Legislature(1995 - 1996)
10/16/1995 09:00 AM House JUD
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE JUDICIARY STANDING COMMITTEE
October 16, 1995
9:00 a.m.
MEMBERS PRESENT
Representative Brian Porter, Chairman
Representative Joe Green, Vice Chairman
Representative David Finkelstein
Representative Con Bunde
Representative Bettye Davis
MEMBERS ABSENT
Representative Al Vezey
Representative Cynthia Toohey
COMMITTEE CALENDAR
HOUSE JOINT RESOLUTION NO. 2
Proposing amendments to the Constitution of the State of Alaska
relating to redistricting and to the length of a regular session,
and establishing a unicameral legislature; and providing for an
effective date for each amendment.
- HEARD AND HELD
HOUSE BILL NO. 308
"An Act relating to the Uniform Probate Code, including nonprobate
transfers, guardianships, trusts, and multiple-party accounts;
relating to the Uniform Simultaneous Death Act; amending Alaska
Rule of Probate Procedure 5; and providing for an effective date."
- HEARD AND HELD
PREVIOUS ACTION
BILL: HJR 2
SHORT TITLE: UNICAMERAL LEGISLATURE/SESSION LIMIT
SPONSOR(S): REPRESENTATIVE(S) GREEN,Navarre
JRN-DATE JRN-PG ACTION
01/06/95 16 (H) PREFILE RELEASED
01/16/95 16 (H) READ THE FIRST TIME - REFERRAL(S)
01/16/95 16 (H) STA, JUD, FIN
04/27/95 (H) STA AT 8:00 AM CAPITOL 102
04/27/95 (H) MINUTE(STA)
04/27/95 (H) MINUTE(STA)
04/28/95 1611 (H) STA RPT 1DP 4NR
04/28/95 1612 (H) DP: GREEN
04/28/95 1612 (H) NR: JAMES, ROBINSON, OGAN, WILLIS
04/28/95 1612 (H) 3 FNS (2-GOV, LAA)
04/28/95 1612 (H) ZERO FISCAL NOTE (LAW)
10/16/95 (H) JUD AT 9:00 AM JUNEAU LIO
BILL: HB 308
SHORT TITLE: UNIFORM PROBATE CODE REVISIONS
SPONSOR(S): REPRESENTATIVE(S) PARNELL
JRN-DATE JRN-PG ACTION
04/13/95 1318 (H) READ THE FIRST TIME - REFERRAL(S)
04/13/95 1318 (H) JUDICIARY
10/16/95 (H) JUD AT 9:00 AM JUNEAU LIO
WITNESS REGISTER
BEN BROWN, Researcher for
Representative Cynthia Toohey
Alaska State Legislature
Capitol Building, Room 104
Juneau, Alaska 99801-1182
Telephone: (907) 465-4919
POSITION STATEMENT: Commented on HJR 2
JEFF LOGAN, Legislative Assistant
to Representative Joe Green
Alaska State Legislature
Capitol Building, Room 24
Juneau, Alaska 99801-1182
Telephone: (907) 465-4931
POSITION STATEMENT: Testified on HJR 2
REPRESENTATIVE SEAN PARNELL
Alaska State Legislature
Capitol Building, Room 515
Juneau, Alaska 99801-1182
Telephone: (907) 465-2995
POSITION STATEMENT: Sponsor of HB 308
BOB MANLY, Esq.
324 East Cook
Anchorage, Alaska 99501
Telephone: (907) 263-8251
POSITION STATEMENT: Testified on HB 308
L. S. (JERRY) KURTZ, JR., Esq.;
Alaska Commissioner
National Conference of Commissioners on
Uniform State Laws
1050 Beech Lane
Anchorage, Alaska 99501
Telephone: (907) 258-6051
POSITION STATEMENT: Testified on HB 308
DEBORAH RANDALL, Attorney
Davis and Goerig
405 West 36th Avenue, Suite 200
Anchorage, Alaska 99503-5872
Telephone: (907) 271-5071
POSITION STATEMENT: Testified on HB 308
DICK THWAITES
500 "L" Street, Suite 301
Anchorage, Alaska 99501
Telephone: (907) 277-1595
POSITION STATEMENT: Testified on HB 308
ACTION NARRATIVE
TAPE 95-59, SIDE A
Number 001
NOTE: The meeting was in progress when this tape begins.
HJR 2 - UNICAMERAL LEGISLATURE/SESSION LIMIT
REPRESENTATIVE JOE GREEN: ....in committee when we reconvene in
Juneau. Ya, there will be fiscal notes. That will be addressed.
REPRESENTATIVE BETTYE DAVIS: I (indisc.) discussion.
CHAIRMAN BRIAN PORTER: Representative Finkelstein.
Number 004
REPRESENTATIVE DAVID FINKELSTEIN: Thank you, Mr. Chairman. I
don't -- I think it's completely appropriate to put in the fiscal
note for some sort of a new location or, you know, rebuilding and
things. It is theoretically possible to fit 60 people into that
room with a little bit of reconfiguration (indisc.). We probably
wouldn't want to really teleconference with our own body -- I mean,
I think when the public makes its decision of the cost of this is
going to be a relatively slight factor. I just don't think -- if
you're for a unicameral legislature -- if you're for a shorter
session, the cost of a one-time reconfiguration, while significant,
is much less than the money saved from, you know, having one body.
I mean, it's a comedy the way our budget is now. The House and
Senate budgets are identical every year. They have 20 members, we
have 40. You know, the system doesn't encourage control of
spending. Basically -- and if they spend less and manage to save
some money, all they've done is make the case for a reduction next
year, so it never occurs. I - we've probably never seen as bad a
system as the way that particular budget has been configured.
CHAIRMAN PORTER: What is their response to that? They have the
same amount of constituents.
REPRESENTATIVE FINKELSTEIN: Ya, it should be a little bit higher.
They certainly have as much travel as all 40 of (indisc.-laughter)
as 20 members. But whether -- ya, but whether it's -- I just think
we ought to be real straightforward on that one piece of it and put
in some appropriate expense because I think the public won't mind.
Number 022
CHAIRMAN PORTER: Well, we have not given this consideration - a
lot of consideration which obviously it needs. My first thought
was just the opposite - I don't think we would want to try to shove
60 people into the House. I don't think...
REPRESENTATIVE B. DAVIS: It wouldn't work.
CHAIRMAN PORTER: I don't think it would fit. So, there would have
to be some other consideration and how that would work, I don't
know. It might be that we'd have to take another floor and you
know, move offices off the fourth floor or something back to the
court house and put a whole big one floor room or something like
that. In any event, there's an awful lot of thought that needs to
go into that and that one was just an idea for something we could
do. Representative Bunde.
Number 031
REPRESENTATIVE CON BUNDE: You know the notion that you'd actually
have a gallery where people could attend the session.
CHAIRMAN PORTER: Ya.
REPRESENTATIVE BUNDE: The -- with 60 member districts, have you
looked into - have you speculated how large would a district be now
in comparison to what we have now?
REPRESENTATIVE GREEN: It effectively - numerically, would be half
as big as the current House - current House district.
REPRESENTATIVE FINKELSTEIN: It would be two-thirds.
REPRESENTATIVE GREEN: Two-thirds, okay.
REPRESENTATIVE BUNDE: Two-thirds. Ya, it wouldn't be half. Two-
thirds, so you're talking about or perhaps 6,000 registered voters
per district - something like that?
REPRESENTATIVE GREEN: Probably, in that range.
REPRESENTATIVE BUNDE: Ya, and so as we mentioned earlier....
REPRESENTATIVE GREEN: Ten thousand total.
REPRESENTATIVE BUNDE: It's conceivable that you could then reach
that many people on a personal level -- within sound bite level.
CHAIRMAN PORTER: There would still be some difficulties in the
rural areas....
REPRESENTATIVE BUNDE: In the -- well....
CHAIRMAN PORTER: They would be reduced by a third (indisc.).
REPRESENTATIVE BUNDE: Ya, though I think the personal contact is
even more important perhaps in the rural areas than....
CHAIRMAN PORTER: We - we have some - some input from
Representative Toohey's office.
Number 042
BEN BROWN, RESEARCHER FOR REPRESENTATIVE CYNTHIA TOOHEY, ALASKA
STATE LEGISLATURE: You've actually -- Representative Davis'
question got to the heart of it, but I just noticed looking at the
fiscal note from the LAA, it didn't incorporate any of the savings
from going to one body and as Representative Green had mentioned,
that was -- I didn't know that Nebraska's motivation had been
depression or public financing. But you figure with pages and
photocopiers and just everything, I think, you know, as -- as scary
as the initial capital costs of building a new chamber on the
fourth floor or whatever you would do would be the long running
operating savings are gonna to make this a very beneficial fiscal
effect in the long run and I know Representative Toohey would -
would want to know just how much money it was going to save down
the road and that's why I wanted to mention that. So, she would
look forward to seeing something from LAA that reflected those
costs as well, I'm sure.
CHAIRMAN PORTER: The savings -- the additional savings and the
cost.
REPRESENTATIVE GREEN: Yes....
Number 052
JEFF LOGAN, LEGISLATIVE ASSISTANT TO REPRESENTATIVE JOE GREEN,
ALASKA STATE LEGISLATURE: Mr. Chairman, I just...
CHAIRMAN PORTER: Jeff.
MR. LOGAN: I want to bring to the member's attention that one
fiscal note that we do have from LAA calculates $1.1 million a year
savings. The experience in Nebraska was the first year they went
to be a unicameral system, they cut their total operating expenses
in half.
CHAIRMAN PORTER: Did they reduce the number of people they have
or...?
MR. LOGAN: They did reduce the total number...
REPRESENTATIVE GREEN: I don't know the number, but they did reduce
it...
MR. LOGAN: Slightly, ya.
UNIDENTIFIED SPEAKER: Excuse me, Mr. Chairman. That's the number
of employees, not the number of legislators.
CHAIRMAN PORTER: (Indisc.) number of elected legislators.
MR. LOGAN: Their ballot question allowed the legislature to set
their level between 30 and 50 members and they started out with 43.
