Legislature(1999 - 2000)

02/21/2000 01:19 PM JUD

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
txt
         HOUSE JUDICIARY STANDING COMMITTEE                                                                                     
                 February 21, 2000                                                                                              
                     1:19 p.m.                                                                                                  
                                                                                                                                
MEMBERS PRESENT                                                                                                                 
                                                                                                                                
Representative Pete Kott, Chairman                                                                                              
Representative Joe Green                                                                                                        
Representative Norman Rokeberg                                                                                                  
Representative Jeannette James                                                                                                  
Representative Lisa Murkowski                                                                                                   
                                                                                                                                
MEMBERS ABSENT                                                                                                                  
                                                                                                                                
Representative Eric Croft                                                                                                       
Representative Beth Kerttula                                                                                                    
                                                                                                                                
COMMITTEE CALENDAR                                                                                                              
                                                                                                                                
SPONSOR SUBSTITUTE FOR HOUSE BILL NO. 275                                                                                       
"An Act relating to the Uniform Probate Code, including trusts and                                                              
governing instruments; relating to trustees; relating to                                                                        
underproductive trust property; and relating to conveyances of real                                                             
property and interests in real property by or to trusts."                                                                       
                                                                                                                                
     - MOVED CSSSHB 275(JUD) OUT OF COMMITTEE                                                                                   
                                                                                                                                
HOUSE BILL NO. 354                                                                                                              
"An Act relating to criminal sexual inducement of a minor, to                                                                   
distribution of pornography to minors, and to sex offenses."                                                                    
                                                                                                                                
     - HEARD AND HELD                                                                                                           
                                                                                                                                
PREVIOUS ACTION                                                                                                                 
                                                                                                                                
BILL: HB 275                                                                                                                    
SHORT TITLE: UNIFORM PROBATE CODE/TRANSFERS                                                                                     
                                                                                                                                
Jrn-Date    Jrn-Page           Action                                                                                           
 1/10/00      1891     (H)  PREFILE RELEASED 1/7/00                                                                             
 1/10/00      1891     (H)  READ THE FIRST TIME - REFERRALS                                                                     
 1/10/00      1891     (H)  JUD                                                                                                 
 2/16/00      2207     (H)  SPONSOR SUBSTITUTE INTRODUCED                                                                       
 2/16/00      2207     (H)  READ THE FIRST TIME - REFERRALS                                                                     
 2/16/00      2207     (H)  JUD                                                                                                 
 2/21/00               (H)  JUD AT  1:00 PM CAPITOL 120                                                                         
                                                                                                                                
BILL: HB 354                                                                                                                    
SHORT TITLE: SEXUAL INDUCEMENT OF A MINOR/PORNOGRAPHY                                                                           
                                                                                                                                
Jrn-Date    Jrn-Page           Action                                                                                           
 2/09/00      2146     (H)  READ THE FIRST TIME - REFERRALS                                                                     
 2/09/00      2147     (H)  JUD, FIN                                                                                            
 2/09/00      2147     (H)  REFERRED TO JUDICIARY                                                                               
 2/21/00               (H)  JUD AT  1:00 PM CAPITOL 120                                                                         
                                                                                                                                
WITNESS REGISTER                                                                                                                
                                                                                                                                
REPRESENTATIVE GENE THERRIAULT                                                                                                  
Alaska State Legislature                                                                                                        
Capitol Building, Room 511                                                                                                      
Juneau, Alaska  99801                                                                                                           
POSITION STATEMENT:  Sponsor of SSHB 275.                                                                                       
                                                                                                                                
STEPHEN GREER, Attorney at Law                                                                                                  
4041 B Street, Suite 205                                                                                                        
Anchorage, Alaska  99503                                                                                                        
POSITION STATEMENT:  Testified in support of SSHB 275 and answered                                                              
questions.                                                                                                                      
                                                                                                                                
DAVID SHAFTEL, Attorney at Law                                                                                                  
550 West 7th Avenue, Suite 705                                                                                                  
Anchorage, Alaska  99501                                                                                                        
POSITION STATEMENT:  Testified in support of SSHB 275 and answered                                                              
questions.                                                                                                                      
                                                                                                                                
WILDA RODMAN, Staff                                                                                                             
   to Representative Gene Therriault                                                                                            
Alaska State Legislature                                                                                                        
Capitol Building, Room 511                                                                                                      
Juneau, Alaska  99801                                                                                                           
POSITION STATEMENT:  As sponsor's representative, briefly discussed                                                             
amendments to SSHB 275.                                                                                                         
                                                                                                                                
MARY ELLEN BEARDSLEY, Assistant Attorney General                                                                                
Civil Division (Anchorage)                                                                                                      
Department of Law                                                                                                               
1031 West Fourth Avenue, Suite 200                                                                                              
Anchorage, Alaska 99501-1994                                                                                                    
POSITION STATEMENT:  Answered questions and offered a technical                                                                 
correction to SSHB 275.                                                                                                         
                                                                                                                                
ANNE CARPENETI, Assistant Attorney General                                                                                      
Criminal Division                                                                                                               
Legal Services Section-Juneau                                                                                                   
Department of Law                                                                                                               
P.O. Box 110300                                                                                                                 
Juneau, Alaska 99811-0300                                                                                                       
POSITION STATEMENT:  Answered a question with regard to the legal                                                               
interest rate.                                                                                                                  
                                                                                                                                
GAYLE GARRIGUES, Staff                                                                                                          
   to Representative Tom Brice                                                                                                  
Alaska State Legislature                                                                                                        
Capitol Building, Room 426                                                                                                      
Juneau, Alaska  99801                                                                                                           
POSITION STATEMENT:  As sponsor's representative, presented HB 354.                                                             
                                                                                                                                
ACTION NARRATIVE                                                                                                                
                                                                                                                                
TAPE 00-16, SIDE A                                                                                                              
Number 0001                                                                                                                     
                                                                                                                                
CHAIRMAN PETE KOTT called the House Judiciary Standing Committee                                                                
meeting to order at 1:19 p.m.  Members present at the call to order                                                             
were Representatives Kott, Green, Rokeberg, James and Murkowski.                                                                
                                                                                                                                
HB 275 - UNIFORM PROBATE CODE/TRANSFERS                                                                                         
                                                                                                                                
CHAIRMAN KOTT announced that the first item of business would be                                                                
SPONSOR SUBSTITUTE FOR HOUSE BILL NO. 275, "An Act relating to the                                                              
Uniform Probate Code, including trusts and governing instruments;                                                               
relating to trustees; relating to underproductive trust property;                                                               
and relating to conveyances of real property and interests in real                                                              
property by or to trusts."                                                                                                      
                                                                                                                                
Number 0071                                                                                                                     
                                                                                                                                
REPRESENTATIVE GENE THERRIAULT, Alaska State Legislature, sponsor,                                                              
came forward to present the bill.  He explained that SSHB 275                                                                   
proposes a number of changes to the Uniform Probate Code sections                                                               
that were adopted nearly unanimously by the legislature a couple of                                                             
years before.  For the last couple of years, a loose "federation"                                                               
of attorneys who deal with estate planning and probate issues in                                                                
Alaska have been working on proposed changes to the state statutes,                                                             
so Alaska can keep abreast of changes in federal laws and ideas put                                                             
forward in other states' statutes.                                                                                              
                                                                                                                                
REPRESENTATIVE THERRIAULT referred members to the sectional                                                                     
analysis in the written sponsor statement, noting that it includes                                                              
examples and cross-references to other states' statutes mirrored in                                                             
SSHB 275.  He pointed out that a couple of individuals who have                                                                 
been very involved in SSHB 275 were on teleconference to discuss                                                                
technical aspects and provide real-life examples and explanations.                                                              
He added that one driving concern for himself is that Alaska                                                                    
residents be able to avail themselves of all sections of the                                                                    
Internal Revenue Service (IRS) that would allow them to avoid                                                                   
having to pay federal income taxes.  A number of sections,                                                                      
therefore, deal with how persons may plan their estates in order to                                                             
pass on assets to loved ones without having to pay federal taxes.                                                               
                                                                                                                                
Number 0285                                                                                                                     
                                                                                                                                
REPRESENTATIVE THERRIAULT informed members that along with SSHB 275                                                             
were a couple of suggested amendments.  The one with his name on it                                                             
[1-LS1188\I.1, Bannister, 2/18/00, which later became Amendment 1],                                                             
requested by the Department of Law, read:                                                                                       
                                                                                                                                
     Page 9, line 15, following "(a)", through line 17:                                                                         
          Delete all material.                                                                                                  
          Insert "A person, including a trustee, may convey                                                                     
     real property to a trust whether or not a trustee of the                                                                   
     trust is named as a grantee in the instrument of                                                                           
     conveyance.  A trustee of a trust may convey real                                                                          
     property from a trust whether or not a trustee of the                                                                      
     trust is named as a grantor in the instrument of                                                                           
     conveyance."                                                                                                               
                                                                                                                                
