Legislature(2019 - 2020)BELTZ 105 (TSBldg)

03/06/2020 01:30 PM JUDICIARY

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Audio Topic
01:35:04 PM Start
01:36:04 PM Confirmation Hearing(s):
01:47:34 PM SB191
01:55:23 PM Confirmation Hearing(s):
01:59:12 PM SB191
03:01:16 PM Confirmation Hearing(s)
03:02:17 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ Consideration of Governor's Appointees: TELECONFERENCED
State Board of Parole - Leitoni "Lei" Tupou
Commission on Judicial Conduct - Robert Sheldon
-- Public Testimony on All Appointees --
+ Bills Previously Heard/Scheduled: TELECONFERENCED
+= SB 8 ACCESS TO MARIJUANA CONVICTION RECORDS TELECONFERENCED
Scheduled but Not Heard
+= SB 191 TRUSTS, TRUSTEES, COMMUNITY PROPERTY TELECONFERENCED
Heard & Held
                    ALASKA STATE LEGISLATURE                                                                                  
              SENATE JUDICIARY STANDING COMMITTEE                                                                             
                         March 6, 2020                                                                                          
                           1:35 p.m.                                                                                            
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Senator John Coghill, Chair                                                                                                     
Senator Peter Micciche, Vice Chair                                                                                              
Senator Shelley Hughes                                                                                                          
Senator Lora Reinbold                                                                                                           
Senator Jesse Kiehl                                                                                                             
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
All members present                                                                                                             
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
CONFIRMATION HEARING(S):                                                                                                        
                                                                                                                                
State Board of Parole                                                                                                         
Leitoni "Lei" Tupou - Juneau                                                                                                    
                                                                                                                                
     - CONFIRMATION ADVANCED                                                                                                    
                                                                                                                                
Alaska Commission on Judicial Conduct                                                                                         
Jane Mores - Juneau                                                                                                             
Robert Shelton - Anchorage                                                                                                      
                                                                                                                                
     - CONFIRMATIONS ADVANCED                                                                                                   
                                                                                                                                
SENATE BILL NO. 191                                                                                                             
"An Act relating to trusts and trustees, including trust                                                                        
division, the  powers of  trustees, delayed  gifts to  trusts, and                                                              
community property trusts; and providing  for an effective date."                                                               
                                                                                                                                
     - HEARD AND HELD                                                                                                           
                                                                                                                                
SENATE BILL NO. 8                                                                                                               
"An Act restricting the release of certain records of                                                                           
convictions; amending Rule 37.6, Alaska Rules of Administration;                                                                
and providing for an effective date."                                                                                           
                                                                                                                                
     - SCHEDULED BUT NOT HEARD                                                                                                  
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
BILL: SB 191                                                                                                                  
SHORT TITLE: TRUSTS, TRUSTEES, COMMUNITY PROPERTY                                                                               
SPONSOR(s): SENATOR(s) COGHILL                                                                                                  
                                                                                                                                
02/14/20       (S)       READ THE FIRST TIME - REFERRALS                                                                        
02/14/20       (S)       JUD                                                                                                    
02/26/20       (S)       JUD AT 1:30 PM BELTZ 105 (TSBldg)                                                                      
02/26/20       (S)       Heard & Held                                                                                           
02/26/20       (S)       MINUTE(JUD)                                                                                            
02/28/20       (S)       JUD AT 1:30 PM BELTZ 105 (TSBldg)                                                                      
02/28/20       (S)       Heard & Held                                                                                           
02/28/20       (S)       MINUTE(JUD)                                                                                            
03/04/20       (S)       JUD AT 1:30 PM BELTZ 105 (TSBldg)                                                                      
03/04/20       (S)       Heard & Held                                                                                           
03/04/20       (S)       MINUTE(JUD)                                                                                            
03/06/20       (S)       JUD AT 1:30 PM BELTZ 105 (TSBldg)                                                                      
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
LEITONI "LEI" TUPOU, Appointee                                                                                                  
State Board of Parole                                                                                                           
Department of Corrections                                                                                                       
Juneau, Alaska                                                                                                                  
POSITION STATEMENT: Testified as appointee to the State Board of                                                              
Parole.                                                                                                                         
                                                                                                                                
JANE MORES, Attorney; Appointee                                                                                                 
Alaska Commission on Judicial Conduct                                                                                           
Alaska Court System                                                                                                             
Juneau, Alaska                                                                                                                  
POSITION STATEMENT: Testified as appointee to the Alaska                                                                      
Commission on Judicial Conduct.                                                                                                 
                                                                                                                                
AIMEE BUSHNELL, Staff                                                                                                           
Senator John Coghill                                                                                                            
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT: Explained the changes in the committee                                                                    
substitute (CS) for SB 191, version M, on behalf of the sponsor.                                                                
                                                                                                                                
ROBERT D. SHELDON, Appointee                                                                                                    
Alaska Commission on Judicial Conduct                                                                                           
Juneau, Alaska                                                                                                                  
POSITION STATEMENT: Testified as appointee to the Alaska                                                                      
Commission on Judicial Conduct.                                                                                                 
                                                                                                                                