Right now, they're at 49. Another point, Mr. Chairman that I might
bring up that no one else has but we'll be considering this, is the
drafters, just this morning after talking several times with
Representative Green and them on this, is they think maybe an odd
number -- the Bradner bill in 1975 had 59 -- either an odd number
or allow the Lieutenant Governor to break ties because with 60,
there's - you know - one body there. So that will be something
we'll be looking at and bring back to the committee, if there's a
need for that - session hearing.
UNIDENTIFIED SPEAKER: Anybody who's in Alaska (indisc.) odd
legislators.
CHAIRMAN PORTER: At least we digress too far. If there is nothing
further, for the information of the committee, we do have the
second bill up for consideration at 1:30 so we'll have time to
repair to our offices and get our acts together and go have lunch
and see you at 1:30 p.m.
TAPE 95-60, SIDE A
Number 001
CHAIRMAN PORTER called the meeting back to order at 1:45 p.m. He
announced that members present were Representatives Finkelstein,
Porter, Green, Bunde and B. Davis.
HB 308 - UNIFORM PROBATE CODE REVISIONS
CHAIRMAN PORTER: We have for consideration this afternoon, a very
straightforward little piece of legislation (laughter) -- 94 pages
of HB 308, "An Act relating to the Uniform Probate Code," which I
hope has no connection to the one that we heard this morning, the
Unicameral legislation. We have present, the sponsor of this piece
of legislation, Representative Parnell. Welcome Sean, would you
like to introduce your bill.
Number 011
REPRESENTATIVE SEAN PARNELL, Sponsor of HB 308: Mr. Chairman, I
won't even take up a lot of the committee's time to do that. I
just want to say that please don't be daunted by the 90 pages
because a lot of it is just re-enactment of current law.
Everything I was going to say is actually going to be covered by
Bob Manly. I appreciate having a much friendlier audience than I
had at lunch time.
CHAIRMAN PORTER: First then to testify before the committee, to
tell us about the bill, is Bob Manly. Welcome Bob.
Number 018
BOB MANLY, ESQ.: Thank you. Right now in Alaska, we've got the
Uniform Probate Code governing probate procedure, intestacy - what
happens if you don't have a will and another -- and most of those
kind of related matters. We've got the 19 -- one of the 1960 --
either the 1967 or the 1969 version of the Uniform Probate Code
right near -- right now. It was enacted in about 1972 and it
served us real well. Basically, the Uniform Probate Code and well,
while our bill is thick, this is the whole thing with the
commentary. It developed simply because the old probate system was
too cumbersome, too expensive and it just didn't work. I mean
that's why Norm Dacey(ph) made a whole lot of money selling "How to
Avoid Probate at any Costs," and all these form books. And
basically, the Uniform Probate Code simplifies it and reduces the
possibility of litigation in the probate process. The
modifications you have in front of you right now are the 1990
update to the Uniform Probate Code and basically it's based on the
experience with the old Uniform Probate Code and just largely some
tune-ups, some minor changes to reflect changing social views,
changing families and also to expand the Uniform Probate Code
procedural directives to cover a number of nonprobate assets, such
as joint bank accounts, a little more coverage on life insurance
and revocable trusts. Basically, a lot of the bill is sort of back
stopping. In other words, if nobody wrote it down in the will or
the trust, this contingency that happens, well how do you cover it?
Rather than go to the court and get a different answer each time
and slowly develop case law, it's going to be set out here for
people to take a look at. There's some changes in the intestacy
law, how property passes if you don't have a will. It broadens
what's known as the "augmented estate", the prohibitions against
disinheriting your surviving spouse. And it applies some default
rules, like I said, to trusts and insurance policies.
Number 044
MR. MANLY: Now the state Bar Association probate section reviewed
the 1990 updates for about a year. I mean, quite literally, we
have a monthly meeting and every month, someone was assigned a
part, we reviewed it, discussed it and suggested some modifications
to the Uniform Act to conform to the Alaska experience and current
Alaska bond (indisc.) the legislature has done in the past. Now,
as a matter of Bar policy, the section can't speak as a group. So,
my testimony and any other testimony you get from members are
strictly as individuals, but we did discuss it as a group and the
consensus of the group was the bill that you have in front of you.
We've got more than a dozen layers sitting down there and anytime
we can get anything close to - to agreement, we're doing real well.
So, there's a always a few people that say, "Well no, it should be
this way, that way." But by and large, the group felt that what's
before you is the - the best way to proceed.
Number 057
MR. MANLY: I want to mention you know the question of uniformity.
Anytime you have a uniform law in front you - proposed - there's
always a certain amount of pressure to "well, let's keep it
uniform. Let's do what everyone else has done," which makes a lot
of sense particularly in the commercial contest like the Uniform
Commercial Code or banks are going across state lines. It makes a
lot less sense in the probate area. I mean, people either die in
Alaska or they don't die in Alaska. It's not like you've got an
interstate commerce. You know, occasionally there's - there's
overlap where it's of concern, but really the bill, I think, needs
to be and in fact does in its present form tailor itself to the
Alaska concerns.
Number 065
MR. MANLY: Now I want to just highlight for you some of the
modifications from the uniform bill, so you'll know exactly what's
going on. One of them - the uniform bill proposes an age of
majority at age 18. In other words, money can be passed to
children totally an out-route right at age 18. Current law in
Alaska is age 19. It has been for quite awhile and the Supreme
Court recently passed a rule confirming that. Again, it's a policy
decision, but when is a child responsible enough to receive a major
deposit of money? I mean I know at age 18 if I would have gotten
a lump of money I would have bought a purple medal-flecked camaro
instead of a college education. And maybe 19 isn't that much
better but at least current law is 19 and that's what the bill does
provide right now. The other big change from the Uniform Act is
with regard to the augmented estate or the elective share. And
basically this is the provision which prevents you from
disinheriting your spouse. Basically, as a matter of social policy
in the prior -- in the present Uniform Probate Code, you're limited
to the extent you can exclude a surviving spouse in your will or
otherwise. And basically, a surviving spouse must get at least
one-third of the augmented estate and the...
CHAIRMAN PORTER: That's the current code?
MR. MANLY: That's current code, that's current law and - and it
remains the same in this bill. One-third of the augmented estate -
and the augmented estate includes the probate estate, life
insurance passing to the surviving spouse, gifts to the surviving
spouse, gifts in certain circumstances to third parties, revocable
trusts, joint bank accounts with third parties; basically there's
an attempt to include everything a person owns in ownership
interest when they passed away and require that the surviving
spouse get at least one-third of that. You can certainly give your
surviving spouse more, as most people do, but that limits your
ability to disinherit. What this bill does -- ya, I'm sorry.
REPRESENTATIVE GREEN: Can I just ask one question. Now you say
that it's currently that way and this bill maintains it that way?
MR. MANLY: That's correct.
REPRESENTATIVE GREEN: Does it change in...
CHAIRMAN PORTER: The Uniform Code is - is something different....
MR. MANLY: The proposed Uniform Code is something different and
the - the bill in front of you does change the augmented estate in
some procedural aspects in terms of how you value certain trust
assets and what's included. Right now the big hole in the
augmented estate is life insurance where a third party is the
beneficiary. So in other words, if I wanted to disinherit my wife,
what I'd do is run out and buy a big cash value life insurance
policy and name someone else - you know, my brother - as the
beneficiary and use up all my money to buy that life insurance
policy. Then I'd know when I passed away, it would go - most of my
assets would go to my brother instead of my spouse. So, it - it
kind of plugs a hole - the current bill and the Uniform Act plugs
a hole here and that's in front of you, where the current bill in
front of you retains the one-third share. And what the Uniform Act
does, is it puts up a vesting schedule. So in other words, if
someone is married for a very short period of time, the surviving
spouse is entitled to very little. If they're married for 10 years
or actually 11 years, then it goes up to the one-third share. And
finally, if you're married for 15 years or more, it goes up to the
50 percent share. So it's sort of like a buy-in and that's one
reason I personally don't like it. My view is you're either
married or you're not married and this new -- or the Uniform Act
would treat a less wealthy spouse sort of like an employee, a loyal
employee buying into the process. And at least the drafters
described this as sort of the partnership theory of marriage and I
really think of it more as the employee theory of marriage. In any
case, there's some controversy on this. There was certainly
significant controversy within the group of lawyers that reviewed
it and we thought the best thing to do is leave it the same - leave
it that one-third versus the buy-in the same as opposed to try to
introduce a controversial aspect of it because I really don't think
out of all this long bill, there's any other significantly
controversial items.
CHAIRMAN PORTER: Just to be clear for the record that this would
only apply in those cases where there was not a will or prenuptial
or something like that in any event.
MR. MANLY: It would only apply for those not a prenuptial. If you
had a will, you could certainly give the spouse more but you
couldn't give her less. And I'm gonna say her just out of reflex
because women live longer. I mean that's almost -- by and large,
that's almost the - the universal experience.
CHAIRMAN PORTER: Discriminatory as that is. Representative Green.
Number 131
REPRESENTATIVE GREEN: Thank you, Mr. Chairman. For my edification
then, if this is a community property state and there is a divorce,
the spouse gets half but if that spouse -- one person dies, they
could actually contract for less than half?
MR. MANLY: This -- just starting out with sort of a technical
point - actually this is a non-community property state.
REPRESENTATIVE GREEN: Oh, I thought it was.
MR. MANLY: Ya, no - no, we are not a community property state;
it's a separate property state. But in terms of divorce, basically
the rule is the allocation of assets is whatever the judge you're
in front of thinks is fair and often times that ends up as 50/50.
But you can before marriage, or even after marriage, contract
around that with a prenuptial or postnuptial agreement and say,
"No, you know, we're going to agree ahead of time to some other
allocation," and you can certainly contract around this statute
that says you must give the spouse at least one-third of the
augmented estate. So you can change it but you've got to think
about it ahead of time and you've got to agree. Jumping back to
another difference between the bill in front of you and the Uniform
Probate Code, 1990 version, is the formalities of wills. Under the
bill in front of you, the formalities for a will are the same as
they are now. A will must be either entirely in your own
handwriting or the substand of portions in your own handwriting,
signed by you and dated by you - that would be a holographic will.
