Legislature(1999 - 2000)
03/22/2000 01:44 PM Senate JUD
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* first hearing in first committee of referral
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+ teleconferenced
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SENATE JUDICIARY COMMITTEE
March 22, 2000
1:44 p.m.
MEMBERS PRESENT
Senator Robin Taylor, Chairman
Senator Rick Halford, Vice-Chairman
Senator Dave Donley
Senator Johnny Ellis
MEMBERS ABSENT
Senator John Torgerson
COMMITTEE CALENDAR
SENATE BILL NO. 277
"An Act relating to the elimination of the Alaska Administrative
Journal and the establishment of the Alaska Online Public Notice
System; amending public notice publication requirements for
regulations; and providing for an effective date."
-MOVED CSSB 277(JUD)am OUT OF COMMITTEE
SENATE BILL NO. 286
"An Act relating to the duties and powers of the attorney general."
-MOVED CSSB 286(JUD)am OUT OF COMMITTEE
CS FOR SPONSOR SUBSTITUTE FOR HOUSE BILL NO. 275(JUD)
"An Act relating to the Uniform Probate Code, including trusts and
governing instruments; relating to trustees; relating to under
productive trust property; and relating to conveyances of real
property and interests in real property by or to trusts."
-HEARD AND HELD
CS FOR SENATE JOINT RESOLUTION NO. 14(JUD)
Proposing amendments to the Constitution of the State of Alaska
relating to the election and the duties of the attorney general.
-MOVED CSSJR 14(JUD) OUT OF COMMITTEE
PREVIOUS SENATE COMMITTEE ACTION
SB 286 - See Judiciary Committee minutes dated 3/6/00.
SB 277 - See Judiciary Committee minutes dated 3/1/00.
HB 275 - No previous action to report.
SJR 14 - See State Affairs minutes dated 3/18/99 and 4/7/99.
Judiciary minutes dated 4-12-99, 2-9-00 and 3-6-00.
WITNESS REGISTER
Ms. Deborah Behr
Department of Law
PO Box 110300
Juneau, Alaska 99811-0300
POSITION STATEMENT: Testified on SB 277
Mr. John Lindback, Chief of Staff
Office of the Lieutenant Governor
PO Box 110015
Juneau, Alaska 99811-0015
POSITION STATEMENT: Testified on SB 277
Ms. Annette Kreitzer
Staff to Senator Leman
State Capitol Building
Juneau, Alaska 99801
POSITION STATEMENT: Testified on SB 277
Mr. Mark Johnson
Subcommittee on Privatization for the
Department of Law
13631 Windward Circle
Anchorage, Alaska 99516
POSITION STATEMENT: Testified on SB 286
Senator Jerry Ward
State Capitol Building
Juneau, Alaska 99801
POSITION STATEMENT: Sponsor of SJR 14
Ms. Wilda Rodman
Staff to Representative Therriault
State Capitol Building
Juneau, Alaska 99801
POSITION STATEMENT: Testified on HB 275
Mr. Steve Greer
Attorney
PO Box 24-2903
Anchorage, Alaska 99524
POSITION STATEMENT: Supports HB 275
Ms. Tammy Troyer
Staff to Representative Cissna
State Capitol Building
Juneau, Alaska 99801
POSITION STATEMENT: Testified on HB 275
Mr. David Sheftel
Estate Planning and Business Attorney
550 West 7th Avenue, #705
Anchorage, Alaska 99501
POSITION STATEMENT: Testified on HB 275
ACTION NARRATIVE
TAPE 00-15, SIDE A
Number 001
CHAIRMAN ROBIN TAYLOR called the Judiciary Committee meeting to
order at 1:44 p.m. Present were Senator Halford, Senator Donley
and Chairman Taylor. The first order of business to come before
the committee was SB 277.
SB 277-ONLINE SYSTEM REPLACES AK ADMIN JOURNAL
MS. DEBORAH BEHR, Assistant Attorney General for the Department of
Law (DOL), commented that during the March 3 Judiciary Committee
meeting a question was raised about the definition of "newspaper
of general circulation." This wording appears twice in SB 277.
