a  definition, whereas  it's in a trust,  a trust basically  is                                                            
interpreted  by  its  wordage.    Where   property  is  asserted  by                                                            
statutory  or code or what  not, it will  need clarification  there.                                                            
Thank you.                                                                                                                      
Number 1175                                                                                                                     
CHAIRMAN  TAYLOR:    Dana,  I got  to  tell  you  you've  thoroughly                                                            
confused  me and the panel  because nothing  within this bill,  that                                                            
I'm aware  of, would impact  in any way the  subjects that  you were                                                            
discussing.    This is  a  bill that  would  impact  private  trusts                                                            
created  by  individuals  who  own  property,  whether  it  is  real                                                            
property  or personal property  and the decision  that these  people                                                            
have made about  how they want their  property conveyed or  held and                                                            
what the tax aspects may  be.  That's what this bill effects and, if                                                            
anything,  this  bill  would  give   you  greater  rights  with  the                                                            
disposition or alienation  of your property, either real or personal                                                            
than what you  would have had under  state law prior to the  time we                                                            
made these  changes.  In  fact the changes  that are suggested  here                                                            
are for the primary purpose  of protecting individuals like you from                                                            
paying additional  federal taxes to  the federal government  because                                                            
of  the  way  in  which  they've  placed  their   property  for  the                                                            
protection  of their wife or their  children or their grandchildren                                                             
and placed  it in  trust.  That's  the purpose  of the legislation.                                                             
There's nothing  within this legislation that would  in any way that                                                            
I can  contemplate,  at least,  impact either  RS 2477,  which  is a                                                            
federal right  granted as  against property  in this state  prior to                                                            
the time it was  even conveyed at statehood.  Nor  is there anything                                                            
that I'm aware  of that would effect  in a negative way your  rights                                                            
as an individual  to sell,  convey, or in  anyway alienate  your own                                                            
personal  property  whether it's  real  property, dirt  or  personal                                                            
property, cash or bonds  or jewelry.  You've confused me thoroughly,                                                            
Dana, and if I'm  missing something please correct  me cause I'm not                                                            
quite sure how your subjects relate to this bill.                                                                               
MS.  DANA OLSON:   Okay,  I'd  be glad  to.   First of  all I  think                                                            
there's a - I  have followed your past bill in the  last legislative                                                            
session and it was stated  that, it is the rule against perpetuities                                                            
is a complex thing, and again I'm not a lawyer.                                                                                 
CHAIRMAN  TAYLOR:  Let me  stop you right  there for a minute.   The                                                            
rule against perpetuities  was to prevent a person  like you, if you                                                            
owned a piece  of ground out there  in the Mat-Su Valley,  you could                                                            
not under  the rule  against perpetuities  convey  your property  to                                                            
your heirs forever to be  used only for a farm in the Mat-Su Valley.                                                            
That was because  they ended up with people holding  farmland in the                                                            
middle of  downtown London  and the city needed  the land to  expand                                                            
into, but nobody could  get access to the land and they had to raise                                                            
cows and  pigs in the  middle of  downtown London.   And so  the old                                                            
English  common law  said, wait  a minute  why isn't  this  property                                                            
coming back  into the market place,  why isn't it turning  over, why                                                            
isn't  somebody  either able  to  buy it  or sell  it.   Well,  they                                                            
couldn't buy it or sell  it because the original deed said it had to                                                            
be used for that  purpose forever.  So they came up  with a rule and                                                            
they said  you can't establish  a piece of  property and lock  it up                                                            
forever  like  that,  it  violates  the  rule against  perpetuities                                                             
because it  was locked up in perpetuity.   So that's where  the rule                                                            
come from, and what we're  saying here is that we are going to allow                                                            
a trust to extend beyond  the rule against perpetuities, which is by                                                            
the way  is measured by  - many different  jurisdictions measure  it                                                            
different ways  but normally it's like 80, 90 years  plus [indisc.].                                                            
In other words,  if you had a great  grandchild alive 90  years from                                                            
now the  trust wouldn't  terminate till that  last great  grandchild                                                            
died.  So if  you do it right you  can probably extend a  trust even                                                            
on  land for  a period  of  maybe a  hundred and  fifty  years.   It                                                            
otherwise  would then  have to  come back  into the  main stream  of                                                            
market place and so on.   So that's what it's all about, it's really                                                            
the rule against  perpetuities - limits people on  what they can do.                                                            