JONATHAN BLATTMACHR, Attorney; Principal                                                                                        
ILS Management, LLC                                                                                                             
Long Island, New York                                                                                                           
POSITION STATEMENT:  Answered questions  during the hearing  on SB
191.                                                                                                                            
                                                                                                                                
JAMIE DELMAN, Attorney                                                                                                          
Shaftel Delman LLC; Member                                                                                                      
Alaska Trust & Estate Professionals                                                                                             
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Answered questions  during the hearing  on SB
191.                                                                                                                            
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
1:35:04 PM                                                                                                                    
CHAIR   JOHN  COGHILL   called  the   Senate  Judiciary   Standing                                                            
Committee meeting  to order  at 1:35 p.m.  Present at the  call to                                                              
order were  Senators Reinbold, Kiehl,  Hughes, and  Chair Coghill.                                                              
Senator Micciche joined shortly thereafter.                                                                                     
                                                                                                                                
^CONFIRMATION HEARING(S):                                                                                                       
                    CONFIRMATION HEARING(S):                                                                                
                     State Board of Parole                                                                                  
                 Commission on Judicial Conduct                                                                             
                                                                                                                                
1:36:04 PM                                                                                                                    
CHAIR COGHILL announced  the consideration of  governor appointees                                                              
to  the  State  Board  of Parole  and  the  Alaska  Commission  on                                                              
Judicial Conduct.                                                                                                               
                                                                                                                                
1:36:43 PM                                                                                                                    
LEITONI   "LEI"  TUPOU,   Appointee,   State   Board  of   Parole,                                                              
Department of  Corrections, Juneau, Alaska,  said he was  born and                                                              
raised  in Tonga  in  the South  Pacific and  came  to the  United                                                              
States 43 years  ago to attend school. He has worked  for 18 years                                                              
at  the  Department   of  Corrections,  including   serving  as  a                                                              
correctional  officer, a  probation officer,  and a senior  parole                                                              
and  probation officer.  During  that time,  he  said he  traveled                                                              
several years with  the State Board of Parole,  attending hearings                                                              
and providing  technical supervision  for board members.  He later                                                              
served  as  a  special  assistant   to  the  commissioner  of  the                                                              
Department  of Correction,  and  as director  of  the Division  of                                                              
Institutions. He  said he would like  to serve on the  State Board                                                              
of Parole because  he would like to make contributions.  He brings                                                              
his  expertise  in  supervising  and overseeing  parolees  to  the                                                              
board.                                                                                                                          
                                                                                                                                
1:38:39 PM                                                                                                                    
CHAIR COGHILL asked  how long he has served on the  State Board of                                                              
Parole.                                                                                                                         
                                                                                                                                
MR. TUPOU answered that he just began serving this week.                                                                        
                                                                                                                                
CHAIR COGHILL  thanked him  for his service  and asked  whether he                                                              
had attended any hearings yet.                                                                                                  
                                                                                                                                
MR. TUPOU answered  that the board held approximately  52 hearings                                                              
this week.                                                                                                                      
                                                                                                                                
CHAIR COGHILL  asked if he  had any ideas  related to  the board's                                                              
key responsibilities.                                                                                                           
                                                                                                                                
1:40:03 PM                                                                                                                    
MR. TUPOU  said after attending  hearings, he came to  realize the                                                              
impact  that   Senate  Bill  91   had  on  the  Board   of  Parole                                                              
activities. He said  a number of offenders have  been arrested for                                                              
parole violations, some of whom have committed new crimes.                                                                      
                                                                                                                                
CHAIR  COGHILL said  the legislature  knew  there would  be a  lag                                                              
between  passage  of  the  bill  and impacts  to  the  system.  He                                                              
thanked him for his willingness to serve.                                                                                       
                                                                                                                                
CHAIR COGHILL said  public testimony would be taken  after hearing                                                              
from other appointees.                                                                                                          
                                                                                                                                
1:42:04 PM                                                                                                                    
JANE  MORES, Attorney;  Appointee, Alaska  Commission on  Judicial                                                              
Conduct,  Alaska  Court  System,  Juneau,  Alaska,  said  she  has                                                              
served as a member  of the Alaska Bar for nearly  30 years. It has                                                              
been a  pleasure to  serve on  the commission  this past  year and                                                              
she  said  would  be  honored  to  continue  her  service  with  a                                                              
reappointment  to  a full  four-year  term. She  reminded  members                                                              
that she  gave a full  statement last year  but she  was available                                                              
to answer any questions.                                                                                                        
                                                                                                                                
She said  she views her role  on the commission as  very important                                                              
in upholding the  integrity of the judiciary and  holding Alaska's                                                              
judges accountable to the public.                                                                                               
                                                                                                                                
1:43:28 PM                                                                                                                    
SENATOR HUGHES asked  the record to reflect that Ms.  Mores is her                                                              
sister. She commended her integrity and ability.                                                                                
                                                                                                                                
1:44:11 PM                                                                                                                    
SENATOR MICCICHE  asked if  the commission has  been a  good "fit"                                                              
and whether she had any suggestions.                                                                                            
                                                                                                                                
