Legislature(2011 - 2012)BARNES 124

02/29/2012 03:15 PM LABOR & COMMERCE

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-- Meeting Delayed to 4:00 p.m. Today --
Heard & Held
Heard & Held
                    ALASKA STATE LEGISLATURE                                                                                  
          HOUSE LABOR AND COMMERCE STANDING COMMITTEE                                                                         
                       February 29, 2012                                                                                        
                           4:04 p.m.                                                                                            
MEMBERS PRESENT                                                                                                               
Representative Kurt Olson, Chair                                                                                                
Representative Craig Johnson, Vice Chair                                                                                        
Representative Mike Chenault                                                                                                    
Representative Dan Saddler                                                                                                      
Representative Steve Thompson                                                                                                   
Representative Lindsey Holmes                                                                                                   
Representative Bob Miller                                                                                                       
MEMBERS ABSENT                                                                                                                
All members present                                                                                                             
COMMITTEE CALENDAR                                                                                                            
HOUSE BILL NO. 292,                                                                                                             
"An  Act relating  to property  exemptions for  retirement plans;                                                               
relating to  pleadings, orders, liability, and  notices under the                                                               
Uniform  Probate  Code;  relating  to the  Alaska  Principal  and                                                               
Income Act;  relating to the  Alaska Uniform Transfers  to Minors                                                               
Act; relating  to the disposition  of human remains;  relating to                                                               
insurable  interests for  life  insurance  policies; relating  to                                                               
transfers  of  individual  retirement   plans;  relating  to  the                                                               
community property of married persons;  and amending Rule 301(a),                                                               
Alaska Rules of Evidence."                                                                                                      
     - HEARD & HELD                                                                                                             
HOUSE BILL NO. 266                                                                                                              
"An Act  relating to the  practice of naturopathy;  and providing                                                               
for an effective date."                                                                                                         
     - HEARD & HELD                                                                                                             
PREVIOUS COMMITTEE ACTION                                                                                                     
BILL: HB 292                                                                                                                  
SHORT TITLE: PRINCIP.& INC/PROBATE/UTMA/RETIREMT/ETC.                                                                           
SPONSOR(s): REPRESENTATIVE(s) THOMPSON                                                                                          
01/20/12       (H)       READ THE FIRST TIME - REFERRALS                                                                        
01/20/12       (H)       L&C, JUD, FIN                                                                                          
02/29/12       (H)       L&C AT 3:15 PM BARNES 124                                                                              
BILL: HB 266                                                                                                                  
SHORT TITLE: PRACTICE OF NATUROPATHY                                                                                            
SPONSOR(s): REPRESENTATIVE(s) MUNOZ, TUCK, THOMPSON                                                                             
01/17/12       (H)       PREFILE RELEASED 1/13/12                                                                               
01/17/12       (H)       READ THE FIRST TIME - REFERRALS                                                                        
01/17/12       (H)       L&C                                                                                                    
02/08/12       (H)       L&C AT 3:15 PM BARNES 124                                                                              
02/08/12       (H)       Heard & Held                                                                                           
02/08/12       (H)       MINUTE(L&C)                                                                                            
02/17/12       (H)       L&C AT 3:15 PM BARNES 124                                                                              
02/17/12       (H)       Heard & Held                                                                                           
02/17/12       (H)       MINUTE(L&C)                                                                                            
02/29/12       (H)       L&C AT 3:15 PM BARNES 124                                                                              
WITNESS REGISTER                                                                                                              
JANE PIERSON, Staff                                                                                                             
Representative Steve Thompson                                                                                                   
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Presented a brief overview of HB 292, on                                                                 
behalf of the prime sponsor, Representative Steve Thompson.                                                                     
DAVE SHAFTEL, Attorney                                                                                                          
Shaftel Law Offices, LLC                                                                                                        
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Testified and presented a sectional                                                                      
analysis of HB 292.                                                                                                             
DOUG BLATTMACHR, President; Chief Executive Officer                                                                             
Alaska Trust Company                                                                                                            
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Testified in support of HB 292.                                                                          
DANIEL YOUNG, Naturopathic Doctor                                                                                               
Chugiak, Alaska                                                                                                                 
POSITION STATEMENT:  Testified in support of HB 266.                                                                          
JANE MADISON                                                                                                                    
Soldotna, Alaska                                                                                                                
POSITION STATEMENT:  Testified in support of HB 266.                                                                          
MARY MINER, Naturopathic Doctor                                                                                                 
Fairbanks, Alaska                                                                                                               
POSITION STATEMENT:  Testified in support of HB 266.                                                                          
DAVID OTTESEN                                                                                                                   
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Testified in support of HB 266.                                                                          
TIM PETERSON, Allopathic Doctor                                                                                                 
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Testified during the discussion of HB 266.                                                               
ACTION NARRATIVE                                                                                                              
4:04:33 PM                                                                                                                    
CHAIR KURT  OLSON called  the House  Labor and  Commerce Standing                                                             
Committee  meeting  to  order  at   4:04  p.m.    Representatives                                                               