     Page 9, line 18:                                                                                                           
          Delete "or devise"                                                                                                    
                                                                                                                                
REPRESENTATIVE THERRIAULT said the second amendment [copy not                                                                   
provided in packet] just corrects a typographical error.                                                                        
                                                                                                                                
Number 0345                                                                                                                     
                                                                                                                                
REPRESENTATIVE GREEN inquired about planned testimony.                                                                          
                                                                                                                                
REPRESENTATIVE THERRIAULT specified that Steve Greer would walk the                                                             
committee through the majority of bill sections but would defer to                                                              
another individual with more expertise for two sections.  In                                                                    
addition, Dave Shaftel was online to answer questions.                                                                          
                                                                                                                                
Number 0388                                                                                                                     
                                                                                                                                
REPRESENTATIVE MURKOWSKI asked if the Uniform Probate Code is like                                                              
the Uniform Commercial Code in that uniformity is sought throughout                                                             
the states and individual changes in states are discouraged.  She                                                               
further asked how it fits as a national uniform code.                                                                           
                                                                                                                                
REPRESENTATIVE THERRIAULT deferred to testifiers but pointed out                                                                
that federal tax codes change all the time.  Until there is a new                                                               
suggested uniform code to bring all states up to the same level,                                                                
states are somewhat free, to his understanding, to deal with                                                                    
federal changes as they see fit.  He noted that testifiers have                                                                 
participated in national bar association conferences where this has                                                             
been discussed.                                                                                                                 
                                                                                                                                
Number 0502                                                                                                                     
                                                                                                                                
REPRESENTATIVE ROKEBERG encouraged fellow members to complete their                                                             
estate planning, as he himself had recently done.  He referred to                                                               
the phrase "stated rate" on page 3, line 28, in Section 3.  He                                                                  
asked why that isn't defined in the bill unless it is defined                                                                   
elsewhere in statute.  He voiced his understanding that it is a                                                                 
change from "legal rate."                                                                                                       
                                                                                                                                
REPRESENTATIVE THERRIAULT answered that if he understands the                                                                   
question correctly, that refers to AS 45.45.010(b), commonly                                                                    
referred to as the "discount borrowing rate," so that it would be                                                               
a floating rate instead of a rate set in statute.                                                                               
                                                                                                                                
REPRESENTATIVE ROKEBERG pointed out that there isn't a reference to                                                             
the other statute there.  Recalling that this had been done before,                                                             
on trust bills, he asked whether perhaps it is a conforming                                                                     
amendment.                                                                                                                      
                                                                                                                                
REPRESENTATIVE THERRIAULT suggested that would be a good question                                                               
for the testifiers.  He informed the committee that his assistant,                                                              
Wilda Rodman, had been working with the gentlemen who were online,                                                              
and that he himself had to leave the meeting to attend to other                                                                 
matters.                                                                                                                        
                                                                                                                                
Number 0714                                                                                                                     
                                                                                                                                
STEPHEN GREER, Attorney at Law, testified via teleconference from                                                               
Anchorage, first asking whether Bryan Merrell was online.                                                                       
                                                                                                                                
CHAIRMAN KOTT answered that Mr. Merrell was not online yet.  On                                                                 
teleconference were Dave Shaftel, mentioned previously, and Mary                                                                
Ellen Beardsley of the Department of Law.                                                                                       
                                                                                                                                
MR. GREER told members that although dry and complicated, this bill                                                             
is important because each provision can produce tax savings for                                                                 
Alaskans.  He believes this legislation is very good and should be                                                              
noncontroversial.  It is essentially an estate planning bill.  Many                                                             
provisions originally contemplated for it were dropped after                                                                    
further study, he noted.  All the provisions have been closely                                                                  
scrutinized and revised over the last year and a half by the                                                                    
informal committee of estate planning attorneys.  In response to                                                                
Representative Murkowski's earlier questions, he said very few                                                                  
provisions of the Uniform Probate Code are being changed in this                                                                
bill.  Rather, this supplements those to take into account tax                                                                  
defects of legislation.  "We have to put ... these sections in a                                                                
certain place, and it just seemed most appropriate that it be put                                                               
into the same chapter that the Uniform Probate Code provision is                                                                
found," he added.                                                                                                               
                                                                                                                                
Number 0860                                                                                                                     
                                                                                                                                
MR. GREER discussed reasons that these tax-savings provisions are                                                               
needed.  First, estate planning is highly complicated and takes                                                                 
years to master because of the complexity of estate and gift tax,                                                               
as well as the ever-changing nature.  For example, Congress enacted                                                             
a so-called generation-skipping tax in 1976; in 1986, after eight                                                               
years of confusion, Congress repealed it retroactive to 1976 and                                                                
enacted a new generation-skipping regime.  At best, enactment of a                                                              
tax section can only superficially cover a subject.  Practitioners                                                              
generally await the promulgation of [U.S. Department of the]                                                                    
Treasury regulations for guidance.  In the generation-skipping tax                                                              
area, however, it took that department from 1986 until December of                                                              
1995 to issue final regulations.  Complicating this, the IRS issues                                                             
thousands of rulings each year and there are countless court                                                                    
decisions, all instrumental to estate tax planning goals.  Mr.                                                                  
Greer stated:                                                                                                                   
                                                                                                                                
     Woe to the person who created a trust five years ago                                                                       
     without having it updated to take into account today's                                                                     
     tax law.  Woe to the person who creates their own trust.                                                                   
     ... You can go to any bookstore and you'll see countless                                                                   
     do-it-yourself estate planning books.  How could a lay                                                                     
     person possibly recognize the dire tax consequence which                                                                   
     the IRS attaches to the use of a word like "comfort,"                                                                      
     when the settlor of a trust is trying to state the manner                                                                  
     in which trust assets should be made available to the                                                                      
     beneficiary?                                                                                                               
                                                                                                                                
     Woe to the lawyer who doesn't specialized in this area,                                                                    
     who creates a simple will for a client, not realizing the                                                                  
     tax consequences which the simple will produces.  And woe                                                                  
     to the lawyer who practices in this area, who drafts a                                                                     
     trust after a statute has been enacted, only to find                                                                       
     regulations which are produced eight years later [put] a                                                                   
     different cloth on prior planning.                                                                                         
                                                                                                                                
     The taxpaying provisions in this bill are simply state                                                                     
     law provisions that supplement the interpretation and                                                                      
     administration of a trust so the correct tax result will                                                                   
     be produced.  No bill could ever completely ensure the                                                                     
     tax viability of every trust instrument.  This bill is                                                                     
     only meant to deal with some of the commonly occurring                                                                     
     problems.  And with this bill, fewer Alaskans will be                                                                      
     hurt by a bad tax consequence.                                                                                             
                                                                                                                                
     Now, I should say at the outset that most, if not all,                                                                     
     the provisions of this bill are found in other states.                                                                     
     These provisions have been recommended for passage by a                                                                    
     national expert in the estate planning area as models of                                                                   
     good statutes for a state to follow.  Reading these                                                                        
     publications, ... our committee of estate planning                                                                         
     attorneys have felt that these statutes would be good                                                                      
     additions to our present statutes, so that bad tax                                                                         
     results won't be produced and, instead, good tax results                                                                   
     will be produced.  And by that, I mean less estate taxes                                                                   
     will have to be paid.  And so that's the general                                                                           
     underlying philosophy of this bill.                                                                                        
                                                                                                                                
Number 1103                                                                                                                     
                                                                                                                                
MR. GREER addressed sections of the bill dealing with tax-savings                                                               
provisions.  He referred to page 3, beginning at line 6, Section 2,                                                             
"family-owned business deduction," found under new section AS                                                                   
13.12.720.  In 1997, he explained, Congress passed a law allowing                                                               
the owner of a family-owned business to deduct an additional                                                                    
$625,000 in estate tax; that was to prevent a business having to be                                                             
sold to pay the estate tax.  The government allows the additional                                                               
deduction only if the trust instrument is properly drafted.  The                                                                
bill, therefore, says the family-owned business deduction will be                                                               
allocated to the credit trust in order to take advantage of the                                                                 
deduction; if allocated to the marital trust, in contrast, the                                                                  
deduction couldn't be utilized.  In itself, this provision allows                                                               
almost $300,000 in estate tax savings to a family with a family-                                                                
owned business.                                                                                                                 
                                                                                                                                
MR. GREER turned attention to Section 3, beginning on page 3, line                                                              
22, which deals with interest on general pecuniary devises.  He                                                                 
said the first of two aspects to this provision is the tax-savings                                                              
aspect.  When one distributes assets to a grandchild, the                                                                       
government imposes a severe 55 percent generation-skipping tax on                                                               
top of the estate tax.  The government gives each person $1 million                                                             
in generation-skipping tax exemptions, but in order to properly                                                                 
allocate this exemption to a trust, each trust has some highly                                                                  
technical requirements found in the regulations.  One regulation                                                                
says interest has to be paid on a pecuniary bequest in accordance                                                               
with state law.  If it isn't paid, the generation-skipping tax                                                                  
exemption is negated and the grandchildren are subjected to this                                                                
severe tax.  Therefore, [Section 3] delays the payment of interest                                                              
to two years following the date of a decedent's death; presently,                                                               
it is one year from the day that the personal representative is                                                                 
appointed.  This allows more time to settle the estate so that the                                                              
generation-skipping exemption can be properly allocated to these                                                                
trusts to avoid this adverse tax result.                                                                                        
                                                                                                                                