MS.  MORES said  she was  impressed  with the  way the  commission                                                              
functions. She  said when  she became a  member she  was sensitive                                                              
to  the  interplay   between  members  since  the   commission  is                                                              
comprised  of  three judges,  three  members  of the  public,  and                                                              
three attorneys.  She committed last  year to ensuring  that every                                                              
voice carried  equal weight and was  heard. She said she  has been                                                              
very  impressed  with  how  the  public members  are  not  at  all                                                              
intimidated and  have given valuable input. She  characterized the                                                              
dynamic as  one of  mutual respect.  No one  member has  a greater                                                              
voice  than  another.   She  said  it  is  a   highly  functioning                                                              
commission.  The work  is dependent  upon  complaints received  by                                                              
the  executive director  and it  has  been a  smooth process.  She                                                              
said  so she  did  not  have any  suggestions  and  she feels  the                                                              
public should feel very good about the commission.                                                                              
                                                                                                                                
1:45:56 PM                                                                                                                    
CHAIR  COGHILL said  he was  pleased  to hear  the commission  was                                                              
functioning well. He thanked her for her willingness to serve.                                                                  
                                                                                                                                
          SB 191-TRUSTS, TRUSTEES, COMMUNITY PROPERTY                                                                       
                                                                                                                                
1:47:34 PM                                                                                                                    
CHAIR  COGHILL announced  consideration  of SENATE  BILL NO.  191,                                                              
"An  Act  relating   to  trusts  and  trustees,   including  trust                                                              
division, the  powers of  trustees, delayed  gifts to  trusts, and                                                              
community property trusts; and providing for an effective date."                                                                
                                                                                                                                
CHAIR COGHILL  noted that  there were  several amendments  for the                                                              
committee to consider.                                                                                                          
                                                                                                                                
1:47:52 PM                                                                                                                    
At-ease.                                                                                                                        
                                                                                                                                
1:51:57 PM                                                                                                                    
CHAIR COGHILL  reconvened the  meeting and  solicited a  motion to                                                              
adopt the committee substitute.                                                                                                 
                                                                                                                                
1:52:21 PM                                                                                                                    
SENATOR  MICCICHE moved  to adopt  the  committee substitute  (CS)                                                              
for SB 191, work order 31-LS1370\M, as the working document.                                                                    
                                                                                                                                
CHAIR COGHILL objected for discussion purposes.                                                                                 
                                                                                                                                
1:52:53 PM                                                                                                                    
AIMEE  BUSHNELL,   Staff,  Senator  John  Coghill,   Alaska  State                                                              
Legislature, Juneau,  Alaska, on  behalf of the sponsor  explained                                                              
that  version M  incorporated the  two amendments  adopted in  the                                                              
previous committee  hearing. She referred to the  first change, on                                                              
page 6, line 22, to delete the language "or a right accrued."                                                                   
                                                                                                                                
1:53:34 PM                                                                                                                    
At-ease.                                                                                                                        
                                                                                                                                
1:54:02 PM                                                                                                                    
CHAIR COGHILL reconvened the meeting.                                                                                           
                                                                                                                                
1:54:08 PM                                                                                                                    
MS.  BUSHNELL said  the  first change  in  version M  incorporates                                                              
Amendment  1, [A.1],  which was  adopted at the  last hearing.  It                                                              
read:                                                                                                                           
                                                                                                                                
     Page 6, line 22:                                                                                                           
          Delete "or a right accrued"                                                                                           
                                                                                                                                
She said  the second change  in version M, incorporates  Amendment                                                              
2, [A.2], which was adopted at the last hearing. It read:                                                                       
                                                                                                                                
     Page 6, line 26:                                                                                                           
          Delete "Sections 5 and 8"                                                                                             
          Insert "Sections 5, 7, and 8"                                                                                         
                                                                                                                                
She explained  that this  change is  in Section  9. The  effect is                                                              
that Section 7 will have an immediate effective date.                                                                           
                                                                                                                                
1:54:52 PM                                                                                                                    
CHAIR COGHILL removed his objection and Version M was adopted.                                                                  
                                                                                                                                
He  stated   he  would  set  SB   191  aside  to  return   to  the                                                              
consideration of governor appointees.                                                                                           
                                                                                                                                
^CONFIRMATION HEARING(S):                                                                                                       
                    CONFIRMATION HEARING(S):                                                                                
                 Commission on Judicial Conduct                                                                             
1:55:23 PM                                                                                                                    
CHAIR  COGHILL  announced  the consideration  of  Robert  Sheldon,                                                              
governor appointee to the Commission on Judicial Conduct.                                                                       
                                                                                                                                
1:44:36 PM                                                                                                                    
ROBERT  D. SHELDON,  Appointee,  Commission  on Judicial  Conduct,                                                              
Juneau,  Alaska,  said  he  is  a  third  generation  Alaskan.  He                                                              
currently serves  on boards for  business endeavors in  Alaska and                                                              
several countries.  Since 2004, he has been appointed  to a number                                                              
of boards, commissions,  or councils in Alaska. This  would be his                                                              
fourth  term  serving   on  the  Alaska  Commission   on  Judicial                                                              
Conduct. The  commission investigates alleged  judicial misconduct                                                              
and ethical impropriety.  Fortunately, most complaints  are either                                                              
unsubstantiated or non-jurisdictional in nature.                                                                                
                                                                                                                                