Or in the alternative that if it's typewritten or written by
somebody else, it must be witnessed by two persons. Now those
witnesses can be beneficiaries, but it must be two people who saw
you sign or saw you acknowledge your signature. The 1990 UPC
provision would reduce the formalities. The 1990 version would say
that if it can be established in court that you intended it to be
a will or that you intended to pass your property in this fashion,
then that proof will substitute as a will. The advantage of such
a proposal is that in some cases you're going to get people's
wishes carried out who didn't get around to making out a will or
making out a whole formal will or who made some procedural mistake.
The disadvantage is you're going to have a lot more litigation.
You're going to have will contests. Right now, it's pretty clear,
either it's a will or it's not a will. It doesn't do any good to
say, "He always told me he was gonna leave me the farm." Under the
1990 version, which is not in front of you, the -- it would be
possible to do that. All you'd have to do is go in and have a
court case and prove by clear and convincing evidence that that's
what the intent was. I've talked with the probate masters in
Anchorage and Fairbanks and both of them are concerned that it
would really lead to an upsurge of litigation and that's why a
majority of the committee didn't like that 1990 proposal and so
that's why we're suggesting we stay with the current Alaska law on
that point. Another minor technical deviation relates to Probate
Rule 5. Under the 1990 version, if you deposit a will with the
court for safekeeping and then die, the will is released to whoever
you named as your personal representative, which is just the fancy
new unisex name for administrator/administratrix - that kind of
stuff. The experience at least in Fairbanks was that when they
released - the court system - somebody died, the court system
released these wills, people kept losing them. The will never made
it back to the probate court. So the Probate Rules Committee
decided that now wills are no longer released to the personal
representative; rather, they're transferred directly to the probate
court so you don't have that problem. And the 1990 version of the
Uniform Probate Code didn't cover that and so our proposed
modification - the bill in front of you right now - would conform
to our current probate rules which don't - doesn't release that
will. The last....
CHAIRMAN PORTER: Could I -- Before you leave that one, could I ask
a question?
MR. MANLY: Sure.
CHAIRMAN PORTER: Recognizing the goal of this is to eliminate
procedural steps and less time, less money, and those kinds of
things, why isn't that increasing it to send it through a probate
court rather than directly to the executor.
MR. MANLY: Well, if you - once the executor-direct gets it, the
executor in order to make it effective must go to the probate court
and be formally appointed as the personal representative.
CHAIRMAN PORTER: Oh, that's the way the law is?
MR. MANLY: Ya, ya. The will itself does not good; rather what you
must do is present to the court, along with the will, basically an
affidavit saying I'm the person named here; I don't know of any
other named will; I don't know of anyone who should be personal
representative instead of me; please appoint me. Then the court
appoints you without a hearing, without anything else, and you
could go forth and administer the estate and need have no more
contact with the court until everything is done; at which point you
can either file an affidavit with the court saying, "I'm done. If
anybody wants to sue me they have to sue me within six months," or
you can actually present to the court a detailed inventory. But
it's a real minimal intrusion, but just the will itself doesn't do
anybody any good.
CHAIRMAN PORTER: An executor receiving the will now has to have an
(indisc.) interaction with the probate court in any event.
MR. MANLY: Right, in any event. The last sort of deviation from
the 1990 version and the bill in front of you is on ademption. And
what ademption means is if I give someone my diamond ring and my
diamond ring before I die gets stolen by a burglar, what happens?
Current Alaska law which is retained in this bill in front of you
is that the person who was to get the diamond ring gets nothing
because it is adeemed by extinction - it no longer exists.
Similarly, if I give you my pink cadillac and I sell my pink
cadillac before I die and buy a Masarati, the person who got the
pink cadillac in the will gets nothing because the pink cadillac is
gone. Again, the 1990 version of the Uniform Probate Code would
have changed that and I think it's in an attempt to make what they
hope or think people's intent might have been, carried out. They
would say that if I gave you the diamond ring in my will and it was
stolen by a burglar, well instead of the ring you get $50,000 in
cash because that's what it was worth at the time it was stolen.
Similarly, if I gave you my pink cadillac and bought a replacement
car, it was a replacement car and so you get that. And at least
the majority of the committee - in fact I think this was one of the
few areas where we were unanimous - thought that in most cases if
my client wants to give a diamond ring to a daughter and a gold
watch to a son and the diamond ring isn't gone anymore, it's the
object they're giving; not the value. It's a policy decision to a
certain extent but at least the committee thought we were better
off under current law which would extinguish those kind of gifts.
MR. MANLY: There are some other, I guess, changes from current law
that I think are of significance - probably half a dozen here.
Would you like me to sort of highlight those at this point?
CHAIRMAN PORTER: Representative Bunde.
REPRESENTATIVE BUNDE: Before we go on - if I could just to
clarify. The bill's position on age of majority is...
MR. MANLY: Nineteen.
REPRESENTATIVE BUNDE: Nineteen as opposed to the eighteen in
the...
MR. MANLY: Correct.
REPRESENTATIVE BUNDE: Thank you.
CHAIRMAN PORTER: I think there's only one other person to testify.
And I think it would be helpful to me I will readily admit, having
some familiarity with Uniform Code provisions, that I haven't read
this and looked forward to being briefed before I dove in. I
haven't and I would appreciate the information.
MR. MANLY: Okay, great. One of the, I think, significant changes
you ought to pay attention to that I think is a policy change is
the change in the intestacy law - what happens if you don't have a
will? And I've always viewed intestacy as a combined sort of a
decision by the legislature, trying to figure out what a person
would have wanted to do if they would have gone to the trouble of
getting a will and, to a certain extent, what they should have
done. So, it's a combined policy decision there. And what the May
1990 Act has done, which is incorporated into the bill in front of
you, is try to take into a little closer consideration sort of the
changed nature of a family where we have many more second marriages
and the like and many more childless couples. And right now, if a
spouse passes away with no children of that relationship and no
children of a prior relationship by that deceased spouse and also
leaves a parent, the surviving spouse gets half and the parent gets
half. The change -- or the bill in front of you would change that
a little bit and if the -- and what would happen instead is the
surviving spouse would get the first $200,000 of an estate and
three-quarters of the rest and the parents would only get that one-
quarter above $200,000. So it significantly reduces the share of
parents in a married situation where there are no children and the
parents survived. Again, a policy decision. Right now, under
current law, if a spouse passes - or a spouse passes away, leaves
a surviving spouse with children - only the children of that
relationship, no children of a prior marriage or the like - the
surviving spouse gets the first $50,000 plus half of the rest and
the kids split down the rest. Under the bill in front of you, the
surviving spouse with children of that marriage relationship but no
other children, would get 100 percent. In other words, the change
is the surviving spouse is relied on to take care of his or her own
children and there's no immediate split off to those children,
whether they're adult or minors or whatever.
CHAIRMAN PORTER: Representative Bunde.
REPRESENTATIVE BUNDE: That brings a question to mind as you talked
about these his, mine and our kids situation. The surviving
spouse, but there are children of a previous marriage of the
deceased spouse, are they addressed in this because it sounds to me
that 100 percent goes to issue of that marriage, not of previous
marriages.
CHAIRMAN PORTER: That's the next one, right?
MR. MANLY: Okay, ya that is the next one and it gets a little
complicated. Right now, under current law, if husband passes
aways, wife survives, husband has children of a prior marriage and
this marriage, then the spouse gets half and all the kids split the
remaining half. You don't have that first $50,000 going to the
surviving spouse. An even more complicated change in the bill in
front of you, which conforms to the 1990 revisions, if there's
children by this marriage and the surviving spouse has kids by a
prior marriage - not the deceased spouse, but the surviving spouse
has kids by that prior marriage then the surviving spouse gets
$150,000 plus half of the rest and then that remaining half after
the $150,000 is split among all the kids. However...
CHAIRMAN PORTER: All the kids? Even including her kids?
MR. MANLY: Yes, including her kids.
CHAIRMAN PORTER: Including her kids?
MR. MANLY: Ya, all kids are treated - divided up equal and if the
deceased spouse had children by a prior relationship and the
surviving spouse and the deceased spouse had children by the same
relationship, so you have a mixed family the other way with the
deceased spouses children also surviving, then the surviving spouse
gets $100,000 plus half the rest and half the rest, beyond the
$100,000 is split out. Again, it just take -- it's a little more
complex but it takes into account a little bit of those kind of
changes and at least the probate group with some experience in the
area, seemed - they seemed to think that it was a reasonable
compromise in - in terms of what people probably would want or
should want. Other than that, the intestacy laws are unchanged.
If you don't have kids, it goes down to grand kids; if you've got
no lineal descendants, it goes back on up to parents then out to
brothers, sisters, down to nieces and nephews, back up to
grandparents, out to second cousins many, many times removed. But
if you don't have anybody within the class of descendants of your
grandparents, then it goes to the state of Alaska. It escheats.
Now I've already talked about the elective share which is a
significant modification. Another modification that's of some
significance is the expansion of the 120 hour survival rule. Right
now if I leave my wife everything in my will - in order to take,
unless I say otherwise in my will - I can say that she has to
survive for six months; I can say she has to survive for 30
seconds. But if I don't say anything, she must survive for 120
hours - five days - just to try to cover this situation where we're
both in a car accident, she lingers a little longer than I do. But
right now under current law, that applies only to probate assets
governed by your will. It doesn't apply to joint bank account. It
doesn't apply to your jointly held stock. It doesn't apply to your
jointly held house - tenants by the entirety. And that's where
most peoples' wealth are. (Indisc.) doesn't apply to life
insurance designation, beneficiary designations.
CHAIRMAN PORTER: Representative Finkelstein:
REPRESENTATIVE FINKELSTEIN: Mr. Chair. I'm a little confused.
Your house isn't a probate asset - is not a probate asset?