Number 1312                                                                                                                     
                                                                                                                                
MR. GREER alluded to Representative Rokeberg's earlier questions                                                                
and said the second thing is a change in the interest rate.  He                                                                 
drew attention to AS 45.45.010, subsections (a) and (b), which                                                                  
read:                                                                                                                           
                                                                                                                                
          (a) The rate of interest in the state is 10.5                                                                         
     percent a year and no more on money after it is due                                                                        
     except as provided in (b) of this section.                                                                                 
          (b) Interest may not be charged by express agreement                                                                  
     of the parties in a contract or loan commitment that is                                                                    
     more than five percentage points above the annual rate                                                                     
     charged member banks for advances by the 12th Federal                                                                      
     Reserve District on the day on which the contract or loan                                                                  
     commitment is made.  A contract or loan commitment in                                                                      
     which the principal amount exceeds $25,000 is exempt from                                                                  
     the limitation of this subsection.                                                                                         
                                                                                                                                
MR. GREER pointed out that the 10.5 percent in subsection (a),                                                                  
above, doesn't take into account the changing economic times,                                                                   
whereas subsection (b) uses a rate not more than five percentage                                                                
points above the rate used here, the discount borrowing rate.  The                                                              
idea is that one will pay interest on a pecuniary bequest.  Noting                                                              
that many states, including Washington, don't have this provision,                                                              
he emphasized that if one is going to pay interest on a pecuniary                                                               
bequest, it should be in accordance with the applicable rate at the                                                             
time.                                                                                                                           
                                                                                                                                
MR. GREER further pointed out that where any kind of estate tax                                                                 
return has to be prepared, it is almost impossible to close out an                                                              
estate until about three years after the decedent's death.  The                                                                 
reason is that a personal representative cannot safely distribute                                                               
assets until having received a closing letter from the IRS.  In the                                                             
meantime, the estate stays open.  To have interest paid prior to                                                                
the estate's closure punishes the residuary devisees, the people                                                                
who, by and large, receive the largest part of the estate.  "All of                                                             
us felt that this was a good provision and would help facilitate                                                                
the administration of estates," Mr. Greer added.                                                                                
                                                                                                                                
Number 1456                                                                                                                     
                                                                                                                                
MR. GREER reported that Section 4 [page 4] says although interest                                                               
doesn't have to be paid until two years following the death of the                                                              
decedent, nonetheless income allocated to a marital bequest has to                                                              
be paid to the marital share from the date of death to the date of                                                              
distribution.  This mirrors, almost verbatim, a Virginia statute.                                                               
The desire is to save the marital deduction for any property going                                                              
to a surviving spouse.  This provision ensures that delaying the                                                                
payment of interest to other people won't jeopardize the marital                                                                
deduction with respect to assets being allocated to the spouse.                                                                 
                                                                                                                                
MR. GREER explained that Section 5 [beginning on page 4] adds                                                                   
another provision to AS 13.16.560(a)(4).  This is meant to simplify                                                             
the administration of a trust so that tax savings can be effected                                                               
by its beneficiaries.  If, for example, a decedent left two assets                                                              
and had two beneficiaries, the two assets don't have to be split in                                                             
half, with half of each going to each beneficiary.  Instead, if the                                                             
assets are of equal value, one asset can go to each beneficiary.                                                                
This important tax provision puts into law that a personal                                                                      
representative has the authority to make these "non-pro rata"                                                                   
allocations of assets.                                                                                                          
                                                                                                                                
Number 1587                                                                                                                     
                                                                                                                                
MR. GREER told members Section 6 [beginning on page 5] is an                                                                    
important provision that will prevent many dire consequences.  This                                                             
provision is found in numerous states, and the heart of it came                                                                 
from Colorado.  Mr. Greer explained that unfortunately many                                                                     
individuals create their own trusts or hire attorneys who aren't                                                                
sophisticated estate planners.  Much of what estate planning                                                                    
attorneys do is mandated by highly technical regulations                                                                        
promulgated by the Department of the Treasury.  If he created a                                                                 
trust and named his spouse as trustee, for example, he could give                                                               
his spouse certain rights to use the trust assets; if those were                                                                
only certain limited rights, the assets wouldn't be included in her                                                             
estate, to be taxed at her death.  However, if he gave her an                                                                   
unlimited right to use the property of the trust, then this                                                                     
property would be included in her estate, producing a bad tax                                                                   
consequence.                                                                                                                    
                                                                                                                                
MR. GREER highlighted the importance of Section 6 to people doing                                                               
their own trusts or hiring attorneys who don't know about the IRS                                                               
distinction  between "comfort" and "maintenance and support."  If                                                               
he named his spouse as trustee of the trust discussed previously,                                                               
for example, he could give her the right to use the income and                                                                  
principal to the extent of her "maintenance and support"; those                                                                 
rights won't rise to the level of ownership.  However, as trustee                                                               
she couldn't distribute this principal and income to herself for                                                                
her own comfort; that word "comfort" would result in all the trust                                                              
assets being put into her estate and taxed at her death.                                                                        
Therefore, this provision is meant for situations where one has                                                                 
named the beneficiary of a trust as the trustee of the trust.  If                                                               
one mistakenly uses the word "comfort" in there, this statute will                                                              
save the day.                                                                                                                   
                                                                                                                                
Number 1794                                                                                                                     
                                                                                                                                
MR. GREER told members Section 7 [beginning on page 7] is another                                                               
provision found in numerous states that is meant to save the day.                                                               
He noted that the Q-TIP [qualified terminable interest property]                                                                
provisions and the generation-skipping tax were enacted in 1982 and                                                             
1986, respectively.  He pointed out the importance of every trust                                                               
having a provision that allows its division, so that one can make                                                               
elections to allow allocation of a proper amount for a marital                                                                  
deduction or for generation-skipping tax exemptions.  Mr. Greer                                                                 
voiced his opinion that with such a provision, the interests of the                                                             
beneficiaries aren't being changed at all.  He recounted a case in                                                              
which he went to court and asked the judge to reform the trust                                                                  
instrument so his client could make this division authorized by                                                                 
Department of the Treasury regulations; this cost his client money.                                                             
The proposed provision would prevent that, because it says the                                                                  
trustee can go ahead and divide the trust if that provision is                                                                  
lacking in the trust instrument.                                                                                                
                                                                                                                                
MR. GREER turned attention to Section 8 [page 8].  He noted that                                                                
years ago wills were the going instrument for testamentary                                                                      
dispositions.  Now, perhaps in the vast majority of cases,                                                                      
revocable trusts are used because they can avoid the cost of a                                                                  
probate proceeding.  Most Uniform Probate Code provisions pertain                                                               
to the administration of an estate that follows a will which goes                                                               
through probate court; very little is said about how to administer                                                              
a trust after a person dies.  Many, if not most, of the same                                                                    
considerations pertain to administration of a trust, however.                                                                   
Therefore, this provision makes certain distribution provisions                                                                 
that are applicable to an estate also applicable to the                                                                         
administration of a revocable trust following the death of a                                                                    
settlor.                                                                                                                        
                                                                                                                                
Number 1978                                                                                                                     
                                                                                                                                
MR. GREER pointed out that Section 9 [beginning on page 8] would                                                                
rarely, if ever, be used.  It simply defines those individuals in                                                               
a trust who, for some reason, may want to elect out of the tax-                                                                 
savings provisions.  He said he can't imagine that circumstance.                                                                
                                                                                                                                
MR. GREER informed members that Section 10 [page 9] is another tax-                                                             
savings provision.  If he creates a trust for his spouse, for                                                                   
example, and gives his spouse all the income which that trust                                                                   
produces on an annual basis, that trust will qualify for the                                                                    
marital deduction, and no estate tax will be imposed with respect                                                               
to assets going to that trust.  However, that right to receive                                                                  
income has to be a genuine right.  This provision says that a                                                                   
spouse can require the trustee to make those trust assets                                                                       
productive of income.  Normally, one finds that in a trust                                                                      
instrument produced by someone technically competent in that area.                                                              
However, in those trusts where that provision is not found, the IRS                                                             
could challenge the trust, saying that because the spouse doesn't                                                               
have the right to require the trustee to produce income, they                                                                   
aren't receiving all the income that this trust could earn.  This                                                               
tax-savings provision supplements an otherwise sufficient trust                                                                 
instrument.                                                                                                                     
                                                                                                                                