Johnson,  Saddler, Thompson,  Holmes,  Chenault,  and Olson  were                                                               
present at the  call to order.  Representative  Miller arrived as                                                               
the meeting was in progress.                                                                                                    
        HB 292-PRINCIP.& INC/PROBATE/UTMA/RETIREMT/ETC.                                                                     
4:05:28 PM                                                                                                                    
CHAIR OLSON announced  that the first order of  business would be                                                               
HOUSE BILL NO.  292, "An Act relating to  property exemptions for                                                               
retirement plans;  relating to pleadings, orders,  liability, and                                                               
notices under  the Uniform Probate  Code; relating to  the Alaska                                                               
Principal  and  Income  Act;  relating   to  the  Alaska  Uniform                                                               
Transfers to  Minors Act;  relating to  the disposition  of human                                                               
remains;  relating  to  insurable interests  for  life  insurance                                                               
policies; relating  to transfers of individual  retirement plans;                                                               
relating  to  the  community property  of  married  persons;  and                                                               
amending Rule 301(a), Alaska Rules of Evidence."                                                                                
4:05:58 PM                                                                                                                    
JANE PIERSON, Staff, Representative  Steve Thompson, Alaska State                                                               
Legislature,  on behalf  of  the  bill's sponsor,  Representative                                                               
Thompson, stated  that HB 292 is  a trust bill and  she then read                                                               
the title  of the bill.   She  indicated that Dave  Shaftel would                                                               
walk the committee through the bill.                                                                                            
4:07:28 PM                                                                                                                    
DAVE SHAFTEL, Attorney, Shaftel Law  Offices, LLC, stated that he                                                               
is  an attorney  in private  practice who  works in  the area  of                                                               
estate and  estate and  trust administration.   He related  he is                                                               
also a member of an informal  group of lawyers and trust officers                                                               
who have worked  with the legislature for  approximately 14 years                                                               
on estate  law to  make recommendations to  improve this  area of                                                               
Alaska's law.  He highlighted  that Alaska is considered a leader                                                               
in estate law,  such that many states have  copied Alaska's laws.                                                               
He characterized  this area of  law as  a dynamic one  across the                                                               
U.S.   Estates affect  nearly everyone  so improving  estate laws                                                               
will  help  all  Alaskans.    This is  a  particularly  good  and                                                               
thorough  bill  that  covers  a  number  of  "bread  and  butter"                                                               
subjects,  which  are  the  types  of  things  that  affect  many                                                               
4:09:17 PM                                                                                                                    
MR. SHAFTEL provided  a section by section analysis  of the bill.                                                               
He  stated  that  Section  1 pertains  to  asset  protection  for                                                               
inherited retirement  plans.  He explained  that retirement plans                                                               
are protected from  an employee's creditors by  federal and state                                                               
law.   Under  federal law,  the bankruptcy  courts have  extended                                                               
this protection  to the beneficiaries  of a retirement plan.   He                                                               
related a scenario in which in  which a husband has an individual                                                               
retirement account  (IRA) or retirement interest  and passes away                                                               
and names his  wife as beneficiary.  Thus the  wife's interest in                                                               
the plan would be protected from her creditors.                                                                                 
MR.  SHAFTEL stated  that this  represents the  majority rule  in                                                               
bankruptcy  courts.    There  are  12  jurisdictions  which  have                                                               
enacted  this type  of protection  under their  bankruptcy codes,                                                               
including Arizona, Florida, and Texas.                                                                                          
4:11:04 PM                                                                                                                    
MR. SHAFTEL turned  to proposed Section 2, which  is a conforming                                                               
amendment  for Section  28, while  Section 3  offers definitional                                                               
changes relating  to the provision  just described.   The changes                                                               
in Section 4 pertain to  settlement agreements and representation                                                               
for settlement agreements.  He  explained that practical problems                                                               
arise   in  reaching   settlement   agreements  in   non-judicial                                                               
settlement proceedings  or in court.   He  characterized Alaska's                                                               
statute  as  a good  statute.    This  would allow  someone  with                                                               
similar interests, such  as a parent, to  represent his/her minor                                                               
children in a  settlement agreement.  The problem  was that while                                                               
it is clear it pertains  to judicial proceedings, questions arose                                                               
as  to   whether  the  provision   pertained  to  out   of  court                                                               
4:12:05 PM                                                                                                                    
REPRESENTATIVE SADDLER  referred back to the  example for Section                                                               
1,  which outlines  that the  surviving spouse's  interest in  an                                                               
Individual  Retirement  Account (IRA)  would  be  protected.   He                                                               
asked  for  clarification  on how  this  provision  would  affect                                                               
children who  were partial beneficiaries  of an IRA.   He pointed                                                               
out this is the case for his wife and children.                                                                                 
MR.  SHAFTEL answered  that the  protection would  apply to  each                                                               
4:13:08 PM                                                                                                                    
MR. SHAFTEL  turned again  to settlement  agreements.   He stated                                                               
that Section  4 and Section 5  will make it clear  that this type                                                               
of  representation  would  apply to  settlement  agreements  made                                                               
outside  a judicial  setting.   He  gave an  example  in which  a                                                               
trustee  renders  an accounting,  noting  in  such instances  the                                                               
mother  can approve  the  accounting for  herself  and her  minor                                                               
children.   He explained  that this provision  is binding  on the                                                               
minor  children since  the interest  of children  is same  as the                                                               
mother's  interest.   He pointed  out  that this  provision is  a                                                               
clarification provision of AS 13.06.120.                                                                                        
4:13:59 PM                                                                                                                    