MR. MANLY: Well, most married people - I'd say 99 percent of
people own their house as tenants by the entireties. So in other
words, if husband passes away - bang - everything goes to the wife
automatically, outside of probate. No muss, no fuss. People own
things that way because it's simple, easy and convenient and that's
what they want.
REPRESENTATIVE FINKELSTEIN: And in - in regard to bank accounts,
it's the same if they're joint accounts?
MR. MANLY: Correct, if they're joint accounts. But there's no
survival requirement. And most of the lawyers in this room have
had one or two cases where husband and wife - no kids - are driving
along or flying along and there's a simultaneous death. But it
really isn't a simultaneous death; it's a near simultaneous death.
The pathologist comes in says, "Well, she died first because she
didn't bleed all over the windshield and obviously her neck broke,
but he lived for at least one heartbeat longer cause there's blood
all over the windshield." The reason that's important - that
depends - depending on who died first, that's who -- that's who's
heirs get the house. So husband, wife, no kids - wife dies first -
house goes to the husband - house goes to husband's family; his
parents or whatever. So, you ended up with a fair amount of
litigation with pathologists trying to tell you who died first.
And this is going to eliminate it and, I think, carry out people's
intent. You know, you usually intend that well if somebody -- you
want them to live more than 120 hours. And all of these things you
can modify by the terms of the agreement or contract. For example,
your life insurance policy - you can say you know, "I don't care
about the 120 hour survival rule," or you can say, "I want my wife
to survive me by six months before she gets anything under this
life insurance policy." But the default rule now instead of
instantaneous, gives you that 120 hours. And I think that's going
to reduce litigation. Another good thing that you're doing with
this is expanding the disclaimer provisions. If someone passes
away and you're set to inherit something, sometimes you really
don't want it. Sometimes for tax reasons it's a lot better to send
it on down to your kids if your parents pass away and avoid a state
taxation at your generation level and things like that. And right
now the Alaska statutory law allows disclaimer of probate property
but doesn't address nonprobate property. For example, the house.
Husband and wife tenants by the entireties. The statute expands
disclaimers to cover nonprobate property so you can disclaim or
surviving spouse can clearly and legally disclaim his or her
interest in that house if that's the right thing to do tax wise or
for other personal reasons.
CHAIRMAN PORTER: Representative Green.
REPRESENTATIVE GREEN: Now would that mean that that would be a
separate action - overt action - that the spouse would have to
take?
MR. MANLY: Yes.
REPRESENTATIVE GREEN: Or is it automatic?
MR. MANLY: No. He or she would have to take an overt action.
They would have to write a statement that they were disclaiming
this interest in the house. They would have to record it with the
recorders office. They would have to do so within nine months
after the spouse passes away. So there's a time limit.
REPRESENTATIVE GREEN: Okay.
MR. MANLY: And we've always had that nine month time limit; it's
just now expanded to cover nonprobate property. Last thing I want
to mention is automatic revocation by divorce. Right now, if you
have a will and you're divorced, that automatically revokes the
will as to any reference to your ex-spouse, but that does not do
anything - our current law doesn't do anything for life insurance
beneficiary designations, pension and profit sharing designations
or joint bank accounts. And I've had any number of cases I've seen
where husband and wife get divorced - a relatively amicable
settlement - they each go their own ways - husband or wife
remarries but he or she forgets to change the beneficiary on the
life insurance designation - that spouse passes away and bang the
life insurance goes to the old wife instead of the new wife. Yes,
people are genuinely unhappy and justifiably so in those
circumstances. And again, you can say the people should have
remembered to do that, but it's easy to forget that kind of stuff
in going along with your daily business. And this just expands
sort of what I was mentioning - the backstop coverage. You know,
things that people don't think about. And again, it reduces
litigation between the ex-spouse and current spouse as to those
life insurance proceeds.
CHAIRMAN PORTER: This wouldn't affect an intentional agreement in
the divorce?
MR. MANLY: No - no. This can definitely be superseded in the
divorce or by contract or by subsequent redesignation of that ex-
spouse. And that's really the -- there's -- there are some other
technical changes in here but these are at least the ones that I
view as sort of the high points. I think it's an excellent bill -
I think it's something that you should pass out and should be
enacted into law.
CHAIRMAN PORTER: Thank you, Bob. Are there any questions?
Representative Bunde.
Number 406
REPRESENTATIVE BUNDE: You - you had mentioned that -- thank you --
that you were speaking as an individual and your subsection of the
Bar Association.
MR. MANLY: Correct.
REPRESENTATIVE BUNDE: ....speak for the Bar Association? Will the
Bar Association as a whole be taking a position?
MR. MANLY: No. The Board of Governors takes the view that we are
a nonprofit entity and they forbid anyone from taking a position on
behalf of the Bar, unless the entire Board of Governors enact it -
take that position. And as far as I know, the Board of Governors
has never taken a position on any legislation, except their own
sunset and their view is that they're afraid they'd have to give
small rebates of your dues back if you opposed a particular view
they took because of their nonprofit status. I'm not sure why
sunset is exempt from that view but that's what they've told me.
CHAIRMAN PORTER: Representative Green.
Number 421
REPRESENTATIVE GREEN: Thank you, Mr. Chairman. You've indicated
that this should reduce litigation. Is there any merit, do you
feel that these changes are changes that should be known to people
who prepare wills or especially these will kits that are still so
popular. For example, you brought out in this automatic revocation
that probably isn't covered in their will kit.
MR. MANLY: Well, right now we do have automatic revocations for
wills, so that is the current law. And the only thing we're doing
is by this proposal is expanding that automatic revocation to life
insurance and sort of your nonprobate assets - your things that
aren't governed by the will. Certainly, I guess the effective date
is - proposed effective date is January 1, 1996. Am I mistaken on
that? That couldn't be.
CHAIRMAN PORTER: January 1, 1997.
MR. MANLY: 97 - I'm sorry. I think that gives a reasonable amount
of time for people to become aware of the will and aware of the
changes and it probably doesn't have any really traps for people in
most cases, because really, you're helping people with things that
they didn't consider rather than the other way around.
Number 441
REPRESENTATIVE GREEN: Okay, that's what I was getting at. So the
whole of what you're saying - or what I'm hearing you say then is
you're patching all these holes so if there is an omission, it
theoretically at least, would be to the benefit of that person who
either made a will and forgot or didn't make a will at all.
MR. MANLY: That's correct.
CHAIRMAN PORTER: At least it answers the question.
REPRESENTATIVE GREEN: Ya.
CHAIRMAN PORTER: Bob, could you for me -- you've mentioned a
couple of times in just here in this last explanation -- could you
explain for me the difference between probate and nonprobate
property?
MR. MANLY: Sure. I guess the answer or the conclusion (indisc.-
coughing) question or something like that -- I'm not sure the
correct tautology there, but in any case probate assets are
governed by your will; nonprobate assets are governed by some other
legal contract. For example, life insurance. If you name an
individual beneficiary, that's governed by the life insurance
contract - where the money goes - not by your will, so it's
generally considered a nonprobate asset. You could make it a
probate asset by saying, "I give this life insurance money to my
probate estate." But in the absence of that, it's a nonprobate
asset. Likewise, a joint bank account. If it passes all to the
survivor automatically by virtue of your contract with the bank,
then it's a nonprobate asset. If it's a sole-named bank account,
then it would pass in accordance with your will.
CHAIRMAN PORTER: Would it be a correct over-simplification to say
that nonprobate assets are things not mentioned in the will and
probate assets are mentioned in will?
MR. MANLY: Nope, that doesn't work because sometime -- usually in
a will you have what's known as a residuary clause - everything I
forgot to mention goes so and so. And just the mention or non-
mention of an asset in the will doesn't control. For example, if
I have a joint bank account with you and I say in my will that I
want it to go to someone else, my will does not govern for the most
part; it's gonna be the contract between you, me and the bank. So,
it's not whether you mention it in your will; it's rather whether
if you mention it in your will, your will controls where it goes.
CHAIRMAN PORTER: Is there any general rule of thumb on
contradictions between contracts and the will?
MR. MANLY: The general rule is that if the outside contract
governs the asset, then that's going to supersede the will.
CHAIRMAN PORTER: Even though the will is made out (indisc.-
coughing).
MR. MANLY: Right. Because for example, I have a life insurance
policy and I fill out my wife as the beneficiary. I subsequently
make out a will and say, "No, my brother should be the
beneficiary." As my contract is with the life insurance contract,
I've told them, "Give the money to my wife." As a matter of law,
I can't change the deal without letting them know in the form that
they say I have to let them know, which is the beneficiary
designation.
CHAIRMAN PORTER: Any other questions of Bob?
REPRESENTATIVE BUNDE: ...will by tritest abrogate that contract...
CHAIRMAN PORTER: I just -- you know, the other thing is you have to
die to be able to benefit.
REPRESENTATIVE GREEN: Ya, you're dead right.
MR. MANLY: One clarification, if I may. If you don't mention a
probate asset in your will, it's governed by the laws of intestacy
that we've just talked about - the first $200,000 of the spouse
under these circumstances. And so a probate asset is governed by
your will if you have one; but if you don't have one, then it's
governed by the laws of intestacy. And you can always have sort of
incomplete rules saying, "I give my house to Fred," but you don't
say anything else - well the bank account goes, if it's not a joint
bank account, in accordance with the laws of intestacy.
CHAIRMAN PORTER: Bob, thank you.
MR. MANLY: Thank you. I think my esteemed colleagues from the
rest of the committee are going to correct me or disagree as they
see fit because we are all testifying individually.
CHAIRMAN PORTER: I would be disappointed if there weren't.... The
next person I see would be Jerry. Did - did you want to testify,
Jerry?
Number 487
L. S. (JERRY) KURTZ, JR., ESQ. and ALASKA COMMISSIONER, NATIONAL
CONFERENCE OF COMMISSIONERS ON UNIFORM STATE LAWS: Yes, I would
like to testify but I suggest any other members of the probate
committee wanted to first testify.