Number 2053                                                                                                                     
                                                                                                                                
MR. GREER turned attention to the two nontax-savings provisions.                                                                
He asked whether Bryan Merrell was online yet; he was not.  He                                                                  
noted that the most significant of these two provisions deals with                                                              
the ability of the trust to own real estate.  He had wanted that to                                                             
be addressed by Mr. Merrell, an Anchorage attorney who serves as                                                                
legal counsel to First American Title Company of Alaska, and who                                                                
had gone over this provision in depth.  Mr. Greer confirmed that                                                                
Mary Ellen Beardsley of the Department of Law was online.  He told                                                              
members that he, Ms. Beardsley and Mr. Merrell had discussed this                                                               
provision the previous week.                                                                                                    
                                                                                                                                
MR. GREER explained that this provision is simply meant to end                                                                  
confusion as to whether a trust can own real estate.  It has been                                                               
the position of some title companies that whenever property is                                                                  
transferred to a trust, it must state that the property goes to                                                                 
"John Doe, trustee of the John Doe trust"; if it said the property                                                              
goes to "the John Doe trust," there might be an ineffective                                                                     
transfer of the real estate to the trust.  Therefore, this                                                                      
provision is to clarify that property can be conveyed to the trust                                                              
directly, without having to say "John Doe, trustee of the John Doe                                                              
trust."  Mr. Greer stated his understanding that Mr. Merrell saw                                                                
this as a benefit to the title company industry in general and had                                                              
shared this proposed statute with his colleagues, who were all in                                                               
support of the provision.                                                                                                       
                                                                                                                                
Number 2071                                                                                                                     
                                                                                                                                
MR. GREER reported that the final provision deals with a very                                                                   
limited circumstance, and is the only provision that changes a                                                                  
provision of the Uniform Probate Code.  When the state originally                                                               
enacted the (indisc.) section of the Uniform Probate Code, they                                                                 
threw out two provisions that were believed not to arrive at the                                                                
intent of the average testator; this throws out one additional                                                                  
provision for the same reason.  Mr. Greer posed a situation where                                                               
his will leaves a cabin to one child who has a special attachment                                                               
and investment in it, with the rest of the property to be                                                                       
distributed equitably to his remaining children.  If Mr. Greer sold                                                             
that cabin prior to his own death, that money would fall into the                                                               
residuary estate, to be divided equally among all the residuary                                                                 
devisees, of whom that child probably be one.  That is the law now,                                                             
as it always has been.                                                                                                          
                                                                                                                                
MR. GREER continued.  If he had sold his cabin to a third party who                                                             
was unable to get a bank loan and cash him out, however, then Mr.                                                               
Greer would probably have to take back the promissory note.  Under                                                              
current law, that note would go to the child mentioned, even though                                                             
the intention was to have the child receive the cabin, not the                                                                  
money.  That result seems unfair; in that instance, the note should                                                             
be shared by all of the residuary devisees.  Mr. Greer concluded by                                                             
indicating this bill is just meant to assist Alaska residents by                                                                
producing good tax results in trust instruments where they                                                                      
otherwise might not be found.                                                                                                   
                                                                                                                                
Number 2334                                                                                                                     
                                                                                                                                
REPRESENTATIVE GREEN referred to page 3, Section 3.  He asked                                                                   
whether going from one year to two years may create a longer time                                                               
than even a probate in some cases.                                                                                              
                                                                                                                                
MR. GREER said no.  It just says that if an estate is unduly                                                                    
delayed, one doesn't have to start paying interest on the pecuniary                                                             
bequests until two years after the decedent's death.  He                                                                        
illustrated the unfairness of having the interest payments be due                                                               
earlier, posing an example where he had an estate of $100,000,                                                                  
leaving $10,000 to one child and the remaining amount to be divided                                                             
equally among all the children; he acknowledged that these amounts                                                              
are too low.  If there is a tax consequence, he explained, that                                                                 
estate couldn't be safely distributed to anyone until the IRS had                                                               
issued its closing letter with respect to the estate.  Unless the                                                               
final estate tax bill is known, the IRS will look to the personal                                                               
representative if he or she makes any distribution; therefore, no                                                               
personal representative will ever make a distribution such as the                                                               
$10,000 until receiving the closing letter.                                                                                     
                                                                                                                                
MR. GREER continued.  He emphasized that how long the estate                                                                    
remains open depends, essentially, upon the IRS.  However, a year                                                               
after the personal representative's appointment, that $10,000                                                                   
devise would start receiving interest at 10.5 percent per year, and                                                             
the people who are supposed to receive the remaining $90,000 - who                                                              
aren't at fault - would receive far less because the interest                                                                   
charge would come from that portion.  Therefore, this provision                                                                 
cuts everyone a break by saying interest begins two years after the                                                             
date of death.  It just extends the time.  If the estate is closed                                                              
within that time period, everyone is happy and no interest must be                                                              
paid at all.  It certainly doesn't delay administration of the                                                                  
estate.  It just means this exorbitant interest rate doesn't have                                                               
to be paid to this specific devisee.  Mr. Greer pointed out that                                                                
the federal government had issued regulations in December 1999 in                                                               
which they say pecuniary bequests have to share in the income                                                                   
earned by the estate until the estate is closed [ends mid-speech                                                                
because of tape change].                                                                                                        
                                                                                                                                
TAPE 00-16, SIDE B                                                                                                              
Number 0001                                                                                                                     
                                                                                                                                
REPRESENTATIVE GREEN asked whether, if it takes two years and there                                                             
is a large amount of cash, for example, then no interest will be                                                                
returned to any of the recipients.                                                                                              
                                                                                                                                
MR. GREER replied, "No, we're only talking about specific devisees.                                                             
After two years, interest starts accruing on that specific bequest.                                                             
But it's going to accrue at the interest rate that's there at the                                                               
time, not the 10.5 percent - whatever the discount borrowing rate                                                               
is at the time."                                                                                                                
                                                                                                                                
Number 0035                                                                                                                     
                                                                                                                                
REPRESENTATIVE ROKEBERG asked whether Mr. Greer had said that                                                                   
"stated rate" means the discount borrowing rate.  He also asked                                                                 
whether "stated rate" is defined in trust law now, pointing out                                                                 
that it isn't in a definitions section.                                                                                         
                                                                                                                                
MR. GREER drew attention to AS 45.45.010(b) and to the web page of                                                              
the 12th Federal Reserve District, the latter which lists all of                                                                
these rates.  He affirmed the first question.  In response to the                                                               
second, he said, "No.  In fact, that's why we're defining it here."                                                             
He agreed that there isn't a separate definitions section.  He read                                                             
from Section 3 of the bill, page 3, lines 27 through 31, agreeing                                                               
that the whole description is the discount borrowing rate; that                                                                 
language read:                                                                                                                  
                                                                                                                                
     In this subsection, "stated rate" means the annual rate                                                                    
     charged member banks for advances by the 12th Federal                                                                      
     Reserve District in effect on the first day of the month                                                                   
     that is the 23rd month following the decedent's death,                                                                     
     not counting the month of the decedent's death.                                                                            
                                                                                                                                
REPRESENTATIVE ROKEBERG asked whether there is any way to modify                                                                
that to make it clearer to the public, because it is usually called                                                             
the "discount rate," not the "stated rate."  He asked whether that                                                              
is a term that the Federal Reserve District uses.                                                                               
                                                                                                                                
MR. GREER said he shares Representative Rokeberg's concern.  He                                                                 
explained that in an effort to eliminate controversy, they had                                                                  
decided to use the same language presently found under AS                                                                       
45.45.[010](b).  As to why the phrase "discount borrowing rate"                                                                 
wasn't used back when that was enacted, he couldn't answer.                                                                     
                                                                                                                                
REPRESENTATIVE ROKEBERG asked whether Mr. Greer would object if the                                                             
committee added the word "discount" and retained the word "stated."                                                             
He pointed out that "stated rate" is in quotation marks on line 28                                                              
because it refers back to line 24.                                                                                              
                                                                                                                                
MR. GREER proposed perhaps saying that the "stated rate" means the                                                              
discount borrowing rate.                                                                                                        
                                                                                                                                
REPRESENTATIVE ROKEBERG replied, "'Stated rate' or 'discount rate'                                                              
means."  He asked whether that would be all right with Mr. Greer.                                                               
                                                                                                                                
MR. GREER affirmed that.                                                                                                        
                                                                                                                                
Number 0167                                                                                                                     
                                                                                                                                
REPRESENTATIVE ROKEBERG said his second question is one that                                                                    
Representative Green was pursuing.  He expressed some concern that                                                              
if there were a general pecuniary devise such as a cash grant in a                                                              
person's will, that disposition couldn't be made without the                                                                    
closing letter from the IRS.  He asked whether one could make                                                                   
dispositions to one's spouse for maintenance and support, however.                                                              
                                                                                                                                