He read from a prepared statement:                                                                                              
                                                                                                                                
     We  all  know  that  rule of  law  is  critical  to  the                                                                   
     orderly  functioning  of  an  economy, but  it  is  also                                                                   
     priced in  as a component  of Alaska's cost  of capital.                                                                   
     Alaska is priced  as if it's an emerging  economy rather                                                                   
     than a  developed economy. It's  my hope that  through a                                                                   
     continued  ensuring  of  confidence  in  the  judiciary,                                                                   
     that  Alaska's  cost of  capital  would come  down  over                                                                   
     time.                                                                                                                      
                                                                                                                                
     Serving  on the  Alaska Commission  on Judicial  Conduct                                                                   
     has  been an  extremely satisfying  experience, but  one                                                                   
     where  it   has  become  obvious   that  it   is  highly                                                                   
     important  that the commission  have orderly  continuity                                                                   
     of   service   as  well   as   institutional   knowledge                                                                   
     retention amongst the commission members.                                                                                  
                                                                                                                                
     As  you   are  likely  aware,   a  judge  and   attorney                                                                   
     representatives   are   for   a   variety   of   reasons                                                                   
     frequently  unable  to  serve more  than  one  four-year                                                                   
     period. Public  members help bring long-term  continuity                                                                   
     and knowledge.  I hope  to continue to  be part  of that                                                                   
     and I really appreciate your consideration.                                                                                
                                                                                                                                
1:57:51 PM                                                                                                                    
CHAIR COGHILL thanked him for his service.                                                                                      
                                                                                                                                
                                                                                                                                
          SB 191-TRUSTS, TRUSTEES, COMMUNITY PROPERTY                                                                       
                                                                                                                                
1:59:12 PM                                                                                                                    
CHAIR COGHILL  returned to the hearing  on SB 191. [Version  M was                                                              
before the committee].                                                                                                          
                                                                                                                                
2:00:09 PM                                                                                                                    
SENATOR  REINBOLD  expressed concern  that  SB  191 had  just  one                                                              
referal  and was sponsored  by the  chair of  that committee.  She                                                              
noted  that  she  just  received   the  committee  substitute  and                                                              
proposed amendments  at the beginning  of this hearing.  Since she                                                              
has  numerous questions  she recently  spent an  hour speaking  to                                                              
the Legislative  Legal Services bill drafter to  better understand                                                              
the  bill. However,  communications  between the  agency and  bill                                                              
sponsors are  confidential so  the legislative attorney  suggested                                                              
that she  speak to  the sponsor  to ask  any questions.  She asked                                                              
for the purpose of the bill.                                                                                                    
                                                                                                                                
CHAIR COGHILL  confirmed that  he was  the sponsor  of SB  191. He                                                              
said  he   agreed  to  work  with   the  Alaska  Trust   &  Estate                                                              
Professionals (ATEP)  to improve  Alaska's estate and  trust laws.                                                              
He highlighted  three issues  that SB  191 addresses:  it provides                                                              
improved    statutory   language    for   dividing   trusts    for                                                              
beneficiaries;  it  defines  community  property  income;  and  it                                                              
creates a  new section to  allow the promise  of a gift  under the                                                              
Alaska Gift  Trust Act.  This provision, which  is a  new concept,                                                              
will allow  people to  take advantage of  the current  federal tax                                                              
exemptions for  estates.                                                                                                        
                                                                                                                                
2:04:04 PM                                                                                                                    
JONATHAN  BLATTMACHR, Attorney;  Principal,  ILS Management,  LLC,                                                              
Long Island,  New York,  provided a brief  explanation of  how the                                                              
Alaska gift trust  concept was developed. In 2012,  the estate and                                                              
gift tax exemption  was set at $5  million but was slated  to drop                                                              
to $1 million  on January 1, 2013.  Many people wanted  to use the                                                              
enhanced  exemption to  pass on  their wealth  to family  members.                                                              
However, retaining  the right  to use  property until  death meant                                                              
it was  still part  of the  estate for  tax purposes.  One of  his                                                              
colleagues at  Milbank, LLC,  a New York  law firm,  developed the                                                              
"gift  by  a promise"  concept.  In  all  states,  a gift  is  not                                                              
enforceable  unless the  person  receives  some consideration  for                                                              
it.  However, Pennsylvania  common  law suggested  a person  could                                                              
make a  gift by a  promise, which would  be enforceable if  it was                                                              
put in  writing. Many  of his colleagues  suggested their  clients                                                              
take   advantage   of   the  tax   exemption   by   traveling   to                                                              
Pennsylvania, using their lawyers to do so.                                                                                     
                                                                                                                                
Congress kept  the $5  million exemption and  increased it  to $10                                                              
million  in 2017,  or $11,580,000,  adjusted  for inflation.  This                                                              
exemption will  continue to be  adjusted for inflation  until 2026                                                              
when the exemption is expected to be cut in half.                                                                               
                                                                                                                                