CHAIRMAN PORTER: The only other person that I have signed up but
I don't know if there's anybody here that wishes to testify that
has not signed up - there is one. Okay. There are two. Well,
I'll tell you what I'll defer to you guys to see what order you'd
like to... That will allow me time to get this to you guys so that
you.... Welcome Jerry.
Number 496
JERRY KURTZ: Thank you. I am here representing the Alaska
Commissioners appointed by the state to the National Conference of
Commissioners on Uniform State Laws, which is where this animal
you're looking at came from. The first thing I'd like to do is
thank Bob Manly for making an extremely good presentation - far
better than I could. Of the members on the Uniform Law Commission
from Alaska, I'm the closest thing there is to a probate attorney.
The rest of them have handled either no probate matters or relative
few over the years. I retired from active law practice in 1991,
and have my nose back in it on a very limited basis. I can safely
say I've looked at one probate since 1991. That involved Montana
and Alaska and we were very grateful that both states had the
Uniform Probate Code. I'd like to -- and the point is that this
Bar Committee has spent a lot of time on it, includes some good
attorneys and includes attorneys like Mr. Manly who are heavily
immersed in the probate field and have the kind of perspective that
I do not have on what's going on in Alaska at the present time.
The second thing I'd like to point out is that when this Uniform
Probate Code was first enacted in Alaska in 1972, there was
considerable opposition amongst part of the Bar for the very
reasons that I've heard committee members mention - it was a long
Code and it was complicated and it meant a whole lot of people had
to read something new. But it was passed despite that and it has
been an unqualified success. It's very hard. I don't think I've
heard an attorney criticize the adoption of the Code for at least
20 years. The thing has worked beyond our fondest dreams and what
we have before you for the most part an attempt to make it work
better and a lot of those changes are changes that have been made
to reflect not only the changes in family structure, but
particularly the changes in nonprobate assets. The percentage of
wealth that's held in nonprobate assets - retirement funds, mutual
funds, stock funds, automobiles, things in houses, things that
typically are held in joint tenancy behind a husband and wife so
that they automatically go to the survivor without any
infearced(ph.) Probate Code - the percentage of items in the
typical person's estate has increased sharply over the last 30 to
40 years. And the best way to think about this is to look back at
- at what your parents had when they - they passed away or what
they have at this point and most of the assets that we talk
commonly about today - the IRAs, the mutual funds - were unheard of
in those days or were only possessed by a very few people. So the
nonprobate aspects of the bill are, in many respects, just a
catching up and they're, in my opinion, a vast improvement over the
existing ones where frequently there was some difficulty in
determining exactly what fell under those sections. This will help
prevent litigation, it will help financial institutions which
frequently hold money or stock funds or other similar securities-
based properties that are transferred to somebody as a result of
the death of the owner or the people.
Number 499
MR. KURTZ: I'd like to - to - to briefly touch on two things that
Bob did say that I might disagree with a tiny bit to satisfy your
desire that we get some attorney disagreeing because we never agree
completely on everything. But I want to preface it by saying that
there's an attorney in this room and I have not talked to an
attorney about this bill in the past years in Alaska or even on the
Uniform Law Conference, who doesn't think that by and large these
items contained in HB 38 are a substantial improvement over what we
have now. The question was raised of why should the will not be
given to the executor named in the will (indisc.) in court. In a
surprising number of cases, the will initially never gets into
probate. A lot of Alaskans die and they leave a will and whoever's
named as executor can pick up that will when it's stored at the
court and then they discover after they go along a little ways and
maybe talk to an attorney and poke around and see what assets were
there, that there really isn't anything in the way of assets - that
they're all nonprobate assets or virtually all of them - so they
don't need to probate the will. And so they just quit and may
throw the will in the wastebasket when they're cleaning out their
files or something else. And then some time later on - a year or
two or three or maybe even four years later - an asset comes out of
no where that nobody was expecting that really is part of the will
- a piece of property is found...
TAPE 95-60, SIDE B
Number 001
MR. KURTZ: ...and nobody realized he owned it, and nobody can find
the will. And I think particularly in this state, this is reason
enough, we do have a record of having a fair number of lost wills
up here. This is reason enough - once somebody puts one in the
court to have the court preserve it, that it stay there. It
doesn't hamper the executor and it really doesn't add any
substantial expense. And that's just re-enforcement for what Bob
said about why we should not change that existing provision in the
Alaska law. The question of the elective share provision has been
discussed a great deal around the country. Alaska's present bill,
308, chooses to keep our elective share provision exactly as it is
now - substantially as it is now and I have very mixed feelings
about that. The members of the probate committee obviously aren't
unanimous; the members of the Uniform Law Commission members from
Alaska aren't unanimous. At least one of them thinks we should go
with the Uniform National Act; the rest of us are sort of spread
all over the place. I think legislators often tend, when things
are in doubt, not to disturb existing law that has worked and as a
group of commissioners we aren't going to take any position on the
issue and we think that the bill would be an excellent improvement
for Alaska law exactly the way it is or if you choose to go to the
uniform version which does have some theoretical appeal - and maybe
we'd be better - I still have not solidly made up my mind - that's
fine. But either way the important thing is that the bill should
pass. I think what I'm saying is if you can't decide or if there
is considerable controversy over it, please pass the bill anyway
because you aren't changing that facet of Alaska law if you pass it
the way it is.
Number 024
MR. KURTZ: Now the only other real threat of opposition to this
bill was mentioned by Bob and that's the question of whether the
insurance industry will come in and oppose the bill on the grounds
that the augmented estate, which is a fancy term to define what
falls under the Probate Act for purposes of determining who gets
what, that insurance proceeds will now be included in that
augmented estate. And in Alaska, to date as far as we can figure
out and I have talked to several insurance agents about it, members
of the probate committee have also talked to some, there's no
opposition to it. But I do have a letter in my file that I've had
for some time from the American Council of Life Insurance and it's
very strongly opposed to the change. I mention that only because -
because it has been brought up and I don't want the committee to -
to be surprised if it should come up later. It's a national
organization. The main reason -- the main thing that seems to be
aimed at is the situation Bob mentioned where somebody perhaps has
a wife they're not getting a long well with, he has either a
girlfriend or a brother or somebody else he would rather leave
money to - under present law in Alaska, you can go out and
(indisc.) pull cash out of your estate and buy a great large life
insurance policy and have that go to that person and it will not be
part of the augmented estate as it's defined in present Alaska law
and split up. This bill would change that and I think the change
is a good provision and I think everybody else who's testified so
far agrees.
CHAIRMAN PORTER: I have a specific question on that and then I
guess a general question about the expense of probate. But in the
fact situation you just presented, this bill becoming law would
make that life insurance policy that I bought to favor my brother
instead of my wife part of my estate if I die.
MR. KURTZ: That's right.
CHAIRMAN PORTER: How - but getting back to the discussion about
the contract having precedence over the will - what would happen?
This is an exception to that rule - in this case the will provision
would....
MR. KURTZ: Would supersede the contract.
CHAIRMAN PORTER: Supersede the contract.
MR. KURTZ: For the sole purpose of determining the elective share
(indisc.) the elective share of the surviving spouse under the
augmented estate provision.
CHAIRMAN PORTER: If - if I had directed 100 percent of that policy
to my brother, under this law then my wife would retain a third of
it or...
MR. KURTZ: She would if she chose to do so. But she wouldn't just
retain a third of that asset. You'd have to look at all of the
assets of the estate and....
CHAIRMAN PORTER: ...come into the mix.
MR. KURTZ: That's right. And - and it's interesting that we very
seldom - or at least I've never been (indisc.). I cannot recall
the (indisc.) of my law firm is. It's very seldom that this
augmented estate even comes into play. Now it may come into play
behind the scenes at times but to see those litigated outs very
unusual.
CHAIRMAN PORTER: Well, that - that brings me to my broader
question. What is the expense of probate? In other words, does
the value of the - this life insurance policy that results or
accrues to someone by my death - is it diminished somewhat by some
administrative probate cost because of this law now putting it into
that?
MR. KURTZ: No, it's not. It's - the augmented estate defines what
percentage people will take, but the insurance policy money still
doesn't go through the probate proceeding. In fact, I'm glad you
brought that question up because in 1972, a great deal of the
opposition to the adoption of the model act was caused by the
impact it had on attorney's fees, which when I came to Alaska - I
guess I'm naive - when I came to Alaska and practicing law in the
early 60s, I was astonished to find that attorney's fees were based
upon the percentage of the value of the estate. It had nothing to
do with how much work you did or how complicated the estate was.
The person got their affairs in pretty good order before they died
- executed a good will - found his heirs paying the same attorney's
fees as the one who just left everything completely hanging and
screwed up. And partially as a result of the adoption of the
Uniform Probate Code and anti-trust proceedings brought in various
estates against bar associations, that's changed and today your
probate fees are almost invariably based what it takes to untangle
the estate and the court cost fees are based upon a sliding scale
of what goes through the estate and the insurance policy still
isn't going through the estate. What you have is a contract saying
how it would be distributed.
Number 087
CHAIRMAN PORTER: Well, these nonprobate assets that now are
brought into the mix, so to speak, a percentage of that value is
not taken by the probate process?
MR. KURTZ: It's not being transferred automatically. They don't
become part of the probate estate except for purposes for
calculating a share of the estate.
CHAIRMAN PORTER: What is then the basis for the expense of
probate?
MR. KURTZ: Typically, it's time and materials the attorney spends
on the thing and the amount of fees - and I'll defer back to the
Probate Committee on this because I haven't looked at it since 1981
- but it's a percentage of assets that actually pass through the
estate. Now what the augmented estate can cause - let me take a
fairly easy hypo - let's suppose you die with $500,000 of assets
that go through the estate and you have that $1 million insurance
policy you bought for your girlfriend that's outside of the estate
and you're also still married and your wife says, "I'm entitled to
a third of the augmented estate." The augmented estate, including
the insurance policy, would be $500,000 plus a million - it's a
million, five. So she is entitled to $500,000 of that but that's
what she - she can get that much out of the estate without touching
the insurance policy - I'm ignoring federal taxes which is a whole
other story we don't want to talk about. But what the augmented
estate does is define how much money we're looking at or how much
value we're looking for determining the spouse's share but it does
not control what property actually goes through the court
proceeding and is subject of court fees.