REPRESENTATIVE SADDLER  asked for  further clarification  on same                                                               
interest or equivalent monetary interest.                                                                                       
MR. SHAFTEL  answered that the interest  does not need to  be the                                                               
same monetary  interest.  He  referred to the same  scenario, but                                                               
related in  this instance, 50  percent of the IRA  was designated                                                               
for the  surviving spouse, and  10 percent to the  surviving five                                                               
children, three of whom are minors.   If the will was challenged,                                                               
the spouse could agree to it  for herself and for the three minor                                                               
children.   He related that  the children would  essentially have                                                               
the same interest  as the mother.  Thus the  mother would protect                                                               
her share as well as the children's' shares.                                                                                    
REPRESENTATIVE SADDLER  related his  understanding that  it would                                                               
be the same class of interest as a creditor.                                                                                    
4:15:57 PM                                                                                                                    
MR. SHAFTEL stated that proposed  Sections 6-8 pertains to a type                                                               
of  trust  modification  referred  to  as  decanting,  which  has                                                               
developed  nationwide in  order  modify an  irrevocable trust  to                                                               
correct errors  and to adjust  for changed circumstances  and new                                                               
laws.   In 1998,  Alaska enacted its  decanting statute  under AS                                                               
13.36.157.   At that time,  Alaska was  the third state  to enact                                                               
that type  of law,  which was modeled  after New  York's statute.                                                               
Since  that time,  then 13  other states  have enacted  decanting                                                               
statutes and three others have  pending changes.  This has become                                                               
a popular  way to handle irrevocable  trusts.  In 2011,  New York                                                               
substantially revised  its law.   The proposed changes in  HB 292                                                               
amendment  closely tracks  the New  York provisions  with certain                                                               
procedural changes to accommodate references to our law.                                                                        
4:17:46 PM                                                                                                                    
MR.  SHAFTEL  referred  to  the  proposed  Sections  9-25,  which                                                               
pertain  to  the  Uniform  Alaska   Principal  and  Interest  Act                                                               
(UAPIA).   He  provided a  brief  history, noting  that in  2003,                                                               
Alaska updated  their UAPIA act.   One  of the main  changes made                                                               
was to create  a unitrust approach for determining  the income of                                                               
the trust.   Often, many trusts provide for income  to be paid to                                                               
the spouse  and after  his/her death, will  pay the  remainder of                                                               
the estate to surviving children  in equal shares.  This approach                                                               
has  created  a tension  between  the  surviving spouse  and  the                                                               
children  since  the  surviving spouse  often  is  interested  in                                                               
investing  the  estate's  assets  to produce  income,  while  the                                                               
children  prefer  to  have  assets  invested  to  produce  equity                                                               
growth.  Therefore,  while the spouse would often  want to invest                                                               
in bonds,  the children would  prefer to  invest in stocks.   The                                                               
unitrust concept was developed to  alleviate that tension.  Under                                                               
a  unitrust, instead  of paying  income the  trust would  require                                                               
payment of  a percentage of assets,  such as four percent  of the                                                               
assets that exists at the beginning  of the year.  Thus if stocks                                                               
provided  the  best  investment,   the  family  could  invest  in                                                               
equities and  sell four  percent of  them each  year.   After the                                                               
unitrust  concept was  enacted,  over time  the  IRS has  enacted                                                               
regulations related  to the  unitrust.   The unitrust  concept is                                                               
one  that has  been  used  nationwide.   He  said a  Philadelphia                                                               
attorney who  is a  specialist in  this area  of estate  law, has                                                               
recommended  changes  to  update  Alaska's unitrust  laws.    The                                                               
changes would allow  a trustee to choose a  unitrust rate without                                                               
going to  court.  The  unitrust rate does not  have to be  set at                                                               
four percent, but is flexible and  could range from three to five                                                               
percent.   These changes  provide a  better definition  of income                                                               
and  an  ordering  of  income  among  the  types  of  income  and                                                               
principal, such as capital gains,  ordinary income, and return of                                                               
principal.   Additionally, this also provides  a smoothing period                                                               
of up  to five years for  determining the amount of  assets. This                                                               
helps  avoid fluctuations  by using  a five-year  average of  the                                                               
value of the  assets in the trust and applies  that percentage to                                                               
the  average.   This provision  would also  clarify the  unitrust                                                               
method can  apply to  retirement benefits, as  well.   He offered                                                               
his  belief that  these changes  will facilitate  the use  of the                                                               
unitrust concept for Alaska's residents.                                                                                        
4:21:34 PM                                                                                                                    
REPRESENTATIVE HOLMES asked  whether it is fair to  say that this                                                               
would make the  trust law a little more like  how foundations are                                                               
run, which is a percent of market value calculation to be used.                                                                 
MR. SHAFTEL answered yes.                                                                                                       
4:22:01 PM                                                                                                                    
REPRESENTATIVE SADDLER questioned whether  this would resolve the                                                               
growth versus income issue just raised.   He pointed out that the                                                               
children  may still  want long-term  growth  investments and  the                                                               
spouse may want bonds for short-term return on investment.                                                                      
MR.  SHAFTEL offered  to  clarify  this aspect  more  fully.   He                                                               
explained that in  2003, Alaska's law was changed  to address the                                                               
growth  versus income  aspects.   He agreed  the changes  he just                                                               
described did not focus on this  issue.  He offered to illustrate                                                               