MR. GREER said one could always make interim distributions, but one                                                             
would never make the final distribution or want to make a                                                                       
distribution in which the personal representative became subjected                                                              
to liability should that representative distribute too much,                                                                    
leaving too little for the federal government.  He pointed out that                                                             
this primarily deals with estates of some substantial size, then                                                                
said, "You're going to find that the surviving spouse, if they did                                                              
any kind of estate planning, is probably going to have half the                                                                 
assets owned by them in any event, so they can continue on."                                                                    
                                                                                                                                
REPRESENTATIVE ROKEBERG asked whether typically there aren't trusts                                                             
where the devisees are the children or other selected parties, but                                                              
that Mr. Greer is saying that any cash grants aren't made until                                                                 
there is a closing letter.                                                                                                      
                                                                                                                                
MR. GREER answered that it could be done if it were a small cash                                                                
distribution, because obviously there would be enough money left to                                                             
pay the estate tax, even if there were to be some discussion over                                                               
exactly what that tax would be.                                                                                                 
                                                                                                                                
REPRESENTATIVE ROKEBERG surmised that it would be the trustee's                                                                 
decision.                                                                                                                       
                                                                                                                                
MR. GREER affirmed that.  If, however, there were a large pecuniary                                                             
bequest, and if the trustee felt he or she couldn't safely make a                                                               
distribution of that pecuniary bequest until receipt of the IRS                                                                 
closing letter, then interest isn't going to accrue on it until two                                                             
years after the date of the decedent's death.  Certainly, nothing                                                               
prevents one from making a prior distribution if it is small and                                                                
doesn't put the personal representative in a bad position.                                                                      
                                                                                                                                
Number 0267                                                                                                                     
                                                                                                                                
REPRESENTATIVE ROKEBERG asked why they couldn't use the date of the                                                             
IRS closing letter, rather than the two years [following the death                                                              
of the decedent].                                                                                                               
                                                                                                                                
MR. GREER said that is very astute, noting that in these                                                                        
discussions over the last year and half among estate planning                                                                   
attorneys, that was his own original position.  However, because                                                                
this is a bill that was reached through consensus, the two-year                                                                 
provision is what the group all agreed upon.                                                                                    
                                                                                                                                
REPRESENTATIVE ROKEBERG commented that if there were some                                                                       
controversy or lawsuits attacking the will, he could envision a                                                                 
much longer period of time before there would be any disposition.                                                               
                                                                                                                                
MR. GREER said he wouldn't disagree with any of Representative                                                                  
Rokeberg's assumptions here.  He restated that this is the                                                                      
consensus arrived at by the group.                                                                                              
                                                                                                                                
REPRESENTATIVE ROKEBERG asked whether the IRS usually is able to                                                                
issue a closing letter even if there is litigation underway.                                                                    
                                                                                                                                
MR. GREER answered that two things can delay the administration of                                                              
the estate.  One is the IRS, when parties don't agree on the value                                                              
of a piece of real estate or a business, for example.  Or there                                                                 
might be the circumstances Representative Rokeberg just alluded to,                                                             
where heirs fight over a will's validity or whether it was written                                                              
under duress; in that case - even if there is no estate tax                                                                     
controversy because the estate comes under the threshold for                                                                    
taxation - the estate could not be closed until the judge said so.                                                              
In each instance, the bill says that if there is a pecuniary                                                                    
bequest, interest doesn't accrue until two years following the date                                                             
of the decedent's death; Mr. Greer said that is certainly better                                                                
than what is in the law now.                                                                                                    
                                                                                                                                
REPRESENTATIVE ROKEBERG responded, "We'll go with the 'discount'                                                                
but I'll leave your two years alone."                                                                                           
                                                                                                                                
Number 0413                                                                                                                     
                                                                                                                                
REPRESENTATIVE GREEN referred to Section 6 and Mr. Greer's                                                                      
testimony that the word "comfort" causes a problem that                                                                         
"maintenance and support" alleviates.  He said he was told recently                                                             
that if by chance the surviving spouse expressed the need for a                                                                 
Chevrolet, for example, that might be fine, whereas a request for                                                               
a Rolls Royce might not be authorized despite the fact that the                                                                 
term "maintenance and support" had been used.                                                                                   
                                                                                                                                
MR. GREER said that is an interesting question.  He pointed out                                                                 
that these are all found in the [federal] regulations under Section                                                             
2041, which defines a general power of appointment.  Regulations                                                                
say maintenance and support will be determined in the customary                                                                 
manner of living of that person.  He cited examples, saying it                                                                  
really depends on the situation.                                                                                                
                                                                                                                                
Number 0499                                                                                                                     
                                                                                                                                
REPRESENTATIVE MURKOWSKI mentioned Sections 6 and 7 of the bill and                                                             
the avoidance of unintended consequences, whether or not those are                                                              
related to taxes.  She asked whether people who really know what                                                                
they are doing could use this as a "hammer" in trying to gain some                                                              
advantage if there were a dispute over the will.                                                                                
                                                                                                                                
MR. GREER said that is a good question.  He pointed out how well                                                                
thought-out this is, and how many revisions this particular statute                                                             
has gone through, more than all the rest.  He answered that he                                                                  
can't think of the circumstance where that would be the case.                                                                   
However, there is a provision in this section that says the                                                                     
beneficiaries of a trust can elect out of this provision is they so                                                             
desire.  So they are protected.                                                                                                 
                                                                                                                                
REPRESENTATIVE MURKOWSKI questioned the need for Section 9, then,                                                               
if they cannot think of anybody who might want to opt out.                                                                      
                                                                                                                                
MR. GREER responded that it is for that one situation they might                                                                
not have envisioned.  Noting that this provision has a counterpart                                                              
in the Colorado statute from which this came, he added, "For the                                                                
most part, you're seeing it here just because it was also there."                                                               
                                                                                                                                
Number 0617                                                                                                                     
                                                                                                                                
REPRESENTATIVE GREEN asked about modifying the trust without                                                                    
actually dropping it and starting over again.                                                                                   
                                                                                                                                
MR. GREER said that question isn't answered by any of the sections                                                              
in this bill.  There is another bill, however, where arguably that                                                              
problem will be approached.  He noted that one may want to create                                                               
a trust that gives the spouse as many rights to these as possible                                                               
without giving so many rights that it would result in the inclusion                                                             
of those assets in the spouse's estate. Someone technically                                                                     
competent in this area would also give that spouse what is called                                                               
a limited power of appointment, which would allow the spouse to                                                                 
direct where those assets are going to go at his or her own death,                                                              
so that person can alter the testamentary disposition and direct                                                                
the assets away from a child who happens to be a drug addict, for                                                               
example, and towards the other children.  Mr. Greer restated that                                                               
nothing in this current bill really touches on that problem, one                                                                
way or the other.                                                                                                               
                                                                                                                                
Number 0752                                                                                                                     
                                                                                                                                
REPRESENTATIVE ROKEBERG referred to Section 6 on page 5; he                                                                     
expressed some discomfort with it.  He questioned the meaning of                                                                
"independent trustee" on line 16, then referred to lines 23 and 24.                                                             
He said it seems that the beneficiary of the trust would have that                                                              
power to remove the trustee.  He asked, "How could you prohibit the                                                             
discretionary distribution to pay a legal obligation of the                                                                     
beneficiary there? ... Or am I reading too much into the language?"                                                             
                                                                                                                                
MR. GREER pointed out that there is a lot to this particular                                                                    
section.  He offered to explain a couple of these provisions.  Mr.                                                              
Greer said he can create a trust, transfer property into the trust,                                                             
and name a bank as trustee of the trust, for example, giving the                                                                
bank the ability to distribute income and principal, as they see                                                                
fit, for the benefit of his children.  The bank is an independent                                                               
trustee, neither related nor subordinate to Mr. Greer, and not a                                                                
beneficiary of the trust.                                                                                                       
                                                                                                                                
MR. GREER continued with hypothetical situations.  He said if he                                                                
creates a trust for the benefit of his [children] and appoints one                                                              
of his children as trustee, that child, as trustee, has the ability                                                             
to distribute income and principal, as he or she sees fit, for the                                                              
benefit of the remaining children.  If he gives the children the                                                                
ability to remove and replace that child, then the IRS will step in                                                             
and say, "Hey, it's just as if you named the children who are                                                                   
beneficiaries as trustees of this trust, because you can appoint                                                                
someone in there, ... as a trustee, who is essentially just a                                                                   
nominee of yourself.  Heck, this is you.  And if you have the right                                                             
to make unlimited distributions of principal and income to                                                                      
yourself, well, this property's going to be included in your                                                                    
estate."  Mr. Greer continued:                                                                                                  
                                                                                                                                
     What we're saying here is this: ... if you have the                                                                        
     ability to remove and replace the trustee, and that                                                                        
     person is related or subordinate to yourself, well, that                                                                   
     person can only make distributions of principal and                                                                        
     income down to you, as a beneficiary, in a manner that's                                                                   
     related to your maintenance and support.  And it puts it                                                                   
     on ... an estate tax footing.  All this - I mean, this is                                                                  
     just how crazy this area is - ... was changed                                                                              
     dramatically by Revenue Ruling 95-58.  Before, the IRS                                                                     
     says that ... it doesn't matter who the trustee was.                                                                       
     Now, they came out with this ruling and said, ... "As                                                                      
     long as you're an independent trustee, we don't care.                                                                      
     But if somebody (indisc.), we continue to care."                                                                           
                                                                                                                                