CHAIRMAN PORTER: And there isn't a fee to the state for for
probating a will, there's not a fee to the state?
MR. KURTZ: There is a fee for the estate and it's based upon the
percentage of....
CHAIRMAN PORTER: Is that the motivation that you're talking about
for someone losing the will and not taking it down to probate?
MR. KURTZ: No, losing the will - an awful lot of people are made
executors of wills who really are not very business like and they
take care of the will in the same fashion they take care of their
charge accounts and what have you - they're in a drawer some place
and they have a lot of stuff in it - and when they realize they're
executor, they start a new file in the drawer and they go through
and determine there are no assets that need to be probated because
everything's in joint tenancy - the car is, the motor home, the
mutual fund has a pay to ex on my death clause and so on - and they
conclude there's nothing to do and even if there is, throw the
thing away. Or they move on and it gets lost in the clean out of
their house or their apartment.
CHAIRMAN PORTER: Even though current law says that they should
take that will down and file it with the probate court?
MR. KURTZ: Well, they have to file it with the probate court if
they're going to probate it, but they may not need to probate it.
CHAIRMAN PORTER: I'm missing something here.
MR. KURTZ: If there are no assets that you have to have probate
for, then you don't need to probate. There's no law that....
CHAIRMAN PORTER: But now you do under this bill?
MR. KURTZ: No.
CHAIRMAN PORTER: You just have to file it with...
MR. KURTZ: Ya.
CHAIRMAN PORTER: Okay. There's a difference.
MR. KURTZ: Ya.
CHAIRMAN PORTER: Representative Green.
Number 129
REPRESENTATIVE GREEN: Thank you. Kind of piggybacking on the
Chairman's question earlier. In your example of this five hundred
and million dollar life insurance policy, the bottom line was that
in fact the spouse only got one-third - she only got the $500,000
that she would automatically have gotten anyway.
MR. KURTZ: Well in present law, that would the case and under the
case it would still be the same.
REPRESENTATIVE GREEN: Now would IRAs and other things also fall in
the same category with insurance?
MR. KURTZ: Yes.
REPRESENTATIVE GREEN: And that also would still be (indisc.).
MR. KURTZ responded affirmatively.
MR. KURTZ: That's probably a good point for me to - to cease. I
would like to mention one other thing and Bob emphasized it, but
you can hardly emphasize too often. The simultaneous death
provision is extremely important in terms of federal taxes. A lot
of people, particularly again in Alaska, don't feel that they're
wealthy people and they probably aren't, but they may have property
that is valuable enough that it gets them into the federal estate
tax situation. And if you have a family when you add up everything
has $600,000 or $800,000 worth of assets or a million dollars,
it's not unusual in this state at all to find that they have about
$50,000 liquid assets they could put their hands on or 25 or 10.
If the - there isn't a simultaneous or 120 hour survival rule and
that thing gets with two chunks of federal income tax, it could be
a lot tougher on the family or the surviving children than it would
be otherwise. I don't think any of us up here are under the
objection to try and keep money in Alaska and away from the federal
government, if it's possible. Are there any other questions? I'll
try to answer them.
CHAIRMAN PORTER: Jerry, I see none. Thank you very much.
Number 156
REPRESENTATIVE B. DAVIS: Excuse me, what - what is your last name?
MR. KURTZ: Kurtz - K U R T Z.
REPRESENTATIVE B. DAVIS: Okay.
UNIDENTIFIED SPEAKER: Excuse me Jerry, just before you leave. On
that last final point, under federal law if one spouse survives the
other by just minutes, there still is the estate tax or is there
some minimum survival time?
MR. KURTZ: I think I'll refer you to Manly because I'm not sure
whether there is a minimum survival time. I don't think there is
under federal law. State law, what you're in effect you're doing
is saying they died simultaneously if they die within 120 hours of
each. That can help. It's very common for clauses to be put in
wills saying that if you die within 30 days or 60 days or 90 days
of each other that (indisc.) the wills of the concern
simultaneously.
UNIDENTIFIED SPEAKER: Okay, thank you.
CHAIRMAN PORTER: I would just for the record indicate that Mary
Ellen Beardsley from the Department of Law is here. If we have any
questions that the attorneys that are testifying can't answer, we
can always go to Mary Ellen in order to be responsive. Next I have
Deborah Randall.
Number 171
DEBORAH RANDALL, ATTORNEY, DAVIS AND GOERIG: Good afternoon. My
name is Deborah Randall. I'm an attorney with Davis and Goerig.
We're an estate planning firm and I've been practicing for about
eight years. I don't really have that much to add to Bob Manly's
comments. He did an absolutely fabulous job for you guys of
outlining the high points of the bill. I guess I am the vociferous
minority of the Probate Committee and my challenge to you is that
the bill as it stands is a very good bill, but I think it could be
even a better bill. And the reason I say that is for the very
reasons that Bob pointed out some of the things were changed in
this version of the bill that came out last year, House bill 307
which is now House bill 308, which was changed based on some input
from one of the members of the Probate Committee and some of the
objections were with regard to the elective share which Bob talked
about and being that that is such a controversial subject there,
the thought was we should maybe move that out of this bill because
we don't want the whole bill to die. But I am definitely in favor
that. I think it's wonderful and I would encourage if you ever
have the time, I'm sure you're very busy, but this what I have as
the uniform public co-article two which was put out by the Uniform
Laws Committee which gives comment to all of these sections and it
goes through a detailed approach as to why the uniform law
commissioners have felt that this was a good thing to do. It's the
vesting schedule marriage which Bob is opposed to and several
members of our committee. However, I from a practicing point of
view, have seen it where you have a client that comes in that for
whatever reasons has not done a prenuptial agreement and is maybe
into a second marriage, has children from a prior marriage and for
their own reasons can't go through a divorce, you know, because
that's very expensive, but yet wants to do something for the
children from the prior marriage. Based on the way the law is if
you've been married for one year, one day, one week, you're
entitled to one-third of that person's estate. And so, you know I
have seen concrete examples of where that has really gone afoul of
what the person - the testator wanted. And it's for that reason
that I felt that when I saw this first come out I was very much in
favor of it. People say I'm cold hearted, that it takes the love
out of marriage, but remember this is talking about situations
where you want to disinherit a spouse. It's not talking about the
provisions where you're leaving everything to your spouse and
taking care of the spouse. So it might not come up a lot, but when
it does come up in my experience I think this new vesting schedule
could be really good. The other thing that I would definitely --
what was pulled out of this bill in which Bob commented on were the
provisions that we're going to relax the formalities for will
execution. Based on Peter Bordigan's(ph.) letter to the -- I guess
with Sean Parnell's office, they've totally deleted those sections
out. Basically what they were trying to do in here was lessen the
formalities, and you have to understand statute of wills is
centuries old. The whole idea, you know I'm sure when you think
about it in your mind you think of this solemn occasion where you
have to have two witnesses and the quilled pen and you have to make
sure that you sign in the testator's presence. And the idea there
was so that you would avoid people coming up and making wills for
people like they do on all the soaps, you know, when they want to
disinherit somebody they conger up a will and get false signatures.
That's what the statute of wills was there to do. What this new
revised law says is "Okay, we've got that," but what if somebody
does not totally comply with the letter of the law. Are we going
to throw out their intent? And what they tried to do here is say,
"No, we are going to look at the testator's intent. What did the
testator want to do?" And our job is to try to carry out what a
testator wanted. And so what they did here is they said, "Lets
lighten it up a little bit." Bob's comment was that they're afraid
that this is gonna increase more litigation. Well the commentary
in here, and they've taken this from other jurisdictions - I
believe it was Australia - it's not one of the states, but that
they were not getting increased, you know, battles over this. They
we're not getting increased fighting which I'm surprised he would
say it because there lawyers -- that's good for us. I mean the
more fights, the more money we get. But the experience of this
committee was contrary to that. It did not increase litigation.
So as one of them now I was really sad to see that provision taken
out because what I'd like to see this new revision do is to take
the probate code and modernize it. Lets move into the 90s. You
know we were back in the 70s, lets move into the 90s. So when I
say to you that this is a very good law, I do believe that. This
is wonderful. It's very complicated. I think you guys are
fabulous to be able to wade through this. I can't even wade
through it and I practice this day in and day out. But this
commentary - this commentary is absolutely wonderful. I use it
almost as a bible because it does explain what revisions were made.
Bob has highlighted the major ones which are definitely a bonus.
So the only thing that I would say to you is that, you know, the
considerations are always there. What can you put in a bill and
what can you not put in a bill get it to pass. My challenge is
just the maybe the bill as it is could be made even better without
totally jeopardizing the bill. And in that regard, I would suggest
strongly looking at the two code sections that were taken out that
had to do with the formalities of a will. Lets see those were
exactly 13.12.502 and 13.12.503.
CHAIRMAN PORTER: Representative Finkelstein.
Number 241
REPRESENTATIVE FINKELSTEIN: Thank you Mr. Chairman. I really
appreciate your testimony. And I can see on this last point how it
may not necessarily result in more litigation because you, and tell
me if this generalization is incorrect, if you do get more people
into the category of improved will, the wills are going to be
generally simpler documents than having to go into the whole
probate code. I'd assume those people, if you can qualify a will,
which they tend to be relatively straight forward allocation of
assets, you don't have to go into searching for the third cousin
and, you know, all the other things that are out there that aren't
going to be as straight forward in the will so I assume that's part
of the reason that you wouldn't have this much court costs if you
succeed in qualifying more wills if the wills are simpler than the
rest of the system.