the basic  changes by  relating a scenario  in which  an existing                                                               
trust would distribute  income to his wife.  After  she dies, the                                                               
trust  would  pay  the  remainder  of the  assets  to  his  three                                                               
children.  He  highlighted that this trust could  be converted to                                                               
a  unitrust.    Thus,  instead  of  having  the  tension  between                                                               
investing  for income  or  equity growth,  the  trustee would  be                                                               
given direction,  for example, to  pay five percent each  year of                                                               
the  value of  assets to  his spouse.   Thus,  the changes  would                                                               
allow the  trustee to invest  to maximize the best  total return,                                                               
which is  also called a  total return  unitrust.  He  offered his                                                               
belief his spouse  will be satisfied so long as  she receives the                                                               
five  percent annually.   Of  course,  she would  hope the  trust                                                               
funds will be invested to maximize the best total return.                                                                       
4:24:17 PM                                                                                                                    
REPRESENTATIVE  SADDLER  clarified  the  three  to  five  percent                                                               
election is based on the corpus and not the proceeds.                                                                           
MR. SHAFTEL agreed.                                                                                                             
4:24:31 PM                                                                                                                    
MR. SHAFTEL turned to proposed  Sections 26-28, which he said was                                                               
initially suggested  by a legislator  and relates to  the Uniform                                                               
Transfer to Minors  Act (UTMA).  He pointed out  that every state                                                               
has  an UTMA.   He  described  a UTMA  as an  informal method  of                                                               
creating a  trust.  A person  could go to bank  or brokerage firm                                                               
to create an  account and make gifts to the  account.  Over time,                                                               
the UTMA  can build up  and become  substantial assets.   The law                                                               
dictated that if the deposits  were gifts, when the child reaches                                                               
age  21, he/she  is entitled  to the  fund, but  up until  then a                                                               
custodian is  named to  the account.   The  custodian may  be the                                                               
person who  contributed to the  UTMA or  it may be  someone else.                                                               
The custodian  can also spend the  money on behalf of  the child.                                                               
He pointed out  that problems have developed since  some of these                                                               
accounts  represent  very  substantial  assets.    When  a  child                                                               
reaches the  age of 21,  he/she may not  be ready for  the assets                                                               
due  to  maturity  problems  or   the  child  may  not  have  the                                                               
experience  to  handle  substantial  funds since  it  may  derail                                                               
him/her   from  attending   college  or   developing  a   career.                                                               
Additionally,  a drug  or alcohol  problem may  exist that  would                                                               
only be exacerbated if he/she receives substantial funds.                                                                       
4:26:51 PM                                                                                                                    
MR.  SHAFTEL explained  that this  issue  has arisen  nationwide.                                                               
Under the IRS  code, the child must be given  the right to compel                                                               
for distribution  at age  21; however, if  the child  agrees, and                                                               
often  that is  the  case,  under existing  law  the  age can  be                                                               
extended to  age 25.  He  pointed out there isn't  any reason the                                                               
age cannot be extended beyond 21  or 25.  This statute allows the                                                               
custodian to  give notice  to the  child to  extend the  trust up                                                               
until  the age  of 30.   The  child has  the right  at age  21 to                                                               
compel  a  distribution, but  if  the  child  agrees it  will  be                                                               
extended to  age 30.   He offered his  belief that often  a child                                                               
will recognizes  he/she is not  quite ready to manage  the funds.                                                               
He reiterated that  the custodian has a fiduciary  duty to manage                                                               
the funds for the benefit of the child.                                                                                         
4:28:22 PM                                                                                                                    
REPRESENTATIVE  SADDLER asked  whether  there is  an outside  age                                                               
MR. SHAFTEL  answered no, but  the longer the extension  the more                                                               
likely the child will not agree  to an extension.  He stated that                                                               
there could  be a series  of these  extensions.  In  practice the                                                               
wisest proposal would be to  propose a reasonable extension, then                                                               
when the  child reaches that  age, to propose  another extension.                                                               
He reminded members  that the beneficiary is  considered an adult                                                               
at 18 and the assets are his/her property.                                                                                      
4:29:38 PM                                                                                                                    
REPRESENTATIVE CHENAULT  asked whether  the child would  have the                                                               
ability to  receive the funds  at any  time.  He  also understood                                                               
that  the  agreement would  allow  the  custodian to  extend  the                                                               
MR.  SHAFTEL  answered that  once  assets  are deposited  to  the                                                               
account the custodian  would manage the funds for  the minor that                                                               
the child has right to demand  the assets until the child reaches                                                               
age 18, or if the UTMA represents  a gift at age 21.  However, if                                                               
the  custodian approaches  the child  at age  21 and  proposes an                                                               
extension to age  25, which is agreed to by  the child, the child                                                               
would not have access to the  assets until he/she reached age 25.                                                               
He cautioned  that the custodian  has a  fiduciary responsibility                                                               
to the  child, so if the  child needed funds for  college and the                                                               
custodian  refused,  the  custodian  would  be  in  violation  of                                                               
his/her  fiduciary duties.    In that  instance  the child  could                                                               
petition the  court for  remedy; however,  the child  cannot just                                                               
demand assets at  will.  He reiterated that  the custodian cannot                                                               
act unreasonably.                                                                                                               
4:32:10 PM                                                                                                                    
REPRESENTATIVE CHENAULT related his  understanding that the child                                                               
would have  access to  the funds unless  he/she agrees  to extend                                                               