These  amendments  provide  you  and other  people  with  a  greater                                                            
opportunity  to tie  up your  assets for  a longer  period of  time.                                                            
That's  a policy  call of  course but  that's what  the legislature                                                             
decided to do here.                                                                                                             
MS.  OLSON:   I think  you're  misunderstanding.   First  of all  my                                                            
property doesn't  relate to a trust,  but it's being alienated  from                                                            
CHAIRMAN  TAYLOR:   No,  no, what's  happened  to your  property  if                                                            
you're impacted by an RS 2477, is that your concern?                                                                            
MS.  OLSON:    No,  I have  two  issues.    One  is  my  1984  Chase                                                            
Agricultural  Homestead Lottery, which  is a conveyance under  state                                                            
CHAIRMAN TAYLOR:  Right.                                                                                                        
MS. OLSON:  All right,  and basically the conveyance, although March                                                            
2000 the entry  permit does not need  a best interest finding.   I'm                                                            
being impacted by a court  decision which is a form of alienation of                                                            
which a  standard has  been set in  the state of  which now  a state                                                            
agency  wants to  override,  by regulation  and SIP  approval,  this                                                            
precedent case which effected my homestead.                                                                                     
CHAIRMAN TAYLOR:   I think I understand the problems  you've got and                                                            
there  are two of  them probably.   There's  the case  that now  has                                                            
changed your  relationship or your  authority over the property  and                                                            
that's the  court case  one.  And  you may have  an RS 2477  concern                                                            
MS. OLSON:   Yes I  do and the  RS 247, as  you having been  working                                                            
with  the  statute  of  limitations,  I  have  asserted  my  claims,                                                            
therefore in relation  to that, but the RS 247 issue  is that I will                                                            
be  put  into  a  different   classification  by  your  retroactive                                                             
provision  in your bill.   I will be treated  unequally,  basically,                                                            
than anyone  of the future  or present or  the future.  I  object to                                                            
that.   RS  247  under your  theory  of  law of  the states  was  as                                                            
transference at statehood,  then we're all treated equally.  I would                                                            
think that  if you were writing this  bill saying that there  cannot                                                            
be any alienation  on property, what  you would be virtually  saying                                                            
is that the RS 247 could  not be alienating the property as any that                                                            
were retroactively back  to April 21st of last year.  So those would                                                            
be in a different category than the ones asserted in 1998.                                                                      
CHAIRMAN TAYLOR:  Let me  assure you that language has absolutely no                                                            
effect or impact on RS 2477 rights.  None.                                                                                      
MS. OLSON:   Well it  does in  a sense because  mine was  prescribed                                                            
already  by federal  survey.    The state  is  trying  to assert  by                                                            
regulation  the width  and  also in  your prior  bill,  on the  rule                                                            
against  perpetuities,   when  something   is  prescribed   under  a                                                            
transference  theory it doesn't  enlarge, so  when you take  five to                                                            
seven feet, and by regulation,  want to insert that it is either 100                                                            
or 500  feet  that is  a property  taking.   So this  bill has  some                                                            
relevance  to RS 247, what  you were working  on last year  has some                                                            
relevance and the alienation aspect does have relevance.                                                                        
CHAIRMAN  TAYLOR:  Okay, I  guess it does.   I haven't seen  it yet.                                                            
All we're  talking  about is  your ability  as a  property owner  to                                                            
convey  to your loved  ones or  people that  you want  to have  in a                                                            
trust.   All we're talking  about is your  ability to sell,  convey,                                                            
alienate your land over to them in a trust.                                                                                     
MS. OLSON:   The rule  in itself  has a greater  capacity than  what                                                            
maybe your  bill is talking  about.  It infers  that it is.   I read                                                            
that it infers,  it's talking about  alienation and that  it doesn't                                                            
specifically  exclude futuristic  interests  or interests that  were                                                            
futuristic at some point.   Maybe if you had put a provision in your                                                            
law  excluding  that,  than  I would  feel  more  comfortable  about                                                            
asserting  that it  does not  apply, but  because there  is no  such                                                            
language  in the bill,  I will  have to  assert that  it does.   One                                                            
never  presumes anything,  it's simply  factual.   The rule  against                                                            
perpetuities  as it  effects alienation,  it  can effect  conveyance                                                            
currently as well  as to my heirs.  I have to do something  pursuant                                                            
to a court case of which  now another state agency wants to override                                                            
the court  precedent.  Therefore,  I will  be under alienation,  and                                                            
the present petitioner,  the oil industry, will not have to be under                                                            
the alienation.   And I object to that.  There is  no rational basis                                                            