Number 0984                                                                                                                     
                                                                                                                                
REPRESENTATIVE ROKEBERG suggested typically it would be a child                                                                 
with siblings as the administrator, and in that case, the trust                                                                 
should not have one of the other children as the trustee.                                                                       
                                                                                                                                
MR. GREER agreed that is certainly the safe ground.                                                                             
                                                                                                                                
REPRESENTATIVE ROKEBERG surmised that many trusts appoint one of                                                                
the children as the trustee, however.                                                                                           
                                                                                                                                
Number 1012                                                                                                                     
                                                                                                                                
DAVID SHAFTEL, Attorney at Law, spoke up via teleconference from                                                                
Anchorage.  He pointed out that typically, if there is a spouse or                                                              
child as a trustee, an experienced attorney would include in the                                                                
trust an "ascertainable standard," which basically says the trustee                                                             
may distribute to the beneficiary income or principal to satisfy                                                                
support, maintenance, health or education needs, in order to                                                                    
maintain the beneficiary's accustomed manner of living.  That is                                                                
what is almost always done.  Mr. Shaftel continued:                                                                             
                                                                                                                                
     In a number of trusts, no standard is put in.  But here                                                                    
     we have independent trustees, such as a bank or a family                                                                   
     friend who is not related or subordinate - the way the                                                                     
     IRS code defines that term - to the person involved.  So,                                                                  
     there will be trusts that say the trustee has the power                                                                    
     to make distributions as the trustee deems advisable; in                                                                   
     other words, there's no limitation on it at all.  But in                                                                   
     those situations, that's where we use independent                                                                          
     trustees.                                                                                                                  
                                                                                                                                
     Now, there are many, many trusts where the spouse will be                                                                  
     the trustee of the trust created by his or her spouse                                                                      
     when the first spouse dies.  So if the husband dies and                                                                    
     creates a bypass trust and a marital trust for his wife,                                                                   
     the wife will be the trustee, but we always give her an                                                                    
     ascertainable standard so that those assets won't be                                                                       
     included in her estate and taxed when she dies.                                                                            
                                                                                                                                
     Similarly, there are trusts created for children where                                                                     
     you may ... put the child in the role of being trustee of                                                                  
     his or her own trust, but you limit the child by, again,                                                                   
     an ascertainable standard.  Now this "ascertainable                                                                        
     standard" is ... a phrase of art; it's defined in the                                                                      
     regulation.  And really it's a very broad standard. ...                                                                    
     It allows distributions for any kind of use or need that                                                                   
     that person has experienced in the past.  You're right in                                                                  
     your examples that if you were to exaggerate it horribly,                                                                  
     so that you got into a wasteful situation, then another                                                                    
     beneficiary could come in and go to court and have the                                                                     
     trustee prevented from making distributions in that                                                                        
     fashion.  But if distributions are made just according to                                                                  
     ... the beneficiary's accustomed manner of living,                                                                         
     there's no problem at all with that.                                                                                       
                                                                                                                                
     What we're concerned about here, with this particular                                                                      
     statute, is people who either drafted their own trust or                                                                   
     went to attorneys or other professionals for assistance                                                                    
     in having those trusts drafted, and ... those trusts were                                                                  
     not drafted properly:  they put in no standard, and then                                                                   
     they put the family member in as the trustee.  And this                                                                    
     cures that problem.  And, unfortunately, you see a number                                                                  
     of these situations arise, where either ... general                                                                        
     practitioners have drafted the documents and don't                                                                         
     understand the tax law or people go and get stationery                                                                     
     forms or books from Amazon.com, draft their own documents                                                                  
     and do it inadequately.                                                                                                    
                                                                                                                                
     So this is a safety net, and that's all is intended, is                                                                    
     a safety net for people who have fallen into ... these                                                                     
     traps of these regulations, not knowing what they were                                                                     
     doing.  This safety net prevents all of the assets from                                                                    
     that trust from being included in the spouse's estate and                                                                  
     taxed, or being included in the child's estate and taxed                                                                   
     - ... which is a consequence that nobody wanted - without                                                                  
     really limiting their power.  The ascertainable standard                                                                   
     is so broad that ... it allows distributions for anything                                                                  
     that they've really needed in the past.                                                                                    
                                                                                                                                
Number 1252                                                                                                                     
                                                                                                                                
REPRESENTATIVE ROKEBERG said he thinks he understands this now.  He                                                             
noted that subsection (b) under Section 6 of the bill prohibits a                                                               
grant of total discretion, for example.  He mentioned an example                                                                
where a trust created 15 years before had granted total discretion                                                              
here; he suggested this new provision would override the provisions                                                             
of that 15-year-old trust and prevent its being taxed at a higher                                                               
rate.  He asked whether that is the logic here.                                                                                 
                                                                                                                                
MR. SHAFTEL replied, "Absolutely."  He pointed out that a $700,000                                                              
trust may not be taxed at all if properly drafted.  Without an                                                                  
ascertainable standard in there, however, the whole trust gets                                                                  
pulled into the wife's estate when she dies, and about $275,000 of                                                              
estate tax will have to be paid, unnecessarily, just because of                                                                 
that.                                                                                                                           
                                                                                                                                
REPRESENTATIVE ROKEBERG asked whether Mr. Shaftel would suggest                                                                 
that there is significant consumer protection in this statute.                                                                  
                                                                                                                                
MR. SHAFTEL said all of these provisions are designed to provide                                                                
Alaskans with these safety nets that other states are providing.                                                                
These provisions have come from national conferences and journals,                                                              
where they are discussed as necessary provisions to add to state                                                                
law to protect residents.  Mr. Shaftel urged support for the bill,                                                              
which he believes is practical and valuable.                                                                                    
                                                                                                                                
Number 1440                                                                                                                     
                                                                                                                                
REPRESENTATIVE GREEN asked whether, when this hybrid was put                                                                    
together, there was review to ensure that wording taken from                                                                    
another state's statutes didn't conflict with something that Alaska                                                             
already has.                                                                                                                    
                                                                                                                                
MR. GREER answered that this has gone through an amazing amount of                                                              
review, not only by the attorneys who drafted it but also by                                                                    
Legislative [Legal and Research] Services personnel, who were                                                                   
invaluable in pointing out any possible conflicts.  He particularly                                                             
extended credit to legislative drafting attorney Teresa Bannister,                                                              
as well as Mary Ellen Beardsley of the Department of Law for her                                                                
improvements to the section dealing with real estate.                                                                           
                                                                                                                                
Number 1513                                                                                                                     
                                                                                                                                
REPRESENTATIVE JAMES remarked that she is impressed with the                                                                    
changes made but wonders whether the Internet encourages people to                                                              
draft their own documents.                                                                                                      
                                                                                                                                
MR. SHAFTEL said he couldn't answer that directly regarding the                                                                 
Internet.  However, he can comment that nonprofessionals - who are                                                              
neither lawyers nor accountants - do try to market estate planning                                                              
tools and "trusts" in Alaska.  During the 1970s pipeline-building                                                               
era, for example, many of those were seen in the area of so-called                                                              
tax shelters.  Alaska doesn't have a strong statute dealing with                                                                
the unauthorized practice of law but only prevents people from                                                                  
appearing in court.  Nor does Mr. Shaftel believe that the bar                                                                  
association has authority regarding people who peddle these types                                                               
of documents.  He agreed the Internet would make it even more                                                                   
complicated.                                                                                                                    
                                                                                                                                
MR. GREER spoke up, adding that not so many years ago, a group up                                                               
here was marketing trusts; the person promoting these trusts                                                                    
certainly never went to law school and had no clue about them.  Mr.                                                             
Greer reported that he himself had filed a complaint with the bar                                                               
association; much to his surprise, however, the bar association's                                                               
response was that they couldn't do anything unless the person was                                                               
actually going to court.  He pointed out that many times these                                                                  
people go to senior centers and dupe senior citizens.                                                                           
                                                                                                                                
REPRESENTATIVE JAMES recalled her own experience as a tax preparer,                                                             
saying she wishes she had a nickel for every hour she spent trying                                                              
to help folks with their problems with the IRS.  She is very                                                                    
concerned about this issue because these are vulnerable people.                                                                 
With the Internet, she believes it will be more prolific.                                                                       
                                                                                                                                
REPRESENTATIVE ROKEBERG expressed his understanding that the                                                                    
Division of Banking, Securities and Corporations is drafting                                                                    
regulations regarding trusts in general right now, focusing mainly                                                              
on trust companies.  He asked Mr. Shaftel and Mr. Greer whether                                                                 
their organization has been contacted by that division or whether                                                               
they are aware of the regulations.                                                                                              
                                                                                                                                