the UTMA to ages 25 or 30.                                                                                                      
MR. SHAFTEL agreed.                                                                                                             
4:32:37 PM                                                                                                                    
MR.  SHAFTEL referred  to  Section 29  to  the decedent  remains.                                                               
Alaska does  not presently have statutory  authority with respect                                                               
to  who may  control  the disposition  of  a decedent's  remains,                                                               
which is an issue that  was identified during the estate planning                                                               
sessions.    Significant disputes  have  arisen,  which not  only                                                               
affect  the  decedent,  his/her  family,  but  also  the  funeral                                                               
businesses.   He explained that his  group would like to  make it                                                               
clear who  has the power to  make these decisions and  to protect                                                               
funeral businesses from any liability.   Thus Section 29 provides                                                               
authority for  a person  to sign  a form to  clarify who  has the                                                               
authority to make final decisions.   If a person has not signed a                                                               
form,  this provision  contains a  priority list  identifying who                                                               
can make any decisions on behalf of a decedent.                                                                                 
4:34:45 PM                                                                                                                    
REPRESENTATIVE CHENAULT  asked for clarification of  who is first                                                               
and last on the priority list just mentioned.                                                                                   
MR. SHAFTEL referred to page 24,  to the proposed AS 13.75.020 of                                                               
HB  275,  which outlines  the  order  of  those who  may  control                                                               
disposition  of   a  decedent's   remains,  beginning   with  the                                                               
designee,   followed   by   the  person   serving   as   personal                                                               
representative, the  spouse, and  sole adult  child.   He related                                                               
that the proposed statute lists a total of eight priorities.                                                                    
4:35:42 PM                                                                                                                    
REPRESENTATIVE  SADDLER asked  whether a  personal representative                                                               
is different class than executor of the estate.                                                                                 
MR. SHAFTEL answered  that most wills will  identify the personal                                                               
representative, who  is the person  to handle the probate  as the                                                               
manager  of the  will.   In  further  response to  Representative                                                               
Saddler, he agreed  that this person is also the  executor of the                                                               
4:36:39 PM                                                                                                                    
MR. SHAFTEL  referred to Section  30 to insurable interests.   He                                                               
explained  that  in order  to  buy  a  life insurance  policy  on                                                               
someone's life,  the person must  have an insurable interest.   A                                                               
person cannot  randomly buy life  insurance policies  for others.                                                               
In  2005,  a federal  court  case  in  Virginia, Chawla,  ex  rel                                                             
Giesinger  V.  Transamerica Occidental  Life  Ins.  Co., 2005  WL                                                             
405405 (E.D. Va.  2005) raised questions as to  whether a trustee                                                               
of a  life insurance  trust had an  insurable interest  and could                                                               
buy insurance  on the  settlor's life.   Additionally,  it raised                                                               
questions about  partnerships and limited  liability corporations                                                               
(LLCs).  The  Uniform Law Commission studied the  matter and made                                                               
amendments to the Uniform Trust  Code.  This section, Section 30,                                                               
would  incorporate  these amendments  to  make  it clear  that  a                                                               
trustee  or  general partner  or  manager  may buy  an  insurance                                                               
policy on  a family  member if the  beneficiaries are  people who                                                               
would have insurable interest.                                                                                                  
4:38:52 PM                                                                                                                    
REPRESENTATIVE  JOHNSON moved  to  adopt  the proposed  committee                                                               
substitute  (CS)  for  HB 292,  labeled  27-LS1232\B,  Bannister,                                                               
2/22/12, as the working document.                                                                                               
CHAIR OLSON objected  for purpose of discussion.   There being no                                                               
objection, Version B was before the committee.                                                                                  
4:39:56 PM                                                                                                                    
MR. SHAFTEL referred  to Section 31, which  pertains to transfers                                                               
of individual  retirement account (IRA) interests.   He explained                                                               
that  lifetime  estate  planning  often  involves  making  gifts,                                                               
sales,  or  other transfers  of  property  to family  members  or                                                               
trusts for  their benefit.  He  offered his belief that  this has                                                               
become  more  popular  as  the  estate and  gift  tax  laws  have                                                               
changed.    This  provision  would  allow  the  transfer  of  IRA                                                               
interest  to a  grantor trust  for  the benefit  of the  employee                                                               
participant's family  members.   He related  that no  adverse tax                                                               
consequences would  occur and would  allow the participant  of an                                                               
IRA to  voluntarily transfer his  or her  IRA, and any  growth of                                                               
the IRA, out of transferors'  gross estate for federal estate tax                                                               
4:41:29 PM                                                                                                                    
REPRESENTATIVE SADDLER  asked whether this would  allow people to                                                               
transfer their IRA during their lifetime.                                                                                       
MR. SHAFTEL  answered yes.   He expanded on this,  noting adverse                                                               
tax consequences would occur if it  was done to other than a gran                                                               
tour trust.   He highlighted  that this provision will  likely be                                                               
used  on  irrevocable  trusts,   with  respect  to  transfers  or                                                               
contributions by  the settlor  of the  trust, without  any income                                                               
tax consequences.                                                                                                               
4:42:24 PM                                                                                                                    
REPRESENTATIVE SADDLER  asked if other states  allow transfers of                                                               
IRA interests.                                                                                                                  
MR. SHAFTEL  answered no.   He stated  that this is  probably the                                                               
first time this provision would be enacted nationwide.                                                                          
REPRESENTATIVE SADDLER questioned the IRS implications.                                                                         