The first time is on page 3, line 26 and it sets out the current
statutory requirement that notice of an agency's intent to adopt a
regulation must be "published in the newspaper of general
circulation..." Then on page 5, line 7, the bill uses the same
language in setting out the method for notifying the public of
updated documents already incorporated by reference in a
regulation. Both references use the phrase in the context of
regulation adoption. The Administrative Procedures Act does not
have a definition of "newspaper of general circulation." When Ms.
Behr reviews regulations, she looks to see that they are published
in a readily available newspaper of wide distribution throughout
the state. Often times she will advise agencies to publish in more
than one newspaper to make sure that the distribution reaches the
area affected by the regulation.
Number 297
SENATOR HALFORD said he was asked by another member of the
legislature about a possible amendment requiring an abbreviated
form to be used in publications.
MS. BEHR commented that she has seen the amendments, and it is her
understanding that the Lieutenant Governor's Office prefers to keep
the bill focused on the online public notice. The language she has
seen is old language from a prior bill that does not reflect on the
online public notice.
Number 379
MR. JOHN LINDBACK, Office of the Lieutenant Governor, noted that in
1997 the Governor proposed, as a bill, what is embodied in these
amendments. Because the lieutenant governor's office is in charge
of filing regulations, it was designated as the lead agency. The
regulations were proposed because there were too many complaints
being received from the public about regulations being adopted
without a public hearing. Mr. Lindback said the newspaper industry
hated the Governor's bill, and since that time an effort has been
made trying to convince them that these amendments are not
something they need to be afraid of, but they have not been
convinced. Because the amendments are controversial, it is
requested they not be attached to this bill.
MS. BEHR noted that there is a technical problem on page two, line
3 of the amendment. This section requires the lieutenant governor
to provide additional public notice, which adds an unnecessary
cost. All of section 4 can be deleted with no effect on the bill.
SENATOR HALFORD noted this will not remove the requirement to
publish, it will only shorten the form.
Number 816
MR. LINDBACK commented there is a long list of requirements in the
statute of what is required for an ad. The amendments being
discussed remove some of these requirements, opening the door for
some agencies to take the notices out of the back of the newspaper
and put them into display ad space. There is also a provision
allowing a coordinated advertising approach allowing municipal
advertising pages. The newspaper industry has been dead set
against these provisions.
SENATOR HALFORD moved to adopt amendment 1-LS1407\A.1, as modified.
SENATOR ELLIS objected.
The roll was taken on the motion. Voting yea: SENATOR DONLEY,
SENATOR HALFORD and CHAIRMAN TAYLOR. Voting nay: SENATOR ELLIS,
and so the amendment was adopted.
SENATOR HALFORD noted the bill now has a positive fiscal note
because it saves the state money.
MS. BEHR commented that the last time DOL asked for a fiscal note,
they were told it would be awash because display ads are a little
more expensive.
MR. LINDBACK said the idea behind the amendment is to get a more
prominent ad for the money, not that it will cost any less.
MS. ANNETTE KREITZER, staff to Senator Leman, thanked the committee
for entertaining the amendment. The amendment does give the
lieutenant governor some discretion in terms of what state agencies
are required to do with legal notices. The Department of
Transportation (DOT) has found a way to save money--about $100,000,
by using the smaller and shorter format, while still informing the
public.
Number 1068
MR. LINDBACK stated that DOT has in deed saved money, but it is not
because of these provisions. The provisions being discussed were
not required at the time--DOT just wrote better ads. Display ad
space is more expensive and that is why the fiscal note was
considered to be awash. There is a possibility that advertising
money can be saved by using the coordinated approach that is
contemplated in one section of the amendments.
Number 1130
SENATOR DONLEY moved SB 277am from committee with individual
recommendations. There being no objection, the motion carried.
SB 286-DUTIES AND POWERS OF ATTORNEY GENERAL
CHAIRMAN TAYLOR moved to delete on page 1, line 5 the words "state,
including the," because an inherent conflict is generated. This
restores the original language of the bill requiring the attorney
general to be subject to the power of the legislature in making
appropriations and settling civil action cases. There being no
objection, amendment 1 carried.