Number 252
MS. RANDALL: Well and the thing is that the standard is still
clear and convincing evidence. I mean if you have not met with the
formalities of the will execution, at least in the 502, you still
have to go into the court and show by clear and convincing evidence
that you tried to comply. I mean I'm talking about situations
where maybe a witness - they were back in Dillingham or whatever,
and they could only get one witness and our law required two
witnesses. Are you going to throw out a will because you didn't
have your two witnesses? I think that's what that section is
trying to do. Now 503 takes it further. 503 says, you know, if
it's -- it just says, "Although a document arriving was not
executed in compliance, the document or value is treated as if it
has been executed and compliance." And again, it's clear and
convincing evidence. So you still have a high standard to meet and
I think what they're saying in their commentary is because of that
clear and convincing standard, it's not going to be easy for fraud
to appear for people (indisc.) make up wills and increased
litigation because you still have to show by clear and convincing
evidence that that's what the testator wanted.
Number 266
CHAIRMAN PORTER: I don't know, I can just create in my own mind a
whole lot of scenarios that would lead to litigation, particularly
any time there was an heir in the will who wasn't the heir in the
stated intent by some other witnesses. We've been talking about
these girlfriends. I guess if someone decided that they were gonna
leave their estate to their girlfriend and the adult children would
take exception to that and this gentleman dies, there is the will
leaving everything to the girlfriend. If I understand the law now,
that's a pretty straight forward transfer notwithstanding the hurt
feelings of the children. But if the children wanted to get
together and say, "We heard the old man say just a week before he
died that it was his intent to change that because she had ticked
him off," - I mean isn't that litigation?
Number 281
MS. RANDALL: Well, you know, in my experience you're gonna get
litigation. I mean people will be in litigation for a variety of
reasons. I mean for executing a will, you're supposed to have -
you know be of sound mind disposing memory. Well that's one of the
very first challenges that somebody is going to make, "Well they
were crazy as loon when they wrote this will," so even though if
you don't have a leg to stand on I've still seen people come in and
try to challenge a will.
Number 286
CHAIRMAN PORTER: I have some experience trying to prove intent,
you know in a criminal lawsuit and that's tough. That just adds to
what you are very correctly saying. There is always room for
litigation.
MS. RANDALL: And there is always a spectrum too. I mean certainly
you can talk at an extreme example where you probably do have some
fraud and some collusion and some wrong doing. But then at the
other end of the spectrum you have a person who is in a hospital
who is trying to get a will done and because there weren't enough
witnesses right before they died, they have one witness and you're
gonna say, "Because you did not comply with the formalities of
execution, we're gonna throw it out." So yes, you have a spectrum.
I just would suggest that maybe you read the commentary, the
uniform commissioners did address that issue of whether it would
increase litigation and their finding was that there was nothing to
substantiate that based on prior jurisdictions that have adopted
this law. So what we're doing here is we're speculating what might
happen which indeed might happen if you have the right facts and
circumstances, but in my experience what I've seen to come into my
office is more of the category I'm talking about where you have
somebody who is trying to comply with the letter of the law but
just can't do it for whatever reason. And then we, as lawyers,
have a real uphill battle to try to get that will admitted and we
may or may not. What this would do for us is help us.
Number 303
CHAIRMAN PORTER: I guess what I'm asking you isn't there some
middle ground between the general statement of whatever he intended
and I don't know if that's what this language is, but that's what
described to be as being. Some middle ground between that and
specifically what you're referring to as would relate to an intent
to meet the criteria but some physical explainable inability to do
so shouldn't (indisc.).
MS. RANDALL: And you can always make that argument to the court
which is what we do. But this does -- again this is a clear and
convincing standard which is where you're protection is built in.
I mean I have to be able to come in and by, you know, using
whatever evidence I have, and 502 allows me to bring in extrinsic
evidence to establish for the testator's intent was. I still have
the clear and convincing standard to me which is a very high
standard and if I'm gonna get a lot of people opposing me, yes the
litigation is gonna go up and the expense is gonna go up and that's
happened to a daily basis. If somebody wants to contest a will,
they can do that now today. So I just felt that this was a very
progressive addition. I like to see it just based on my own
experience and I was very sad to see the committee take a - adopt
a position to remove that totally so....
CHAIRMAN PORTER: David.
Number 319
REPRESENTATIVE FINKELSTEIN: Thank you Mr. Chairman. On the other
issue in terms of when the spouse qualifies for the various
thresholds of percents, what does that override? If you've got a
case where they've been in one year and they meet such a percent of
-- does that override prenuptial agreements? Are we only talking
about a circumstance where these are assets and probates.
MS. RANDALL: Absolutely (indisc.) talk before. I mean what I
would - and Bob was telling you prior to the (indisc.) in here, if
I had a prenuptial agreement in the case I'm thinking of I wouldn't
have this problem because in a prenuptial agreement you can set
forth your rise by contract. In the case I had, I had somebody who
was in a second marriage, had not done a prenuptial agreement,
wanted to disinherit his spouse, did not want to get a divorce and
yet he'd been married for like two or three years and his spouse is
automatically entitled to one-third. He did eventually die and you
know what happened. I mean the children from the prior marriage
just blew through the roof and they're stuck. It's one-third. Now
under this vesting schedule which treats it like a partnership, it
takes out the love, the romance of marriage, you know it's more of
a, as they say, partnership approach to marriage. I think it fits
in with a circumstance like this for a client like that. He could
say, "Yes, you've been married three years, you're entitled to
whatever it's 10 percent - 12 percent, but not automatically one-
third."
CHAIRMAN PORTER: David.
REPRESENTATIVE FINKELSTEIN: What portion of -- how often does this
provision occur? It's got to be a place where there is not a
prenuptial agreement and it's got to be a place where the
provisions of the will either -- well it actually only applies if
there is no will. It isn't a matter because these just the
minimums that a will has to meet. Isn't that correct?
Number 344
MS. RANDALL: The elective share is an election the spouse takes
which is contrary to what the will says or what the elective share
is. Now you realize the way we interpret the elective - I mean the
- excuse me - the intestate share spouses are gonna get a half in
some circumstances or the whole estate in others. So the only time
this augmented state usually comes up in my experience is in a
situation where a person actually did a will and actually did
specifically disinherit the spouse.
REPRESENTATIVE FINKELSTEIN: So how often does it occur where a
will is in violation of these minimums? I mean it sounds to me
like it doesn't come up very often.
Number 353
MS. RANDALL: Well in my office right now, just speaking today I've
got three of these issues with the elective share pending right now
and I work probably about 15 to 20 probates. So it is not a lot
that they're there. They're definitely there and I'll tell you
it's usually in second marriages. It's not the first marriage.
It's the second marriage and you have kids from the previous
marriage. That's when the situation comes up. So it does come up.
It does happen. People do not always put their ducks in order.
Unfortunately when they come into you, you know they haven't done
the prenuptial. It's too late to do the prenuptial. So all that
this law does is say, "We can make the law better." Based on our
experience and experience, you know, this was the uniform law
commissioners that looked at this issue, I can't take any credit
for this, but just based on my experience I thought it was a good
thing. I like things that move the law forward which is what I
think this whole Article 2 does. I would just saying I think we
could make it even better.
CHAIRMAN PORTER: If that portion of the suggested Uniform Code
were in law and two people go married, both for the first time, and
one spouse died within a year and there was no will at all....
Number 373
MS. RANDALL: Then you don't have to worry about it because it
would be covered by the intestate law, which in that case when
there is no children, I believe they get 100 percent or if it's
parents I guess it's 200,000 and then the parents get three-
quarters, or the parents get one-quarter. So it would go to the
intestate law which is much more generous.
CHAIRMAN PORTER: This provision would (indisc.).
MS. RANDALL: No. This is really a provision where a spouse has to
make an election for this. This is something, like again, it
doesn't automatically happen. You have to make an election for
this and it usually happens when you've been disinherit (indisc.)
will and you - the spouse says, "Wait a minute, I can get more
under my elective share." So...
Number 384
CHAIRMAN PORTER: There is an awful lot of room for comment outside
of the law.
MS. RANDALL: Right, it is a very controversial subject. In our
probate committee alone we've spent probably several sessions
talking about this so... Thank you.
CHAIRMAN PORTER: Any questions? Thank you Deborah. And last but
not least, an old friend Dick Thwaites.
Number 390
DICK THWAITES: I'm Dick Thwaites. I've been in and around the
estate planning community I guess since the early 70s, have chaired
the probate committee, currently the elder law section of the Bar.
In my discussion here I really wanted to relate to you that in all
of these forms, Anchorage's State Planning Council, all of these
areas - we've discussed this particular bill and as you can see
between Bob and Deborah there was some controversy and so forth.
Without exception I think in all of these forms, the bill that you
have in front of you is the one that everybody can agree to. The
only challenge here is that some people would like to see more than
this. And while I wanted to point out to you was - I'm gonna save
for a little later - some clarification on the attorney fee thing,
but what I wanted to point out to you is that this bill merely
adjusts and changes article two and some other provisions of the
Uniform Probate Code. As big as this is, it really isn't the whole
Uniform Probate Code. What happens is the uniform commissioners,
as they go along, they look at different sections. It could be a
year from now or two years from that you'll see another section of
the Uniform Probate coming up for amendment. That's what I wanted
to point out.
UNIDENTIFIED SPEAKER: Thanks for the warning.