MR. SHAFTEL answered  prior to estates using  this provision that                                                               
the  parties would  likely  apply  to IRS  for  a private  letter                                                               
4:43:00 PM                                                                                                                    
MR. SHAFTEL turned  to proposed Section 32-36,  which pertains to                                                               
community property law.   In 1998, Alaska was the  tenth state to                                                               
enact an  optional community property  system, which  consists of                                                               
primarily  western  states,   including  Washington,  California,                                                               
Nevada,  Arizona,  New  Mexico,  Texas,  Louisiana,  as  well  as                                                               
Wisconsin.  He  explained that the community  property concept is                                                               
a sharing  concept between  spouses, with  each spouse  owning 50                                                               
percent  of  the  property,  with   very  attractive  income  tax                                                               
implications.   When the  first spouse dies,  both halves  of the                                                               
community  property  receive  an  adjustment,  which  allows  the                                                               
surviving spouse  to sell property  without paying  capital gains                                                               
tax.     He  explained  that  implementation   and  clarification                                                               
provisions are needed.   He explained that  community property is                                                               
unique in every  state.  This bill clarifies  that property which                                                               
spouses  agree  is  owned  as  community  property  is  community                                                               
property regardless of  the form of title to the  property.  Thus                                                               
the  property will  be community  property even  if the  title is                                                               
only in one  spouse's name, so long as the  husband and wife have                                                               
agreed that property is community  property.  This bill clarifies                                                               
this and the  clarification is important for  title companies and                                                               
banks.    Another clarification  and  one  he believes  has  been                                                               
needed pertains  to the right  of survivorship.  In  instances in                                                               
which title to community property is  in a form that provides for                                                               
survivorship ownership  between the  spouses then it  is presumed                                                               
to have  been made  with the  consent of both  spouses.   He said                                                               
that  another situation  commonly  encountered  is property  with                                                               
beneficiary designations.   If one spouse  executes a beneficiary                                                               
designation it is only effective  for that spouse's half interest                                                               
unless  the other  spouse consents  in writing.   He  pointed out                                                               
that various family  designations are presumed to  have been made                                                               
although these can be overcome by surviving spouse's testimony.                                                                 
4:46:27 PM                                                                                                                    
MR.  SHAFTEL said  it was  necessary  to clarify  the statute  of                                                               
limitations when transfers were made  improperly by one spouse of                                                               
community  property  without the  consent  of  the other  and  to                                                               
provide remedies for those improper  transfers.  He characterized                                                               
this  as  a  "clean  up"   bill  that  helps  implement  elective                                                               
community property.                                                                                                             
4:46:52 PM                                                                                                                    
REPRESENTATIVE SADDLER  referred to Section  40.  He  remarked he                                                               
had not seen the standard  for two-thirds majority often included                                                               
in  a bill.    He then  referred  to the  legal  memo from  Terry                                                               
Bannister, Legislative  Legal Services attorney, with  respect to                                                               
the single  subject rule for  bills.  He asked  for clarification                                                               
with respect to the violation of the single subject rule.                                                                       
MR. SHAFTEL  acknowledged that he  was aware  of the letter.   He                                                               
concluded that  the legislative  attorney's job  is to  point out                                                               
possible issues.   He said he  has discussed the letter  with the                                                               
attorney.   He  offered his  belief  that all  of these  proposed                                                               
changes are under  Title 13 and while a possible  issue may occur                                                               
that it would  probably arise by someone who  wanted to challenge                                                               
a part  of the  bill.   He observed  that it  is unclear  how the                                                               
Alaska  Supreme Court  would rule  in such  a case.   He  offered                                                               
there is  a practical reason  to keep  these changes in  one bill                                                               
and  to  not have  numerous  bills  before the  legislature  that                                                               
pertain to estate law.                                                                                                          
CHAIR OLSON  remarked that he planned  to hold the bill  over for                                                               
that reason and is working with Ms. Bannister on this issue.                                                                    
4:49:19 PM                                                                                                                    
DOUG  BLATTMACHR,  President;  Chief  Executive  Officer,  Alaska                                                               
Trust  Company, stated  that Alaska  Trust  Company supports  the                                                               
4:50:04 PM                                                                                                                    
CHAIR  OLSON,  after first  determining  no  one else  wished  to                                                               
testify, closed public testimony on HB 292.                                                                                     
[HB 292 was held over.]                                                                                                         
The committee took an at-ease from 4:50 p.m. to 4:52 p.m.                                                                       
                 HB 266-PRACTICE OF NATUROPATHY                                                                             
4:52:00 PM                                                                                                                    
CHAIR OLSON announced  that the final order of  business would be                                                               
HOUSE  BILL  NO.  266,  "An  Act  relating  to  the  practice  of                                                               
naturopathy; and providing for an effective date."                                                                              
4:52:24 PM                                                                                                                    
DANIEL YOUNG,  Naturopathic Doctor, stated that  he has practiced                                                               
naturopathy for 24 years, with  17 years practice in Eagle River.                                                               
He  said he  is a  vice president  of the  Alaska Association  of                                                               
Naturopathic Physicians and  would like to testify  in support of                                                               
HB  266.   He  explained that  to become  licensed  in Alaska,  a                                                               
naturopathic  doctor  must  have attended  a  four-year  graduate                                                               
level  naturopathic  medical  school  and be  accredited  by  the                                                               