Number 1305
SENATOR DONLEY recommended a new provision saying the attorney
general shall defend the constitution of Alaska.
SENATOR DONLEY moved to insert in Section 1(b), (1) defend the
constitution of the state of Alaska, and to renumber the rest of
the section accordingly. There being no objection, amendment 2
carried.
MR. MARK JOHNSON, Subcommittee on Privatization for the Department
of Law (DOL), noted the legislature has the ability to define the
scope and nature of the responsibilities of the AG.
CHAIRMAN TAYLOR asked Mr. Johnson to further discuss the remaining
provisions on page 2 of SB 286--both the new language and the
deleted language.
MR. JOHNSON commented that on page 2, lines 8 and 9 there is a
significant deletion relating to common law powers. This language
was deleted because, if a limited constitutional government is
desired, the powers granted should not reflect a blank check, which
is what the present language reflected. The addition of subsection
(c) will set into statutory law that which was believed to be the
case all along.
Number 1426
CHAIRMAN TAYLOR moved to amend line 15 by adding the words "enact
laws." The following is how Section 1(c) will read: (c) The
attorney general may, subject to the power of the legislature to
enact laws, make appropriations,.... There being no objection,
amendment 3 carried.
Number 1597
SENATOR ELLIS commented he thinks it is a mistake to eliminate the
common law powers of the AG. He wonders what specific abuse of
power has cause the Chairman to want to limit the office like this
in the future. There are areas of the law that change rapidly, and
he does not understand why the committee should want to minimize
the powers of the office rather than leave them as they are--being
fairly expansive in terms of purview and power. Legislatures are
slow to keep up with changing areas of the law and it is good to
know there is a chief legal officer who will keep up with these
things and exercise power in the public interest.
Number 1658
CHAIRMAN TAYLOR commented that he and Senator Ellis would like an
analogy of specific abuses that went beyond the AG's power, and
where that abuse limited the private sector or stifled business in
some way.
MR. JOHNSON noted the Exxon Valdez settlement is an example of
where things were stretched about as far as they could go.
SENATOR DONLEY said Cleary and Molly Hootch are also examples of
the AG's abuse of power.
CHAIRMAN TAYLOR asked Mr. Johnson to get back to the committee with
a further analysis on this subject.
SENATOR DONLEY moved SB 286 as amended from committee with
individual recommendations.
SENATOR ELLIS objected.
The roll was taken on the motion. Voting yea: SENATOR HALFORD,
SENATOR DONLEY and CHAIRMAN TAYLOR. Voting nay: SENATOR ELLIS,
and so the motion carried.
SJR 14-ELECTION OF ATTORNEY GENERAL
SENATOR WARD, sponsor of SJR 14, commented he likes the 1-LS0588\H,
(Kurtz) draft of SJR 14 more than any version being offered.
SENATOR HALFORD moved CSSJR 14(JUD) from committee with individual
recommendations.
SENATOR ELLIS objected.
The roll was taken on the motion. Voting yea: SENATOR DONLEY,
SENATOR HALFORD and CHAIRMAN TAYLOR. Voting nay: SENATOR ELLIS,
and so the motion carried.
Number 1877
HB 275-UNIFORM PROBATE CODE/TRUSTS/PROPERTY
MS. WILDA RODMAN, staff to Representative Therriault, stated that
HB 275 is intended to enhance the estate planning climate in the
state of Alaska. The bill augments and clarifies the Uniform
Probate Code that was adopted in 1996. The changes in HB 275 were
drafted by estate planning attorneys and have been through
extensive review on a state and national level. The changes are,
for the most part, based on other state statutes and allow Alaska
residents to take advantage of federal tax provisions that have
been passed since the enactment of the uniform probate law.
MS. RODMAN gave the following sectional analysis of HB 275.
Section 1 pertains to "nonademption of specific devises." This
section deals with the specific instance of nonademption when the
person creating the will (decedent) has sold the gift (specific
devise) prior to the decedent's death and is still owed money for
the property. The question of who ultimately receives the proceeds
should not depend on whether the decedent received full or partial
payment before death. Presently if the property were sold and the
decedent did not receive full payment before death, the payment
received after death and any promissory note will go to the
specific devisee--this will not happen under HB 275. Instead, the
payment and any promissory note will be treated in the same manner
as all other property that the decedent owned, and will be
distributed equally among the beneficiaries.