Number 1812                                                                                                                     
                                                                                                                                
MR. SHAFTEL answered that they are aware of trust legislation.  To                                                              
his recollection, several members of his own group, including Bob                                                               
Manley (ph) and Doug Blattmachr, are involved, although he cannot                                                               
report on their conclusions.  As for regulations, he hasn't seen                                                                
those and can't say whether those two individuals are involved.  He                                                             
offered to call Representative Rokeberg's office with that                                                                      
information.                                                                                                                    
                                                                                                                                
REPRESENTATIVE ROKEBERG said it is troubling that Mr. Shaftel isn't                                                             
aware of what is going on.                                                                                                      
                                                                                                                                
MR. SHAFTEL restated that he would check on it and make sure that                                                               
they are involved in it.                                                                                                        
                                                                                                                                
MR. GREER pointed out that his own focus is mostly as an estate                                                                 
planning lawyer to his clients, rather in relationship to a trust                                                               
company.                                                                                                                        
                                                                                                                                
Number 1997                                                                                                                     
                                                                                                                                
CHAIRMAN KOTT asked whether anyone else wished to testify, then                                                                 
closed public comment in order to take up the proposed amendment.                                                               
He asked Mr. Greer and Mr. Shaftel whether they had seen Amendment                                                              
1, amending page 9 of SSHB 275.                                                                                                 
                                                                                                                                
MR. GREER said it certainly had been discussed with him, although                                                               
he hadn't seen it in written form.  He surmised that it has to do                                                               
with the discussion that occurred between Mary Ellen Beardsley,                                                                 
Bryan Merrell and himself on Friday, cleaning up the section that                                                               
pertains to the ability of a trust to own real estate.  He                                                                      
requested confirmation and suggested perhaps Wilda Rodman [staff to                                                             
Representative Therriault] could comment.                                                                                       
                                                                                                                                
CHAIRMAN KOTT confirmed that that is the amendment.                                                                             
                                                                                                                                
MR. GREER remarked that it is a vast improvement.                                                                               
                                                                                                                                
Number 2100                                                                                                                     
                                                                                                                                
WILDA RODMAN, Staff to Representative Gene Therriault, Alaska State                                                             
Legislature, stated, "As Mr. Greer mentioned, we did go over with                                                               
the Department of Law and reviewed the bill; this was her one                                                                   
suggestion for how to clean up the language a little bit.  Mary                                                                 
Ellen [Beardsley] would be available to answer your questions on                                                                
it."                                                                                                                            
                                                                                                                                
Number 2119                                                                                                                     
                                                                                                                                
REPRESENTATIVE GREEN read from proposed Amendment 1 [1-LS1188\I.1,                                                              
Bannister, 2/18/00, provided again here for clarity], which stated:                                                             
                                                                                                                                
     Page 9, line 15, following "(a)", through line 17:                                                                         
          Delete all material.                                                                                                  
          Insert "A person, including a trustee, may convey                                                                     
     real property to a trust whether or not a trustee of the                                                                   
     trust is named as a grantee in the instrument of                                                                           
     conveyance.  A trustee of a trust may convey real                                                                          
     property from a trust whether or not a trustee of the                                                                      
     trust is named as a grantor in the instrument of                                                                           
     conveyance."                                                                                                               
                                                                                                                                
     Page 9, line 18:                                                                                                           
          Delete "or devise"                                                                                                    
                                                                                                                                
REPRESENTATIVE GREEN referred to the line of the amendment that                                                                 
says a trustee may convey real property.  He asked Ms. Beardsley                                                                
whether the trustor would still maintain that authority.                                                                        
                                                                                                                                
Number 2159                                                                                                                     
                                                                                                                                
MARY ELLEN BEARDSLEY, Assistant Attorney General, Civil Division                                                                
(Anchorage), Department of Law, testified via teleconference from                                                               
Anchorage.  She stated her understanding that under the proposed                                                                
language, once the property is in the trust, only the trustee could                                                             
then transfer the property out of the trust.  The trustor wouldn't                                                              
have the authority to do so.                                                                                                    
                                                                                                                                
REPRESENTATIVE GREEN asked why that is good.                                                                                    
                                                                                                                                
MS. BEARDSLEY answered that once the trustor has transferred the                                                                
property into the trust, unless that person is the trustee, it is                                                               
the trustee who is, in a sense, the owner and controller of that                                                                
property; the trustor shouldn't be able to exercise the rights of                                                               
the trustee.                                                                                                                    
                                                                                                                                
Number 2221                                                                                                                     
                                                                                                                                
MR. GREER added that an analogy would be that if he transferred a                                                               
piece of property to his corporation, then only the corporation                                                                 
could transfer that property to somebody else subsequently.  This                                                               
trust is a separate entity, and the person responsible for that                                                                 
entity is the trustee.                                                                                                          
                                                                                                                                
REPRESENTATIVE GREEN indicated he was thinking about a situation                                                                
where a person might want to do something like in Amendment 1, and                                                              
yet not let go of the authority regarding real property.                                                                        
                                                                                                                                
REPRESENTATIVE ROKEBERG said there could be title in the name of                                                                
the estate, not the trustee.                                                                                                    
                                                                                                                                
REPRESENTATIVE JAMES suggested it would allow someone to put                                                                    
something into the trust, leave it for a convenient length of time,                                                             
and then take it back out again.  She asked why they wouldn't want                                                              
to allow that opportunity.                                                                                                      
                                                                                                                                
REPRESENTATIVE GREEN alluded to earlier discussion of modifying the                                                             
trust to eliminate one of several recipients.                                                                                   
                                                                                                                                
MR. GREER pointed out that a trust can be revocable or irrevocable                                                              
- those are the choices when creating a trust.  If one creates a                                                                
revocable trust, that means someone can put property in the trust                                                               
one day and put it right back in one's own name the next day.  With                                                             
a revocable trust, he could take his condominium and transfer it                                                                
into the name of his trust, for example.  If he wanted to put it                                                                
back into his own name, the deed would read:  "I, Steve Greer,                                                                  
trustee of the Stephen Greer revocable trust, hereby transfer it                                                                
back to Steve Greer."                                                                                                           
                                                                                                                                
MR. GREER continued, saying only the trustee of the trust can                                                                   
transfer property once the property has been placed into the trust.                                                             
If he has given himself the ability to revoke the trust, obviously                                                              
he has given up no right of control with respect to that asset.  On                                                             
the other hand, if he makes a gift to somebody, in trust, then he                                                               
would have given up his right to control that asset.  That is, in                                                               
fact, what a gift is all about:  removing assets from ownership and                                                             
putting it into the ownership of somebody else.  If done in the                                                                 
form of a trust, one would transfer it into a irrevocable trust                                                                 
which has someone named as the trustee of that irrevocable trust.                                                               
                                                                                                                                
TAPE 00-17, SIDE A                                                                                                              
Number 0030                                                                                                                     
                                                                                                                                
REPRESENTATIVE GREEN referred to language in the bill that read, "a                                                             
person may convey or devise real property to or from a trust                                                                    
whether or not the trustee of the trust is named as a grantee or                                                                
grantor in the instrument of conveyance."  He indicated he reads                                                                
that as meaning that there is not an irrevocable trust.                                                                         
                                                                                                                                
MR. GREER informed the committee that often trusts or deeds say                                                                 
that someone transferred it to "the John Doe trust," for example,                                                               
to which title companies would provide an exception on the title                                                                
insurance policy.  The title company would say that one cannot                                                                  
transfer to the John Doe trust; one would have to transfer to any                                                               
individual who is trustee of the John Doe trust.  There must be the                                                             
words "trustee of the trust" in there first, he explained.  He                                                                  
pointed out that the language to which Representative Green had                                                                 
referred is meant to correct that problem.  This change would                                                                   
benefit everyone, including title companies.                                                                                    
                                                                                                                                
CHAIRMAN KOTT announced that the amendment would be faxed to Mr.                                                                
Greer's office.  The committee took a brief at-ease, less than a                                                                
minute.  Upon coming back to order, Chairman Kott asked Mr. Greer                                                               
if the amendment included what he thought it was supposed to                                                                    
include.                                                                                                                        
                                                                                                                                
Number 0306                                                                                                                     
                                                                                                                                
MR. GREER answered, "Yes, exactly."                                                                                             
                                                                                                                                
REPRESENTATIVE GREEN pointed out that Section 11 adds a new section                                                             
to AS 34.25.  He asked whether the existing AS 34.25 has a                                                                      
different meaning or is silent on this matter.                                                                                  
                                                                                                                                
MR. GREER clarified that no section under AS 34.25 [now] addresses                                                              
this problem.  Therefore, the language was viewed as a welcome                                                                  
addition.                                                                                                                       
                                                                                                                                
REPRESENTATIVE GREEN asked if this language would do anything other                                                             
than make it clear what has been meant all along.                                                                               
                                                                                                                                
MR. GREER agreed that the language merely clarifies what has been                                                               
meant all along.                                                                                                                
                                                                                                                                