why I should be held to  a standard of which they should not be held                                                            
to a standard.                                                                                                                  
CHAIRMAN TAYLOR:   Dana, honest to goodness I think  you are talking                                                            
about a totally different  subject than what we've got before us.  I                                                            
know you think  there's some relationship  but I can't for  the life                                                            
of me understand how it would do that to you.                                                                                   
MS.  OLSON:   Today in  Alaska the  agricultural  homestead  lottery                                                            
basically  today   do  not  convey  agricultural  rights,   usage  -                                                            
agricultural  use, the right  to use land.   They actually  convey a                                                            
different type of property  interest.  So basically my family may be                                                            
the only one.  So you may not understand--                                                                                      
CHAIRMAN  TAYLOR:     I  understand  fully  what  has   happened  on                                                            
agricultural  rights  and I've  been fighting  to  try and  reassert                                                            
those rights along with  Senator Green down here for some time.  But                                                            
believe me, Dana, that  is a totally different question.  That's the                                                            
question  of  how much  land  do  you own,  how  big  is it,  is  it                                                            
encumbered  in some way by  an easement, are  you allowed to  use it                                                            
for some  purpose other  than farming,  must you  be constricted  to                                                            
farming  only.   Those  are the  kind of  questions  you're  talking                                                            
MS. OLSON:  No, I'm talking about alienation of conveyance.                                                                     
CHAIRMAN TAYLOR:  I understand  that, but you're confusing the words                                                            
alienation  of conveyance.   Alienation  is a right  that you  would                                                            
have under law to sell your property.                                                                                           
MS.  OLSON:   My  property  is under  the  commissioner  of  natural                                                            
CHAIRMAN TAYLOR:   I understand that fully and it  takes his consent                                                            
because of the  restrictions put on your land by the  state when you                                                            
first purchased  that land  and I know there's  been court  cases on                                                            
it, Dana.   But  that has  absolutely nothing  to do  with this,  in                                                            
fact, this bill,  whatever rights you have in that  land would allow                                                            
you to do more  with your land and more with your  property than you                                                            
are currently allowed to  do under Alaskan law or federal law today.                                                            
 We're trying  to expand  your rights as an  individual.  We're  not                                                            
trying to constrict them.                                                                                                       
MS. OLSON:   The way I  understand the bill,  it does not  allow for                                                            
CHAIRMAN TAYLOR:  That's not true.                                                                                              
MS. OLSON:  Okay.                                                                                                               
CHAIRMAN  TAYLOR:   Honestly,  that's  not true.   We're  trying  to                                                            
expand the  ability that you and your  husband or family  would have                                                            
over  this  property to  convey  it  in a  way  that would  be  more                                                            
beneficial  to you  and your  family in  which you  would pay  fewer                                                            
taxes.  That's what we're trying to do.                                                                                         
MS. OLSON:  I  understand the concept of what your  using it for but                                                            
as far as -  if you're going to define  in Alaska statutes  the rule                                                            
against  perpetuities,  which is basically  based  on common law  of                                                            
which there is court precedent  forever.  Okay.  And you're going to                                                            
then use it  only for trust, then  there is confusion on  whether or                                                            
not we're under  common law or whether  we're under state  law.  You                                                            
know   what  I'm   saying  and   you're  using   the  rule   against                                                            
perpetuities,  which has a legal basis and a legal  understanding to                                                            
be narrowly interpreted  for a specific purpose and  you're specific                                                            
purpose is,  like you stated  on it, relating  to trusts.   But what                                                            
I'm trying  to say is your bill does  not exclude nor state  that it                                                            
does not apply  to futuristic interests.   Had it done that,  then I                                                            
would feel  comfortable about  asserting what  your stating,  but it                                                            
doesn't say that.                                                                                                               
CHAIRMAN TAYLOR:  Okay, well thanks much.                                                                                       
MS. OLSON:  Thank you very much.                                                                                                
Number 1818                                                                                                                     
MR. RUDY VETTER:  Good afternoon everyone.                                                                                      
CHAIRMAN TAYLOR:   How you been, Rudy?  It's been  a long time since                                                            
we had a chance to have a cup of coffee together.                                                                               
MR. VETTER:  Yeah, well we'll have to do that one of these days.                                                                
CHAIRMAN  TAYLOR:  I'll  look forward  to that.   Would you  like to                                                            
testify on this bill 34?                                                                                                        