Section 2 makes the rules of construction under 13.12.606
applicable to trusts as well as wills. The second part of section
2, section 13.12.720, allows Alaska residents eligibility for a new
IRS deduction for a family-owned business. In addition to the
present $600,000 tax shelter, people will be eligible for an
additional $675,000 tax shelter for their new family-owned
business. This is to prevent people from having to sell their
business in order to pay the taxes on their inheritance. This
lowers and raises the ceiling between the tax shelter and family
owned business deduction.
Section 3 will change the amount of interest that is paid on a
pecuniary devise. By state law if a person wills money, that
pecuniary bequest has to accrue interest, which comes from the
residuary estate. Presently, the money accrues interest at the
legal rate of 10.5%. HB 275 changes the interest rate from 10.5%
to a discount borrowing rate (variable rate) taken from AS
45.45.010(b).
The provisions in section 4 do not apply to a marital pecuniary
devise, this section enables people to qualify for an IRS
deduction.
Section 5 gives the personal representative more discretion over
how to distribute the residuary estate assets to devisees, as long
as it is in the best interests of the distributees. HB 275 has
added AS 13.16.560(a)4 which says a person can make non pro-rata
distributions of assets. This means if there are two devisees, and
a decedent has a life insurance policy and an IRA account both
policies can be split down the middle and half of each account can
be given to each devisee, this is so neither devisee will have to
bear the full tax consequence.
Section 6 relates to restrictions on exercising certain trustee
powers. This section says that for tax purposes a person who is
both the trustee and beneficiary can only distribute those assets
to himself for his reasonable comfort. There is a difference
between "reasonable comfort" and "comfort and happiness." Support
in "reasonable comfort" is not taxable but support for "comfort,
welfare or happiness" is taxable. The bill says that unless
specifically stated in the trust document, the spouse will only
have the right to distribute principal in a manner limited to an
ascertainable standard.
Tape 00-16, Side B
Section 7 relates to new IRS allowances that allow a person to
divide a single trust into two or more separate trusts as long as
each trust remain substantially identical in terms of the existing
trust, the only difference is that they be administered separately.
Trusts written before this new IRS ruling may not have this
provision, and section 7 allows for the division of a trust without
having to go to court for approval.
Section 8 is the application of special distribution provisions.
This section takes the tried and true provisions that apply to the
distribution of wills and applies them to the administration of a
trust.
Section 9 relates back to Sections 6 and 7, Title 13, Chapter 36.
The only other place that "party in interest" appears in Chapter 36
is in sections 7 and 9. These sections are the restrictions on the
trustees power to distribute assets (ascertainable standards), and
the division of trust. This section says if a person knows of the
tax benefits and they still want to give Uncle Sam more money, they
can opt out. Section 9 defines who has to sign off on the trust in
order to opt out of these two provisions.
Number 2310
SENATOR ELLIS asked about mandatory distribution in section 9.
MS. RODMAN answered that this language causes there to be an
increase in the number of people who have to sign. This provision
is only to opt out--not who can go to court or who is a party of
interest.
MS. RODMAN explained that section 10 is for tax purposes. The
beneficiary of the trust can require the trust to produce income,
this relates to the qualification for the marital deduction.
This section provides that in those trusts where the spouse is
entitled to all the income earned by a trust paid no less
frequently than annually, and a marital deduction is claimed
for the trust, the spouse has the power to require the trustee
to make the trust assets produce income. This simple
provision is a required statement in all trusts intending to
qualify for the marital deduction. This section provides the
required language for those trusts lacking this provision.
MS. RODMAN noted that section 11 ends the confusion over the
ability to transfer real property to or from a trust in the name of
the trust. This section also helps title companies prevent future
legal problems.
MS. RODMAN indicated the amendment she distributed to the committee
has been reviewed by the Department of Law, resulting in one change
being made to the conveyance section.