Council  on Naturopathic  Medical Education  (CNME).   He related                                                               
that the CNME  is a member of the Association  of Specialized and                                                               
Professional Accreditors.   This  body is  regulated by  the U.S.                                                               
Department  of  Education  oversees accreditation  of  allopathic                                                               
medical  doctors  (M.D.),  osteopathic (D.O.),  and  naturopathic                                                               
(N.D.) medical  education.   He stated that  NDs are  required to                                                               
pass  rigorous  board  exams   which  include  pharmacology,  and                                                               
pharmacotherapeutics  modules.    He  stated that  NDs  are  also                                                               
educated  in all  the same  basic sciences  as a  medical doctor.                                                               
However,  NDs  also study  holistic  and  nontoxic approaches  to                                                               
therapy  with  a  strong  emphasis   on  disease  prevention  and                                                               
optimizing wellness.  Just as  medical or osteopathic doctors are                                                               
considered to be  the experts in their fields so  are NDs experts                                                               
in the  practice of  natural medicine.   He highlighted  that NDs                                                               
have practiced in  Alaska for 26 years with  an impeccable safety                                                               
record.   He emphasized that  NDs provide excellent  patient care                                                               
and anyone who says otherwise is  mistaken.  He provided that NDs                                                               
study;  pharmacology   -  how   drugs  work   in  the   body  and                                                               
pharmacotherapeutics   -  how   to  use   drugs  therapeutically.                                                               
Additionally,  NDs  also  study  pharmacognosy  -  the  study  of                                                               
medicines derived from natural sources,  which more than prepares                                                               
them to use natural substances  in their practices.  Further, the                                                               
required pharmacology  board exam ensure  entry-level competency.                                                               
Although  the current  law prohibits  prescribing drugs,  NDs are                                                               
well  trained  to  use  natural   substances,  whether  they  are                                                               
prescription   or  nonprescription   substances.     The  current                                                               
statutes  and  regulations  that explain  prescription  authority                                                               
have had the  due force of law.  He  characterized the statute as                                                               
one that  allows NDs to  function safely  within its tenets.   He                                                               
acknowledged that Dr. Jasper has  provided the history of the NDs                                                               
statutes and  regulations.   He said that  over recent  years the                                                               
NDs have attempted to modify the law.                                                                                           
4:55:20 PM                                                                                                                    
JANE  MADISON stated  that she  is an  interested resident.   She                                                               
testified in  support of HB 266.   She has listened  to testimony                                                               
and has heard  patients in support of naturopath  medicine as the                                                               
only answer  to their  health care  and wellness.   She  has also                                                               
heard  medical doctors  say that  NDs  are not  well trained  and                                                               
should  not be  allowed to  practice health  care.   She believed                                                               
both of  these extreme  positions are incorrect.   Over  the past                                                               
few years  she experienced a  very serious medical issue  and has                                                               
become very  familiar with NDs and  MDs.  She offered  her belief                                                               
that both have  place in health care for Alaskans.   She said she                                                               
was  diagnosed with  a  variety  of endocrine  issues.   She  was                                                               
treated by  an excellent physician assistant,  whom she described                                                               
as  a  wonderful  family  practitioner,  endocrinologist,  and  a                                                               
knowledgeable  internist,  all of  whom  helped  some.   All  her                                                               
providers  have  been  medical   professionals  who  appeared  to                                                               
genuinely care and  were excellent medical detectives.   They all                                                               
gave her case a great deal  of time and attention.  However, none                                                               
could  bring her  back to  normal.   In fact,  an endocrinologist                                                               
actually told  her that her  condition was very serious  and they                                                               
did not have tests or treatment  for it.  A physician's assistant                                                               
told her she  may have to accept  the fact that she  may never be                                                               
well  again.   She consulted  an ND,  who quickly  determined her                                                               
endocrine  system needed  a  little  boost.   She  was given  one                                                               
nonprescription  pill  per day  and  was  monitored with  monthly                                                               
blood  tests for  a  year.   Within  one month  she  was back  to                                                               
normal, even  though she  had spent  several years  of suffering.                                                               
She offered her belief that  MDs are not knowledgeable about what                                                               
NDs   offer  patients   and  Alaska's   regulations  limit   NDs'                                                               
practices.  She  agreed that NDs should  have minimum educational                                                               
requirements prior  to licensure in  Alaska and they  should also                                                               
have oversight by  a state licensing board, as well  as submit to                                                               
continuing  education  requirements.    She  stressed  that  they                                                               
should  be  regulated,  recognized, and  encouraged  to  practice                                                               
alongside  traditional medical  community.   She  said she  hoped                                                               
this  bill will  help this  happen.   She suggested  cost savings                                                               
could be saved if NDs  were given the same prescription authority                                                               
as physician  assistants since  many patients  first visit  an ND                                                               
and must also  visits a physician assistant or  medical doctor to                                                               
get a  prescription.   She stressed  this required  the necessity                                                               
for  patients to  incur two  office  visits.   Thus cost  savings                                                               
could result  in insurance billings.   She encouraged  both sides                                                               
of wellness and  medicine to work together and  recognize the NDs                                                               
are professionals, as well.                                                                                                     
CHAIR OLSON thanked Ms. Madison and  related that there will be a                                                               
town hall meeting next week.                                                                                                    
4:59:22 PM                                                                                                                    
MARY MINER,  Naturopathic Doctor,  stated she works  as an  ND in                                                               
Fairbanks.     She   graduated  from   Bastyr  University   as  a                                                               
naturopathic  doctor in  1983 and  has  been in  practice for  28                                                               