MR. VETTER:  Well just  a little bit.  I was going to ask a question                                                            
-  does  this apply,  in  the  case  that  you  are a  member  of  a                                                            
corporation,  does that apply so that  you, this bill takes  care of                                                            
your interest in a corporation  that you can pass that on or is this                                                            
only for personal property?                                                                                                     
CHAIRMAN  TAYLOR:    No,  I  believe  this  involves  all  forms  of                                                            
property, Rudy.   As a consequence,  it would allow you,  I believe,                                                            
to place  your corporate stock,  say if you  could either do  it now                                                            
because you are alive,  that's inter-vivous, you could also do it in                                                            
a will, which  would be a testamentary transfer into  a trust.  Once                                                            
you had transferred  that property, your corporate  stock, into that                                                            
trust, could the  trustee then move forward and handle  or do things                                                            
with that  stock, yes  they could.   And in fact,  this would  allow                                                            
them  to do  so, literally  in  perpetuity.   It  would  be a  valid                                                            
transfer for  up to a 1,000 years  under the interpretation  of this                                                            
bill, which you would not be allowed to do, but for.                                                                            
MR. VETTER:   Okay,  I think I  understand that  and I think  you've                                                            
explained quite well.                                                                                                           
CHAIRMAN TAYLOR:  Well  actually I overstated just then.  You can do                                                            
that today but without  this language your estate might very well or                                                            
your trustee at some time  in the future who converted this stock to                                                            
some other  stock, would then  be faced with  an estate tax  and you                                                            
would  have to  or your  trustee at  the time  would have  to pay  a                                                            
significant  amount   of estate   tax  for  making  this  change  in                                                            
ownership, this  alienation or change or ownership.   So believe me,                                                            
I don't  specialize in  this field  and this is  very complex  stuff                                                            
about  trust  law, but  I'm  advised  this will  allow  people  like                                                            
yourself   to  place  valuable   stock,   valuable  patents,   other                                                            
instruments  of  value into  a  trust and  then  it will  allow  for                                                            
greater flexibly  on the part of your  trustees with less  liability                                                            
in  the  form  of potential   taxes.   That's  the  purpose  of  the                                                            
legislation, Rudy.                                                                                                              
MR.  VETTER:   Okay,  I  think I  understand  but  I also  have  one                                                            
concern.  In some  of these contracts that I have  made in [indisc.]                                                            
the word perpetuities was  considered void and illegal so I hope the                                                            
legal department  has researched the  word perpetuity - whether  you                                                            
can  do that.    I  think you  are  doing  it with  the  1,000  year                                                            
situation in  here and that should  take care of it.  It  looks good                                                            
quite good to me.                                                                                                               
I don't know why Dana is  so, I believe that was her name, why she's                                                            
so  concerned.    There's  one thing  we  must  remember  about  all                                                            
legislatures, another legislature  can come on, in another term, and                                                            
change the law  again.  So you really find it pretty  hard - I don't                                                            
believe any  legislature could put  anything in perpetuity  and make                                                            
any law last forever.   Because the succeeding legislatures,  it may                                                            
be 30 years, but they could change it too.  Thank you.                                                                          
CHAIRMAN  TAYLOR:  Well,  I certainly agree  with that, Rudy.   It's                                                            
just great to  hear your voice and hear you're doing  well up there.                                                            
Yeah, we certainly can change things.                                                                                           
Let me give you a little  quick background on why we're here on this                                                            
stuff.  People  in the United States, frustrated over  our tax laws,                                                            
took their money out of  the United States and placed it in Bahamian                                                            
banks.  The numbers I've  been told may be as high as $3 trillion of                                                            
U.S. money,  is currently  sitting  in either  European or  offshore                                                            
banks.  It's sitting  out there because those people  didn't want to                                                            
pay estate  taxes on it when it got  conveyed upon their  death from                                                            
their estate  over to their  children or to  their wife or  whoever.                                                            
So what they did,  they ran offshore with this stuff.   Now, the IRS                                                            
would like to have some  of that money back in the United States and                                                            
we're hearing  about a lot of negotiations going on,  but no federal                                                            
laws  have been  changed yet.   And  what the  federal law  changed,                                                            
they're looking  for - is that those people could  bring their money                                                            
back into the United States  and would not have to pay an additional                                                            
tax on it for their lives  but upon their death then they would have                                                            
to  go through  a normal  trust  and estate  planning  process.   In                                                            