MR. BLATTMACHR  said  many people  would like  to make gifts  now.                                                              
The ATEP  worked on  language in  Alaska to  bring money  into the                                                              
state  and  provide  work  for   professionals  in  the  state  by                                                              
creating a qualified  gift trust. These [settlors]  from Alaska or                                                              
the Lower  48 would make  a promise in  writing, for  example, for                                                              
$11.5 million, but  still keep and use the assets.  He offered his                                                              
view that  Alaska will be a  leader in estate planning,  that this                                                              
provision  will  bring work  to  Alaska,  and  it will  result  in                                                              
significant  deposits  of  funds   to  financial  institutions  in                                                              
Alaska. He said  the ATEP does not think anyone will  be harmed by                                                              
it.                                                                                                                             
                                                                                                                                
2:08:03 PM                                                                                                                    
SENATOR REINBOLD  referred to a  notation on the fiscal  note that                                                              
stated this  applied to contracts,  except for contracts  relating                                                              
to  interpretation of  Janus  v. AFSCME.  She  asked whether  this                                                              
bill would  have any  impact on  union trusts,  health trusts,  or                                                              
Native organizations.                                                                                                           
                                                                                                                                
MR. J. BLATTMACHR  answered that he did not believe  it would have                                                              
any impact whatsoever.  The case she mentioned  relates to another                                                              
provision of SB  191. He explained that a case  pending before the                                                              
Alaska Supreme  Court pertains  to community  property. There  are                                                              
major  tax  implications  when   a  couple  makes  their  property                                                              
community  property.  When one  spouse  dies,  his or  her  estate                                                              
receives  forgiveness  on  capital  gains as  does  the  surviving                                                              
spouse's  portion.  There  is an  historic  reason  for  community                                                              
property  receiving that  treatment, but  other forms of  commonly                                                              
owned  property  between spouses  does  not.  In 1998,  the  state                                                              
adopted  community  property  by  an opt-in  system.  People  have                                                              
saved hundreds of  millions of dollars because  of that provision,                                                              
by  merely  creating  an  Alaska   Community  Property  Trust.  An                                                              
Alaskan couple can  do so by contract or by trust.  At the time of                                                              
death  of the  first  spouse,  all of  the  inherent  gain in  the                                                              
property  receives a  step up  in  basis because  it is  community                                                              
property.                                                                                                                       
                                                                                                                                
He said the  case before the  Alaska Supreme Court deals  with the                                                              
circumstance in  which the couple  created community  property but                                                              
one of  the spouses indicated  that it  only applied to  the value                                                              
at  the time  the trust  or contract  was created.  Any income  or                                                              
appreciation  occurring  after   it  was  converted  to  community                                                              
property  remained separate  property.  He offered  his view  that                                                              
the decision  is wrong. The decision  goes against the  purpose of                                                              
Alaska's community  property statutes,  which is  to have  all the                                                              
inherent gain subject to the tax benefit.                                                                                       
                                                                                                                                
MR.  J. BLATTMACHR  said  the Alaska  Supreme  Court  will make  a                                                              
determination  on that  case, but  everyone else  who has  created                                                              
community property will receive the tax benefit.                                                                                
                                                                                                                                
2:12:40 PM                                                                                                                    
SENATOR REINBOLD  asked if it would  impact people with  less than                                                              
$5 million.                                                                                                                     
                                                                                                                                
MR. J. BLATTMACHR  stated that grantor trusts are  structured such                                                              
that they  are ignored for  income tax  purposes. A person  can do                                                              
this alone or with  his or her spouse. The person  who creates the                                                              
trust  must pay  the  income  tax on  it,  which means  the  trust                                                              
receives  its  gains  entirely  free  of  taxes.  The  IRS  allows                                                              
[grantors] to sell  assets to the trust without any  gain or loss.                                                              
When one  spouse dies,  the trust  loses its  grantor status,  but                                                              
the survivor  may want to continue  as a grantor trust.  This bill                                                              
will allow  the trust  to be  divided when  the first  spouse dies                                                              
and continue the grantor trust status.                                                                                          
                                                                                                                                
He advised that  it could affect estates of less  than $5 million.                                                              
For example,  if a  couple has  $4 million  in community  property                                                              
assets  and the  husband dies,  the  entire inherent  gain on  the                                                              
estate  will be  forgiven by  a special  IRS rule.  If the  couple                                                              
owned the property  jointly or separately, only the  half owned by                                                              
the  husband would  receive that  step up  in basis.  SB 191  will                                                              
allow a  spouse to use the  $11 million exemption  by establishing                                                              
the promise  of a  gift in  a trust.  Even if  the estate  is only                                                              
worth  $1  million  at  the  time   of  the  spouse's  death,  the                                                              
exemption  will apply, and  the family  will have  had use  of the                                                              
$11 million asset.                                                                                                              
                                                                                                                                
2:17:24 PM                                                                                                                    
SENATOR REINBOLD  noted the  high rates  of domestic violence  and                                                              
financial  abuse  in  Alaska  and asked  whether  the  bill  would                                                              
create any unintended consequences or financial abuse.                                                                          
                                                                                                                                