MR. THWAITES: This particular section affects basically Article 2,
but their Article 1 is kind of definitions and jurisdiction of
things and so forth and they didn't feel that required any
modification. This is sort of the administrative core of the
Uniform Probate Code and quite frankly it's a very very beneficial
act in that it brings up to date a lot of the things that have
existed since 1967 and 69 - these things came out. And the estate
planning community, as a whole, all supports what you have in front
of you. I don't think you'll find anyone that disagrees with this
change. There are some, however, as you've noticed that might like
a little more change and it was with that in mind that I wanted to
just clarify that because there are some things out there in some
later sections. In the Uniform Probate Code, for example, is the
section regarding guardianships and conservatorships and trusts and
we're not even touching those in this section. Those are other
articles. This is purely and most directly affecting just Article
2 of the code and it's a good article to implement and get some of
these changes brought forward in, but there may be some others
coming down the road in the future. We don't know what the uniform
commissioners are gonna do, but we do support the concept of the
Uniform Act and almost every Uniform Act I've ever seen come along
has option A, B or C in it, so you end up selecting which are those
are appropriate for your jurisdiction. Many of the sections, for
example, in this particular one there was a different section if
you were a community property estate than if you were a separate
property estate. This bill contains the separate property
provisions which are appropriate to Alaska. And I think by in
large, everyone agrees that what's contained in here is the
appropriate change at a minimum for this. There are some obviously
who would like to see additional changes and more modifications and
so forth to streamline certain other aspects of the administration
process, but by in large everyone -- you can't get a unanimous vote
on it because people want more. But by in large, everyone supports
what you have in front of you right here. I mean this is a good
solid piece of work to accomplish. Shifting back a little bit to
you question before where you were addressing some of these issues
with Jerry, I'd like you to know that Alaska happens to be one of
five states and this is based on a study of the American College
Trust Estates Council, Alaska is one of five states that does not
have a percentage fee arrangement. In other words, in fact in
Alaska the first $52,000 goes to surviving spouse and family
members even before any attorney's fees can be taken. So if you
have an estate under $52,000, you better figure out where you're
gonna get paid before you go into the estate because you're not
allowed to make any claim against the first $52,000 in the estate.
Now it could be that you have separate agreement with a spouse or
that certain other things are out there that are important to get
done and in that instance where a lawyer is required, a lawyer can
be taken. But it is possible, both in Fairbanks and Anchorage, to
represent your self procure - that is to go into probate do the
work on your own without an attorney. And the probate courts are
sometimes very helpful in giving people the basic information they
need. Usually what they do is they say the law library is right
over there, go look it up. That's not maybe so helpful. There are
some probate manuals and things like that and I am familiar with
some people who have done that. Usually when they come into the
lawyer offices after they've gotten into that process and
discovered that maybe the planning that they had done as a family
wasn't so good and there were some issues that didn't get resolved
and maybe a lawyer needs to help them straighten those out. The
state of Alaska actually only picks up $102.50. There is a $100
filing fee no matter what the size of the estate is and there is a
$2.50 fee to the Department of Revenue for a determination of
whether there is a tax or there isn't a tax and that's it. It's
the same for every estate. Five states, Maine, Tennessee,
Wisconsin, Idaho and Alaska do not have percentage fees. This is
according to American college studies that were done. That means
that in this state in Alaska you get (indisc.) dollar estate if you
did all the planning right, the whole probate cost for six months
or a year worth of work might be $1,500 or $2,000 depending on how
much work is involved. On the other hand, you could have a
$100,000 estate that might require $40,000 or $50,000 because
everybody is fighting over every nickel and that just depends on
how the planning is done and how the family relates to one another.
So it's actually just paid for based on the amount of planning, the
amount of work and the amount of fight that arises and toward that
circumstance, I think Alaska has a pretty good program. It
certainly is one of the least costly states. There are many
experts who have been up here to talk to us from a community and
legal education standpoint who have suggested that the standard
living trust mechanism that is throughout the rest of the United
States be a state planning tool is not necessary in Alaska because
we don't have percentage fees. The personal representative doesn't
get a fee based on the percentage. They only get reimbursed for
what their expenses are and what work they do. The lawyer only
gets reimbursed for what work is done and so it's basically a
pretty equitable situation that if you do the work and you do the
planning, there might not be such extensive fees involved. If you
don't, if you leave it to chance then it depends on who is gonna be
there at the time you pass away and who is gonna have their hand
out to see what's gonna happen and that's where the fight usually
occurs.
Number 496
REPRESENTATIVE BUNDE: Mr. Chairman.
CHAIRMAN PORTER: Representative Bunde.
REPRESENTATIVE BUNDE: A bit off the subject, but I understand that
the Department of Revenue could give you a determination for $2.50.
MR. THWAITES: Well, not exactly. The Department of Revenue will
give you a certificate for $2.50 saying that you have presented to
them information saying either there is a federal estate tax return
due or there is not. If you send in a report saying there is not,
in essence what happens is they send you a certificate back which
is an estate tax closing letter and the probate court won't close
the estate until they have that certificate back. So if there is
a tax due, state of Alaska would like to know that it's received
it's share of the federal tax or if there is no tax due then they
want to know that. I think that's the only department in state
government who could send a letter for under $25. I think maybe
that needs to be looked at.
CHAIRMAN PORTER: That's only because they - half of those
circumstances get money back from the percentage of the tax. Dave.
REPRESENTATIVE FINKELSTEIN: Thank you, Mr. Chairman. Of course
they actually don't send the letter for $2.50, we just don't charge
enough I'm sure, which brings me to the question of there is a
bigger picture and I don't particularly understand this world at
all. What is the state getting out of these from any sort of tax
that compensates for the court costs and other costs involved?
Looking at the whole picture of any other taxes, what does the
state get for a case going through the court system.
Number 520
MR. THWAITES: Well there is no tax in the court system that is
assessed by the state.
REPRESENTATIVE FINKELSTEIN: This just shows how little I know
about it. Do we have any separate inheritance taxes or....
MR. THWAITES: No, the federal government has a federal estate tax
and in the federal estate tax they have a provision that says
basically a certain percentage of the federal tax will be given as
a credit back against the state estate tax or inheritance tax. Now
an estate tax is a tax against the estate. An inheritance tax is
based on who is receiving the property. So an inheritance looks at
it from the standpoint that if you're a spouse or a child, it's a
low rate. If you're a stranger or some more distant relative, it's
a higher rate.
CHAIRMAN PORTER: Is this an IRS provision?
MR. THWAITES: No, some states have inheritance tax, but here we
have what is referred to in the industry is a piggyback tax. And
basically the piggyback tax is out of a - if there is a $2 million
estate and the amount of tax is payable if the estate planning was
done right were in the vicinity of say $300,000, the federal
government says we'll allow you a credit of something like say
$50,000 for the state credit. In other words, you only have to
send up $250,000, you send the other $50,000 to the state.
REPRESENTATIVE FINKELSTEIN: If there is a stated estate tax.
MR. THWAITES: Yes, and Alaska has adopted the piggyback tax rule
for the feds which means it's sort of self policing because the
state of Alaska, Department of Revenue, doesn't have to have a
division out there doing the administration. They know that
anybody whose subject to the federal tax is also subject to the
state and they require -- with the $2.50, they require a copy of
the federal form 706 to be filed, which looking down they see that
the state of Alaska is entitled to a certain amount and they want
to know where their check is. And then you get the $2.50 closing
letter back after you send them the $80,000 check or whatever the
percentage is that belongs to the state. It's kind of self
policing because nobody is gonna do anything with the feds because
of the threat there I think.
CHAIRMAN PORTER: Instead of a credit then it's an actual refund.
Well no I guess...
MR. THWAITES: No, when you file your 706 federal return, it's
required to be filed at the end of nine months. You can get an
extension to 15 months. The state estate tax is due with 15
months.
CHAIRMAN PORTER: Is this piggyback provision somewhere in the
probate code? Is that where it is?
MR. THWAITES: Yeah, it's Department of Revenue.
REPRESENTATIVE FINKELSTEIN: Mr. Chairman, for our next
consideration of this bill during session could we try to find out
what we get each year in state estate taxes? I didn't even know it
existed. It might be - do you have any idea on what...
UNIDENTIFIED SPEAKER: I don't think this bill would affect that
one way or the other.
REPRESENTATIVE FINKELSTEIN: No, prior to finding this out I was
thinking how can we add on some fees to recoup some of these costs.
There is enough money coming in to cover the costs then it may not
be an issue, but I think we do need to try to cover our costs where
necessary especially on the large settlements.
CHAIRMAN PORTER: Any other questions of Dick. If not, Dick thank
you very much. I have no one else signed up to testify. Is there
anyone here who wishes to give testimony on HB 308 that has not?
Seeing none, Mr. Sponsor is there anything else you'd like to...?
REPRESENTATIVE FINKELSTEIN: No thanks, Mr. Chairman, I just
appreciate you holding a hearing on the bill during the interim.
Visit it again during session.
CHAIRMAN PORTER: It was helpful to me and I know to the other
members and we can now quite frankly read this and have a clue as
to what it was.
REPRESENTATIVE B. DAVIS: Mr. Chairman, I'd like to know how I
could get a copy of that commentary. What would I have to do? How
would I go about it? It would be better to do it here.
CHAIRMAN PORTER: Representative Finkelstein.
REPRESENTATIVE FINKELSTEIN: Thank you Mr. Chairman, I too will try
to (indisc.) and come up with more specific issues is there any.
The only one that hits me so far which if there is any way to get
a little bit material when we take this up is this issue that came
up in regard to the circumstance when the will is in conflict with
the minimums required and on that one I thinks can be real helpful
for me to have both the current provision is in this bill without
change the existing law and the proposed changes that weren't
adopted just so we could have both sides of it to discuss at that
point because it -- I think the other -- I didn't find any that I
felt were particularly controversial, but I think this one is
(indisc.).
CHAIRMAN PORTER: Well in effect, that provision is not in front of
us. Do you want to bring it in front of us?
REPRESENTATIVE FINKELSTEIN: Yes.
CHAIRMAN PORTER: Oh sure, thanks.
REPRESENTATIVE FINKELSTEIN: I don't know exactly where I follow it
either, but I just think it isn't a particularly heartless thing to
take it on because while there may be some spouse that's losing out
somewhat, a particular percent, there is a whole bunch of other
people involved too which are relatives and various....
TAPE 95-61, SIDE A
Number 001
REPRESENTATIVE FINKELSTEIN: It's certainly better we do it in the
committee than try to deal with it on the floor. This kind of
bill, you know, has got terrible (indisc.) certainly encourage our
getting it onto the floor early because this thing can be so
(indisc.), everyone has had some experience.
CHAIRMAN PORTER: I'll tell you what. I'll make you a deal David.
The bill is quite weighty as it is. If you want to look into that
issue and propose an amendment, we can certainly look at it. The
little discussion that I've had on it, it would dominate the
discussion with 1/100 of what the value of the rest of the bill is
and I want to try to avoid that. Is there anything else to come
before the committee? If not thank you very much, we're adjourned.
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