anticipation of  that, we in Alaska have structured  our tax laws so                                                            
as  to provide  them  the  same kinds  of  opportunities  they  were                                                            
receiving in the  Bahamian banks, basically to extend  trusts beyond                                                            
the rule  against perpetuities  and to provide  for some  additional                                                            
flexibility.   In the process of doing that, we've  changed Alaska's                                                            
laws to the place  where they are very attractive  now as a place to                                                            
put your investments, which  would help people throughout the state.                                                            
What this  bill's all about,  Rudy, is just  some clean-up  language                                                            
because  of various federal  tax cases  that have  come up on  these                                                            
subjects to  try and define in advance,  before people end  up going                                                            
to court,  the correct  way  of doing it  so they  don't get  caught                                                            
unawares and lose money  back to Uncle Sam for tax purposes.  That's                                                            
really  all we're  doing here.   But could  this be  changed in  the                                                            
future,  you're absolutely  right, it  could be  changed this  year,                                                            
next year,  or ten  years from  now.   Would it have  the effect  of                                                            
wiping out  the rule against perpetuities  with these trusts,  yes I                                                            
think it would  but only in a prospective  basis, more than  likely.                                                            
And it would establish  a new rule if they wanted  to put a new rule                                                            
against perpetuities  on it.  So yes you're correct,  Rudy, anything                                                            
we do here  can be changed and let's  thank god for that  because we                                                            
never know if  we're doing it right and somebody may  need to change                                                            
it on us.  But  thank you for coming out Rudy.  Any  other comments?                                                            
MR. VETTER:  Yeah,  just a little bit on the stock  market.  The way                                                            
it is, there's  a lot of paper flying everywhere.   And I think some                                                            
of it's  got to go  into the stratosphere.   We've  got to watch  it                                                            
pretty closely.   The only  true medium of  exchange for  exchanging                                                            
debts between  governments  is gold and gold  is way down right  now                                                            
and we gold miners  still hang on, saying we think  it's going to go                                                            
up.  And I  think this stock market  is, regardless of what  all the                                                            
experts  say, I can  remember  in 1929, I  was just  a boy, but  the                                                            
experts said,  oh it's going  to be fine,  it'll be all right,  just                                                            
invest for  the future.  [indisc.]  hang on for the future.   That's                                                            
all I've got to say.                                                                                                            
CHAIRMAN  TAYLOR:    Rudy, thank  you  for  coming  out.   I  really                                                            
appreciate  the great things  you have done  for this state  and the                                                            
work you have  done in the Fairbanks area on behalf  of your friends                                                            
and colleagues  in the mining  industry.  I'm  going to be  up there                                                            
this weekend,  old friend;  I'll be there on  Saturday.  If  I get a                                                            
chance I'll  drop down to the coffee  shop and we can have  a cup of                                                            
coffee together.                                                                                                                
MR. VETTER:  Give me a  call at 457-5509.  There's a lot of things I                                                            
want to talk to you about.                                                                                                      
CHAIRMAN  TAYLOR:  Well Rudy,  I would enjoy  that too.  Okay,  I'll                                                            
give you a shout.  Thank you.                                                                                                   
Number 2147                                                                                                                     
REPRESENTATIVE MCGUIRE:   Chairman Taylor, could I just add a couple                                                            
comments.  I just want to make a couple comments.                                                                               
This is Representative  McGuire the prime sponsor  of the bill and I                                                            
just want to make a couple  general comments to both of you who took                                                            
the time to testify.   I think the most important  thing to remember                                                            
is that this is a legislative  policy that has been made.  This is a                                                            
construct,  but  that,  in any  event,  if  you  are ever  going  to                                                            
consider creating  a trust for yourself, putting specific  corporate                                                            
property into a trust,  any of those types of things, you absolutely                                                            
should seek  out a trust and estates  lawyer who has specialties  in                                                            
the area who can explain  the law, explain whether this is the right                                                            
vehicle  for you  or not.   It  may or  may not  be.   There may  be                                                            
another way  to protect your property  interests.  I just  wanted to                                                            
echo  what Senator  Taylor was  saying,  which is  that this  really                                                            
pertains  to private trusts  law, a very specific  area of  the law.                                                            
When you  start getting into  RS 2477's and  things like that,  that                                                            
really is a separate area.                                                                                                      
And then  the final  thing I  wanted to  say was  that you're  right                                                            
Rudy, there  is a  rule against  perpetuity in  the legislature  and                                                            