MR.  J. BLATTMACHR  answered  no; if  a wife  has  $10 million  in                                                              
assets,  she could  bequeath it  to anyone  without notifying  her                                                              
husband. He  did not see this  bill aggravating the  situation for                                                              
the  spouse. He  reiterated that  the purpose  of the  bill is  to                                                              
allow people  to use  their estate tax  exemption today  before it                                                              
is diminished. He  said one benefit of the bill is  that it allows                                                              
people  to make  gifts for  more  than they  currently own,  which                                                              
helps them protect their families from estate taxes.                                                                            
                                                                                                                                
He related that  the Alaska Trust Act passed in 1997  and the same                                                              
type of estate law  has been adopted in 19 states.  He offered his                                                              
view  that Alaska  has the  best  estate laws,  which has  brought                                                              
significant business  to the state.  These funds are  deposited in                                                              
banks  in  Alaska  and  these  funds  are  loaned  for  people  to                                                              
purchase homes or other things.                                                                                                 
                                                                                                                                
2:21:54 PM                                                                                                                    
SENATOR  REINBOLD  said  she  has had  two  bad  experiences  with                                                              
trusts, so she is  not a big fan of them. She asked  if his nephew                                                              
was Matthew Blattmachr.                                                                                                         
                                                                                                                                
J. BLATTMACHR answered yes.                                                                                                     
                                                                                                                                
2:22:51 PM                                                                                                                    
SENATOR  REINBOLD  acknowledged   that  the  bill  has  some  good                                                              
aspects  for Alaska  in  terms of  investment  but reiterated  her                                                              
concern that it  may allow abuse of community  property. She asked                                                              
whether  it changed  the  definition  of community  property.  She                                                              
related  her  understanding   that  anything  earned   during  the                                                              
marriages is automatically community property.                                                                                  
                                                                                                                                
MR.  J.  BLATTMACHR  explained that  property  a  married  Alaskan                                                              
acquires is  not community property.  For example, if  her husband                                                              
earned $5  million it would be  his money, although a  judge might                                                              
award some  money in  a divorce,  and she would  be entitled  to a                                                              
minimum share  of his estate when  he dies. If a couple  choses to                                                              
have  community  property,  each  spouse owns  half.  He  compared                                                              
Alaska's  system  to Germany's  system,  such that  spouses  start                                                              
with  a  separate  regime,  but  they  can  elect  into  community                                                              
property. He  highlighted the safeguards  in the  Alaska Community                                                              
Property Trust, such  that the contract must be in  writing and it                                                              
must warn  in large,  bold type that  this could have  significant                                                              
financial  and  legal  ramifications.  He  said SB  191  is  safe,                                                              
provides good  measures for  Alaskans, and  in some instances  can                                                              
be used by people outside the state.                                                                                            
                                                                                                                                
2:27:08 PM                                                                                                                    
SENATOR REINBOLD  expressed alarm  that a  mother could  stay home                                                              
and raise  the couple's children, but  have no right to  the money                                                              
her husband earns.                                                                                                              
                                                                                                                                
MR. J.  BLATTMACHR said  in Alaska  and all  but nine states,  the                                                              
spouse who  stays home owns  none of the  property that  the other                                                              
spouse accumulates.  The stay-at-home spouse  has no say  over any                                                              
of property  the other spouse  owns including  how it is  spent or                                                              
invested.  He suggested that  Alaska might  consider adopting  the                                                              
Uniform  Marital Property  Act that  provides  an automatic  50/50                                                              
distribution of property.  He recalled that Wisconsin  did that in                                                              
the 1980s.                                                                                                                      
                                                                                                                                
2:30:00 PM                                                                                                                    
SENATOR KIEHL asked  for an explanation of how  community property                                                              
might be treated differently in a divorce settlement.                                                                           
                                                                                                                                
MR.  J. BLATTMACHR  related  his  understanding  that  a judge  in                                                              
Alaska  has the power  to determine  the division  of assets  that                                                              
were  acquired  during  the  marriage.   The  judge  can  consider                                                              
anything  that  is proper  to  make  the determination,  which  is                                                              
usually  a 50:50  division  in a  long-term  marriage. He  related                                                              
several scenarios  to illustrate how some states  handle community                                                              
property. Under Alaska  law, there is no claw back  if the husband                                                              
gives $1 million to his girlfriend, he said.                                                                                    
                                                                                                                                
2:33:20 PM                                                                                                                    
JAMIE DELMAN, Attorney,  Shaftel Delman LLC; Member,  Alaska Trust                                                              
& Estate Professionals,  Anchorage, Alaska, cautioned  that he was                                                              
not a divorce  lawyer, but the judge  would look at all  facts and                                                              
circumstances if  there was no community property.  He offered his                                                              
view that if  a gift was made  shortly before a divorce,  it could                                                              
be considered during the equitable distribution of assets.                                                                      
                                                                                                                                
2:34:05 PM                                                                                                                    
SENATOR REINBOLD  expressed  concern and  frustration that  a wife                                                              
who stayed  home to  raise the children  while the husband  worked                                                              
would not  be entitled to an  equal part of assets.  She described                                                              
it as an insane system.                                                                                                         
                                                                                                                                