Number 2081
CHAIRMAN TAYLOR moved to amend page 8, line 24, deleting the word
"mandatory," and on page 8, line 26, also deleting the word
"mandatory." The new language will read:
(ii) each beneficiary entitled to receive a distribution of
income or principal from a trust or, if a beneficiary entitled
to receive a distribution of income or principal from a trust
is not 19 years of age or is incapacitated, the beneficiary's
legal representative under applicable law or the beneficiary's
agent under a durable power of attorney; and
MR. STEVE GREER commented there is no problem in going along with
the amendment because Section 9 is a provision that no one will
ever use. The entire bill is a safety net to protect against
sloppy drafting, preventing a bad tax result. Section 9 is in the
bill because Alaska has taken its laws from other states that have
such a provision.
CHAIRMAN TAYLOR said as long as the wording is "mandatory" there is
a limited number of people involved, but once that wording is
removed it will never be known who the signatures have to be
collected from.
MR. GREER noted the intent of the amendment was to protect people,
but people are not protected because it is impossible to elect out
of the provisions. He does not think that the people who drafted
the amendment really understood what it was about.
MS. TAMMY TROYER, staff to Representative Cissna, stated that
Representative Cissna's concern is that beneficiaries who are not
"mandatory distribution" and are at the discretion of the trustee,
should not be allowed to be present when electing to agree to the
provision to opt out.
CHAIRMAN TAYLOR asked how people can be hurt by not being present
when a group of people opt out of the trust enabling them to
receive their distribution--this would be the only reason to opt
out of the trust.
MS. TROYER responded it is to opt out of the provisions outlined in
sections 6 and 7 and not to opt out of the trust.
MR. GREER responded that Representative Cissna did not know what
she was proposing with the amendment. There is pending federal
legislation, the Uniform Trust Act, which will help fill the void
in states that do not already have detailed laws indicating how
trusts should operate--section 9 goes beyond the Uniform Trust Act.
This section was included only because it was felt that the other
states Alaska looked at for direction included it for
constitutional reasons. But if the category of people who have to
opt out is opened up, it will be impossible for the trust to elect
out of this provision.
MS. TROYER interjected that Representative Cissna is aware of this,
and the intent is not to include a distant relative who could
potentially be a beneficiary. What Representative Cissna is trying
to do is open the door for beneficiaries who are now at the
discretion of the trustee. The statute, on line 24, says a person
has to be entitled to a mandatory distribution, and often times
there are no mandatory distributions--distributions are at the
discretion of the trustee. Representative Cissna would like to
make sure these beneficiaries are included.
Number 1705
SENATOR DONLEY asked if notification is the intent of "party of
interest."
MS. TROYER answered to "elect to agree" to the provisions outlined
in sections 6 and 7.
MR. GREER responded that is not correct. It is to define those
people who can elect to not be subject to provisions in sections 6
and 7.
MS. TROYER agreed, and said it allows the beneficiaries to be part
of the discussion of whether or not to opt out of the provisions.
SENATOR DONLEY clarified it has nothing to do with notice.
MS. TROYER agreed.
MR. GREER explained that the whole bill, including sections 6 and
7, is safety net legislation that other states already provide. It
is meant to protect people who have their trusts drawn by lawyers
who do not keep current with state law and for people who have had
their trust prepared by competent estate planning attorneys but who
have not keep the trust updated. This bill is meant to take care
of commonly occurring traps that allow the federal government to
get more money than was originally intended. There is nothing
controversial about this bill. The importance of section 9 is very
low in comparison to the rest of the bill and it should have
nothing to do with the bill passing or not. Section 9 is just about
who can elect out of the safety net provisions.
Number 1537
SENATOR HALFORD commented that he is not comfortable with moving
the bill out of committee until he has more time to look at it.
MR. SHEFTEL commented that HB 275 is a safety net piece of
legislation that is designed to remedy obsolete trusts and poor tax
planning. Most of the provisions in the bill have been taken from
legislation that has been recommended by national experts. HB 275
is designed to bring Alaska law relating to estate planning up to
contemporary standards with that of other states.
SENATOR ELLIS asked to hold the amendment and the bill for further
thought.
There being no further business to come before the committee,
CHAIRMAN TAYLOR adjourned the meeting at 2:56 p.m.
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