years.     She  said  she   has  held  licenses   in  Washington,                                                               
Connecticut, and  Alaska.   She testified in  support of  HB 266.                                                               
She said that she is placed  is an awkward position when she must                                                               
tell  patients she  cannot treat  them with  therapies they  know                                                               
work for them since she is now cut  off from access to them.  She                                                               
also  cannot refer  her patients  to traditional  medical doctors                                                               
who do  not have familiarity  with ND remedies which  are outside                                                               
the MD's training.  She urged members to pass this bill.                                                                        
5:00:49 PM                                                                                                                    
DAVID  OTTESEN, stated  he is  testifying as  a consumer,  but is                                                               
also the  owner of Rainbow  Foods.  He  related that this  is the                                                               
fourth year he has testified on  some form of bill concerning the                                                               
practice of  naturopathy.  He  said he hopes this  year something                                                               
will come  of it.   He  related his  understanding that  in prior                                                               
years the  naturopathy bills  have involved  an expansion  of the                                                               
scope  of  practice  for  NDs  commensurate  with  training  they                                                               
receive.  However,  this year the NDS are just  asking to be able                                                               
to practice as they  have for the past 25 years.   He pointed out                                                               
the testimony  from patients  and consumers  of medical  care who                                                               
have  expressed their  satisfaction with  naturopathic care.   He                                                               
characterized  naturopathy as  high quality,  effective care.  He                                                               
emphasized that  there has not been  a shred of testimony  of any                                                               
harm from  NDs.  Further,  he has  heard lots of  assertions from                                                               
doctors and  the Alaska Medical  Association (AMA) that  "the sky                                                               
will  fall  if  anything  like  this  passes."    He  found  that                                                               
statement ridiculous.   This year  NDs are  asking to be  able to                                                               
perform services they  have provided over the past 25  years.  He                                                               
thinks it  is entirely reasonable to  request this consideration.                                                               
He characterized this situation as  a travesty if something can't                                                               
be done because the current  situation is intolerable.  These NDs                                                               
have  been  practicing  in  Alaska  for  many  years,  but  their                                                               
practices are threatened and they may  need to leave the state if                                                               
something  isn't done  about  the current  situation.   He  urged                                                               
members to pass the bill  because NDs provide low-cost, effective                                                               
care.   He concluded that as  a consumer should have  that choice                                                               
and it is a freedom of choice issue.                                                                                            
CHAIR OLSON  stated that considerable  progress has been  made on                                                               
the bill.                                                                                                                       
5:03:41 PM                                                                                                                    
TIM PETERSON,  Medical Doctor,  stated that  he is  an allopathic                                                               
doctor  and  has practiced  emergency  room  medicine and  family                                                               
medicine  in Juneau  since 1989.    He emphasized  the first  two                                                               
years of training NDs receive  is identical to that of allopathic                                                               
medical  doctors.    He  respects NDs'  diagnostic  skills.    He                                                               
commented on the  type of people who opt to  see naturopaths.  He                                                               
offered his  belief that people  who visit  NDs tend to  be savvy                                                               
consumers.  He  said they sometimes pay their own  fees and often                                                               
must fight with  insurance for coverage.   He characterized those                                                               
who seek naturopaths  as good consumers.  He  suggested that they                                                               
see NDs  as a matter  of choice because  it works out  better for                                                               
them.   He has had a  condition and disease in  which his fingers                                                               
turned white.   His  colleagues wanted to  give him  an expensive                                                               
drug that  required liver  function tests, but  he was  not quite                                                               
ready for  that type  of testing.   He visited  a Harvard-trained                                                               
naturopath in Juneau and was very satisfied with the results.                                                                   
DR.  PETERSON said  as a  matter  of choice  and collegiality  he                                                               
supports  this  bill.    He  has  never  seen  anyone  visit  the                                                               
emergency  room with  side effects  or illnesses  as a  result of                                                               
seeing naturopaths.   He said in  this town the NDs  and MDs work                                                               
together.   "These are not  outliers," he said.   He acknowledged                                                               
that some of  his colleagues would disagree and  that the medical                                                               
association  tends to  be  a  little conservative  as  well as  a                                                               
little  reactive.   He recalled  that  he testified  five or  six                                                               
years   ago   against   the  chiropractors'   efforts   to   give                                                               
prescription  drugs since  he did  not feel  it was  appropriate.                                                               
However, he  believes NDs should  continue to practice,  which is                                                               
appropriate.  He characterized NDs  as an asset and potentially a                                                               
money-saving  option for  patients, rather  than for  patients to                                                               
incur the extra expense of an emergency room visit with him.                                                                    
[HB 266 was held over.]                                                                                                         
5:05:46 PM                                                                                                                    
There being no  further business before the  committee, the House                                                               
Labor and  Commerce Standing Committee  meeting was  adjourned at                                                               
5:05 p.m.                                                                                                                       

Document Name Date/Time Subjects
HB292 Draft Proposed CS ver B.pdf HL&C 2/29/2012 3:15:00 PM
HB 292
HB292 Fiscal Note-DCCED-INS-02-24-12.pdf HL&C 2/29/2012 3:15:00 PM
HB 292
HB292 Explanation of Changes from Ver A to Ver B.pdf HL&C 2/29/2012 3:15:00 PM
HB 292
HB292 Legal Opinion.pdf HL&C 2/29/2012 3:15:00 PM
HB 292
HB292 Sectional Analysis ver B.pdf HL&C 2/29/2012 3:15:00 PM
HB 292
HB292 Sponsor Statement.pdf HL&C 2/29/2012 3:15:00 PM
HB 292
HB292 ver A.pdf HL&C 2/29/2012 3:15:00 PM
HB 292
HB266 Supporting Documents-Assorted emails.pdf HL&C 2/29/2012 3:15:00 PM
HB 266
HB266 Supporting Documents-Assorted faxes 2--17-12.pdf HL&C 2/29/2012 3:15:00 PM
HB 266
HB266 Supporting Documents-Email Michele Scott 2-28-12.pdf HL&C 2/29/2012 3:15:00 PM
HB 266
HB266 Supporting Documents-Written Testimony Danielle Gabriel 2-27-12.pdf HL&C 2/29/2012 3:15:00 PM
HB 266
HB266 Supporting Documents-Assorted Written Testimony 2-29-12.pdf HL&C 2/29/2012 3:15:00 PM
HB 266