CHAIR COGHILL  pointed out that  Mr. J. Blattmachr  said community                                                              
property would be  the saner system and that Alaska  has an opt-in                                                              
system.                                                                                                                         
                                                                                                                                
2:34:47 PM                                                                                                                    
MR. J. BLATTMACHR  confirmed that he said that  community property                                                              
that is  automatic is the sanest  type of marital  property regime                                                              
a  state can  offer its  residents.  He noted  that Alaska  allows                                                              
that by contract.                                                                                                               
                                                                                                                                
SENATOR  REINBOLD   related  her  understanding  that   in  Alaska                                                              
parties must opt in.                                                                                                            
                                                                                                                                
J.  BLATTMACHR  answered  yes.   He  said  parties  in  subsequent                                                              
marriages often  will have  a prenuptial  agreement, but  those in                                                              
first  marriages   may  decide   community  property   offers  tax                                                              
benefits.                                                                                                                       
                                                                                                                                
2:36:57 PM                                                                                                                    
CHAIR COGHILL stated that the committee would not take up SB 8.                                                                 
                                                                                                                                
SENATOR REINBOLD suggested the committee discuss opt in.                                                                        
                                                                                                                                
CHAIR  COGHILL said  common  options  for community  property  are                                                              
joint checking  accounts and joint  registration of  vehicles, but                                                              
looking into  the requirements  of becoming  a community  property                                                              
state would be separate from this bill.                                                                                         
                                                                                                                                
2:38:43 PM                                                                                                                    
SENATOR REINBOLD  advised  that she was  considering an  amendment                                                              
pertaining to automatic community property.                                                                                     
                                                                                                                                
CHAIR COGHILL  said changes  to community  property might  not fit                                                              
within the  subject matter  of SB 191.  He suggested that  she ask                                                              
Legislative Legal Services to weigh in.                                                                                         
                                                                                                                                
2:39:30 PM                                                                                                                    
SENATOR REINBOLD asked  if the 1998 community property  opt in law                                                              
had anything to do with the estate taxes or trusts.                                                                             
                                                                                                                                
2:39:52 PM                                                                                                                    
MR.  J.  BLATTMACHR said  he  was  the  principal drafter  of  the                                                              
Alaska Community  Property Act in  1998. He recalled  meeting with                                                              
every  legislator  and  that  the   bill  passed  the  legislature                                                              
unanimously.  He said he  was not  aware of  any abuse  related to                                                              
that law.  He said  outside of the  hearing he  would be  happy to                                                              
discuss  whether  Alaska  ought  to have  an  automatic  community                                                              
property system.                                                                                                                
                                                                                                                                
2:40:57 PM                                                                                                                    
CHAIR  COGHILL  remarked that  he  had  been patient  during  this                                                              
discussion, but there were several amendments to consider.                                                                      
                                                                                                                                
SENATOR  REINBOLD  said  she  had  lots  of  technical  questions,                                                              
particularly  on  Sections  3  and  4,  but  she  was  willing  to                                                              
consider the amendments.                                                                                                        
                                                                                                                                
2:42:37 PM                                                                                                                    
CHAIR COGHILL suggested her questions might be answered offnet.                                                                 
                                                                                                                                
2:43:29 PM                                                                                                                    
SENATOR REINBOLD reiterated her earlier concerns about the bill.                                                                
                                                                                                                                
CHAIR COGHILL  suggested that  the committee consider  amendments,                                                              
set aside  the bill  to a  future hearing,  and allow  members the                                                              
opportunity  to  research  the   issues  related  to  estates  and                                                              
trusts.                                                                                                                         
                                                                                                                                
SENATOR REINBOLD reiterated her earlier concerns about the bill.                                                                
                                                                                                                                
CHAIR  COGHILL said  the material  is complex,  and he would  like                                                              
members to have their questions answered.                                                                                       
                                                                                                                                
2:45:44 PM                                                                                                                    
SENATOR KIEHL moved to adopt Amendment 5, A.7, which read:                                                                      
                                                                                                                                
                                                 31-LS1370\A.7                                                                  
                                                     Bannister                                                                  
                                                        3/6/20                                                                  
                      A M E N D M E N T  5                                                                                  
                                                                                                                                
                                                                                                                                
     OFFERED IN THE SENATE                   BY SENATOR KIEHL                                                                   
          TO:  SB 191                                                                                                           
                                                                                                                                
     Page 6, following line 5:                                                                                                  
     Insert a new subsection to read:                                                                                           
          "(d)  A person who sells to a third party a                                                                           
     promise  treated as  a note  that  becomes a  negotiable                                                                   
     instrument  under  (c)  of this  section  shall  provide                                                                   
     written notice  to the buyer  that the note  was derived                                                                   
     from  a  promise  made  under   this  section  and  that                                                                   
     consideration  was   not  provided.  In   addition,  the                                                                   
     notice  must  state  whether   the  note  is  backed  by                                                                   
     collateral  and whether  the note is  guaranteed by  the                                                                   
     trustee or another person."                                                                                                
                                                                                                                                
CHAIR COGHILL objected for discussion purposes.                                                                                 
                                                                                                                                