CHAIRMAN KOTT asked if there any comments on Amendment 1.                                                                       
                                                                                                                                
Number 0413                                                                                                                     
                                                                                                                                
REPRESENTATIVE JAMES made a motion that the committee adopt                                                                     
Amendment 1 [1-LS1188\I.1, Bannister, 2/18/00, language provided                                                                
earlier in this document].  There being no objection, it was so                                                                 
ordered and Amendment 1 was adopted.                                                                                            
                                                                                                                                
Number 0438                                                                                                                     
                                                                                                                                
REPRESENTATIVE ROKEBERG made a motion that the committee adopt a                                                                
conceptual Amendment 2, which read as follows:                                                                                  
                                                                                                                                
     Page 3, line 28, after "annual"                                                                                            
          Insert "discount"                                                                                                     
                                                                                                                                
He also requested that the drafter determine whether "discount"                                                                 
needs to be defined in the definitions section.                                                                                 
                                                                                                                                
REPRESENTATIVE GREEN asked if Representative Rokeberg would want                                                                
"or" inserted as well.                                                                                                          
                                                                                                                                
REPRESENTATIVE ROKEBERG replied "no" and informed the committee                                                                 
that it is commonly known as the discount rate.  He stressed the                                                                
need to be clear.                                                                                                               
                                                                                                                                
REPRESENTATIVE GREEN asked, "Do you want to make it read the same                                                               
where it's used before?"                                                                                                        
                                                                                                                                
MR. GREER noted that he had copied different terms from the 12th                                                                
Federal Reserve District's website.  The term that the 12th Federal                                                             
Reserve District used was the "discount window borrowing rate."                                                                 
                                                                                                                                
REPRESENTATIVE ROKEBERG reiterated his preference to use the word                                                               
"discount," as it is a common term.  He requested that Mr. Greer                                                                
and the drafter add a definition [of "discount"] in this section                                                                
and use the Federal Reserve's actual "term of art."                                                                             
                                                                                                                                
Number 0704                                                                                                                     
                                                                                                                                
REPRESENTATIVE ROKEBERG restated his previous motion regarding                                                                  
conceptual Amendment 2, which would insert "discount" on page 3,                                                                
line 28, after "annual".  Conceptual Amendment 2 would also include                                                             
a definition of "discount" in the definition section; that                                                                      
definition would use the Federal Reserve's actual definition.  He                                                               
requested that Mr. Greer fax the committee a copy of the website.                                                               
                                                                                                                                
MR. GREER said that he would do so.  He noted that the website                                                                  
posts a number of different rates.  He reiterated that the rate                                                                 
that he had in mind was the "discount window borrowing rate."                                                                   
                                                                                                                                
Number 0796                                                                                                                     
                                                                                                                                
MS. BEARDSLEY offered a technical correction [later labeled                                                                     
Amendment 3].  She referred the committee to page 3, line 23, where                                                             
"(a)" should be inserted before the word, "Interest".  The next                                                                 
section, Section 4, also deals with AS 13.16.550, she pointed out;                                                              
however, Section 4 begins with subsection (b) and refers to                                                                     
subsection (a).                                                                                                                 
                                                                                                                                
CHAIRMAN KOTT announced that the committee would return later to                                                                
Ms. Beardsley's issue.  He then returned attention to                                                                           
Representative Rokeberg's motion to adopt conceptual Amendment 2                                                                
and asked if there was any objection.  There being no objection, it                                                             
was so ordered and conceptual Amendment 2 was adopted.                                                                          
                                                                                                                                
Number 0916                                                                                                                     
                                                                                                                                
CHAIRMAN KOTT brought attention back to Amendment 3, clarifying                                                                 
that it would insert "(a)" on page 3, line 23, before the word                                                                  
"Interest".  There being no objection, he announced that Amendment                                                              
3 was adopted.                                                                                                                  
                                                                                                                                
MS. RODMAN directed the committee to page 6, line 20, where the                                                                 
first "in" will be changed to "is" in the next version, as that was                                                             
a drafting oversight.                                                                                                           
                                                                                                                                
REPRESENTATIVE JAMES commented that it could be corrected now.                                                                  
                                                                                                                                
REPRESENTATIVE ROKEBERG made a motion that the committee adopt                                                                  
Amendment 4, which read as follows:                                                                                             
                                                                                                                                
     Page 6, line 20,                                                                                                           
          Delete the first "in"                                                                                                 
          Insert "is"                                                                                                           
                                                                                                                                
There being no objection, it was so ordered and Amendment 4 was                                                                 
adopted.                                                                                                                        
                                                                                                                                
Number 0991                                                                                                                     
                                                                                                                                
REPRESENTATIVE ROKEBERG made a motion to move SSHB 275, as amended,                                                             
out of committee with individual recommendations and attached                                                                   
fiscal notes.  There being no objection, CSSSHB 275(JUD) was moved                                                              
from the House Judiciary Standing Committee.                                                                                    
                                                                                                                                
REPRESENTATIVE ROKEBERG recalled that last year the committee had                                                               
discussed changing the legal rate of interest, which is currently                                                               
10.5 percent.  He said he thought that rate had been changed last                                                               
year.                                                                                                                           
                                                                                                                                
CHAIRMAN KOTT agreed and announced that he would look into that.                                                                
                                                                                                                                
REPRESENTATIVE ROKEBERG pointed out that the usury rate is five                                                                 
basis points above the discount rate for amounts under $25,000.                                                                 
Still, the legal rate of interest is a stipulated 10.5 percent,                                                                 
which is about 400 basis points over the prevailing rate.  He asked                                                             
Ms. Carpeneti whether the legislature had changed that rate.                                                                    
                                                                                                                                
ANNE CARPENETI, Assistant Attorney General, Criminal Division,                                                                  
Legal Services Section-Juneau, Department of Law, clarified that                                                                
the legal interest rate was not changed this year.  However, there                                                              
is a supplement [to the Blue Book].                                                                                             
                                                                                                                                
CHAIRMAN KOTT said it may not have passed.  He restated that he                                                                 
would look into it.                                                                                                             
                                                                                                                                
HB 354 - SEXUAL INDUCEMENT OF A MINOR/PORNOGRAPHY                                                                               
                                                                                                                                
CHAIRMAN KOTT announced that the final order of business before the                                                             
committee is HOUSE BILL NO. 354, "An Act relating to criminal                                                                   
sexual inducement of a minor, to distribution of pornography to                                                                 
minors, and to sex offenses."  Acknowledging the late hour, he told                                                             
members he would open testimony on the bill.                                                                                    
                                                                                                                                
Number 1174                                                                                                                     
                                                                                                                                
GAYLE GARRIGUES, Staff to Representative Brice, testified on behalf                                                             
of the sponsor, Representative Brice.  She informed the committee                                                               
that HB 354 is intended to address two different concerns, both of                                                              
which involve children on the Internet.  Although the Internet is                                                               
a great tool for communication and information, it can also be a                                                                
monster because it invites a stranger into the home.  Via the                                                                   
Internet this stranger can influence children in their own homes.                                                               
Sometimes adults use access to the Internet in order to gain access                                                             
and take advantage of children.  Therefore, HB 354 intends to                                                                   
criminalize that sort of behavior.                                                                                              
                                                                                                                                
MS. GARRIGUES explained that the statute says it is a "course of                                                                
conduct," a phrase already used in the criminal code under the                                                                  
stalking statutes.  "Course of conduct" means multiple contacts,                                                                
all of which do not have to be over the Internet.  Ms. Garrigues                                                                
mentioned that there have been a couple of cases in Fairbanks in                                                                
which people found young teenagers over the Internet and later met                                                              
and convinced these young teenagers to engage in inappropriate                                                                  
sexual relations.  That is addressed in the first section of HB
354.                                                                                                                            
                                                                                                                                
MS. GARRIGUES turned attention to the second section of HB 354,                                                                 
which addresses some of the behaviors that are easier to do because                                                             
of the Internet.  One of those behaviors is called "grooming,"                                                                  
which is a way to prepare children to do inappropriate behaviors.                                                               
She noted that one way "grooming" takes place is by providing                                                                   
materials, either written or visual, that describe or demonstrate                                                               
activities the person would like to have the child engage in.  It                                                               
is much easier for these materials to be spread to children because                                                             
of the Internet.  Therefore, the second section of HB 354 is an                                                                 
effort to stop people from "grooming" children through the use of                                                               
these materials.  Ms. Garrigues told members the third section of                                                               
HB 354 simply adds these two crimes to the sex offender registry.                                                               
                                                                                                                                
Number 1371                                                                                                                     
                                                                                                                                
CHAIRMAN KOTT announced that HB 354 would be held over to the next                                                              
meeting on Wednesday, February 23.                                                                                              
                                                                                                                                
ADJOURNMENT                                                                                                                     
                                                                                                                                
There being no further business before the committee, the House                                                                 
Judiciary Standing Committee meeting was adjourned at 3:15 p.m.                                                                 

Document Name Date/Time Subjects