things can't  just continue on and  on into perpetuity.   So at some                                                            
point  there  were,  lets  say as  state  income  tax,  god  forbid,                                                            
implemented this area of the law may be revisited.                                                                              
CHAIRMAN TAYLOR:   Yeah, that's true.   Okay, well thanks  everyone.                                                            
It wasn't my  intent to move the bill  today.  Members had  asked to                                                            
have a little  more time to understand  it.  You have a little  more                                                            
homework to  do around here, I think.   And I think it's  because of                                                            
the unique nature  of this type of legislation, so  I'm going to let                                                            
it cook for maybe another  week or so and we'll bring it back up and                                                            
move it out.                                                                                                                    
SENATOR THERRIAULT:  Is that the extent of people to testify?                                                                   
CHAIRMAN TAYLOR:  That's the only ones I have.                                                                                  
SENATOR THERRIAULT:  Is Steve Greer on line?                                                                                    
MR. STEVEN  DEVRIES:   My name is  Steve DeVries,  I'm here  but I'm                                                            
not---, if Representative McGuire was taking about Steve Greer?                                                                 
REPRESENTATIVE MCGUIRE:  Yeah.                                                                                                  
MR. DEVRIES:  No, my name is Steve DeVries, I'm here.                                                                           
CHAIRMAN TAYLOR:   Okay, if you have  any comments we'd be  happy to                                                            
take them.                                                                                                                      
MR. DEVRIES:  I'm assistant  attorney general, monitoring the status                                                            
of this bill.                                                                                                                   
CHAIRMAN TAYLOR:   Well maybe you  can tell me, did I tell  Dana the                                                            
right things?                                                                                                                   
MR. DEVRIES:  Senator Taylor,  I think as far as a rendition against                                                            
the  rules  of perpetuities  you  may  want to  consider  writing  a                                                            
textbook.  However, I can't promise you I'd buy a copy of it.                                                                   
CHAIRMAN TAYLOR:   Well thank you  for that.  I'll give you  a quick                                                            
story;  I think it's  a fascinating  one.  Bob  Ziegler's father,  a                                                            
wonderful gentleman named  A.H. Ziegler, both of them are long gone,                                                            
god rest their  souls, but A.H. Ziegler  had read law for  two years                                                            
or three in a lawyers office  and felt that he was ready to take the                                                            
bar exam.   So he  took the bar  exam in Nome,  Alaska, and  the bar                                                            
exam  in those  days was  an oral exam  conducted  in an  attorney's                                                            
office.  And so the bar  would authorize an attorney in your town to                                                            
examine  you and  you would  go to his  office where  he and  others                                                            
would  ask  you  questions.    So A.H.  Ziegler  showed  up  in  the                                                            
attorney's  office  in Nome  and  there were  two  other  attorneys'                                                            
there.  And the very first  question asked of him was, please define                                                            
for me  the rule in  Shelly's case.   And A. H.  in telling  me this                                                            
story, allowed  as how he  went on for about  20 minutes, and  I was                                                            
shocked to hear  that because I didn't think I could  go on for five                                                            
minutes on the  rule in Shelly's case, but he had  gone on for about                                                            
20 minutes  explaining the  complexities of  that rule and  was then                                                            
interrupted  by one of  the attorney's  examining  him.  It  was the                                                            
host attorney  who'd  asked the  question initially  and this  other                                                            
attorney  interrupted and  he said,  Mr. Ziegler  you're wrong,  the                                                            
rule in  Shelly's case is  such and such.   He said which  initiated                                                            
quite a discussion  among the three examining attorneys  as to which                                                            
one was  right about  the rule  in Shelly's  case and  he said  that                                                            
argument between the three  examiners continued on for about another                                                            
25 minutes.   He  said at  which point  one of  the guest  attorneys                                                            
looked at the  host attorney and said,  my god George we've  been in                                                            
your office  for over 45 minutes now  and you still haven't  offered                                                            
us a drink.   At this point,  George, the  host attorney, turned  to                                                            
his safe, opened it up,  took out a bottle of scotch, and apparently                                                            
that ended the exam and  A. H. was told he had passed.  So sometimes                                                            
these arcane  rules of law do have  beneficial effects.   But enough                                                            
of my reminiscing here.                                                                                                         
Thank  you so much  for standing  by, is  there anyone  else on  the                                                            
teleconference  that has a question or would like  to give testimony                                                            
on this  bill?  Anybody here?   Okay, we're  going to hold  the bill                                                            
till next Wednesday,  it will be on  the calendar and it  will be my                                                            
intent to move the bill out at that time.  Thank you all for                                                                    
attending.  We're adjourned.                                                                                                    

Document Name Date/Time Subjects