2:46:02 PM                                                                                                                    
SENATOR  KIEHL  explained  that  Amendment  5 is  similar  to  one                                                              
offered  and withdrawn  at an  earlier  hearing. Senator  Micciche                                                              
indicated  it  was  possible  that  one  of  the  notes  could  be                                                              
guaranteed  by  the trustee.  He  worked  with Mr.  Blattmachr  to                                                              
develop this language.  Amendment 5 would allow the  buyer to have                                                              
disclosure.                                                                                                                     
                                                                                                                                
2:46:49 PM                                                                                                                    
SENATOR MICCICHE  said Amendment 5  does not adversely  affect the                                                              
bill, but it is unnecessary.                                                                                                    
                                                                                                                                
2:47:10 PM                                                                                                                    
SENATOR REINBOLD  remarked that she liked the  original amendment,                                                              
but she would support Amendment 5.                                                                                              
                                                                                                                                
2:47:35 PM                                                                                                                    
CHAIR  COGHILL withdrew  his  objection.  There being  no  further                                                              
objection, Amendment 5 was adopted.                                                                                             
                                                                                                                                
2:47:59 PM                                                                                                                    
CHAIR COGHILL moved to adopt Amendment 6, M.1, which read:                                                                      
                                                                                                                                
                                                 31-LS1370\M.1                                                                  
                                                     Bannister                                                                  
                                                        3/6/20                                                                  
                    A M E N D M E N T  6                                                                                    
                                                                                                                                
                                                                                                                                
     OFFERED IN THE SENATE                 BY SENATOR COGHILL                                                                   
          TO:  CSSB 191(JUD), Draft Version "M"                                                                                 
                                                                                                                                
     Page 6, following line 5:                                                                                                  
     Insert a new subsection to read:                                                                                           
          "(d)  If a married person makes a promise under                                                                       
     (a)  of  this  section,  property   owned  as  community                                                                   
     property or  as tenants by  the entirety by  the married                                                                   
     person and the  spouse of the married person  during the                                                                   
     life of  the married person may  not be used to  pay the                                                                   
     obligation  represented   by  the  promise   unless  the                                                                   
     spouse  has   provided  the  spouse's   express  written                                                                   
     consent to the payment."                                                                                                   
                                                                                                                                
SENATOR MICCICHE objected for discussion purposes.                                                                              
                                                                                                                                
2:48:25 PM                                                                                                                    
MS.  BUSHNELL explained  that the  purpose  of Amendment  6 is  to                                                              
achieve good practice  without being too restrictive.  The goal is                                                              
for couples who both  have a right to the property  to make a gift                                                              
together. If only  one spouse makes the gift, it  would not affect                                                              
community  property. She  related her understanding  that  this is                                                              
current statute,  that a  person cannot  give what  is not  his or                                                              
hers. This language makes it expressly clear in Section 4.                                                                      
                                                                                                                                
2:49:58 PM                                                                                                                    
SENATOR  REINBOLD   expressed  concern  that  she   just  received                                                              
Amendment 6.  She asked for assurance  that in instances  in which                                                              
the husband earns  the income and the wife stays  at home, that he                                                              
cannot  gift   his  retirement  to   someone  else  such   as  the                                                              
university.                                                                                                                     
                                                                                                                                
MS. BUSHNELL answered  that a pension is personal  property, which                                                              
in Alaska is  an equitable division. However,  she understood that                                                              
the  division is  almost  never  50:50, since  it  depends on  the                                                              
lifestyle,  the children,  the parties work  history, and  spousal                                                              
decisions  regarding future  education, which  are decisions  that                                                              
should be made by the parties.                                                                                                  
                                                                                                                                
2:51:16 PM                                                                                                                    
CHAIR COGHILL  related his understanding  that income,  except for                                                              
retirement, can be shared.                                                                                                      
                                                                                                                                
2:51:34 PM                                                                                                                    
MR.  DELMAN advised  that federal  law supersedes  state law  with                                                              
respect  to retirement.  To  change  the beneficiary,  the  spouse                                                              
would have  to sign off  on it. As  a general rule,  upon divorce,                                                              
an  asset  in  a marriage  without  community  property  would  be                                                              
subject to equitable  disposition. However, prior  to divorce, the                                                              
other spouse would  not have any control over  an individual asset                                                              
of one spouse.                                                                                                                  
                                                                                                                                
2:52:50 PM                                                                                                                    
SENATOR REINBOLD  said she likes  Amendment 6, but she  would like                                                              
the document  to be  notarized to  protect spouses.  She asked  if                                                              
this   bill  needs   stronger  language   than  "express   written                                                              
consent."                                                                                                                       
                                                                                                                                
MR.  DELMAN  explained that  written  consent  is used  in  Alaska                                                              
statutes in  many places. He said  he was neutral  about requiring                                                              
the document  to be  notarized but  acknowledged that  a notarized                                                              
document  would verify  that the  spouse signed  the document.  He                                                              
suggested  that adding  "acknowledged  written  consent" could  be                                                              
added,  but  he  did  not  believe  the  language  "notarized"  is                                                              
typically used in  statute. He referred to AS  13.12.213, which is                                                              
in the context of  waiving marital rights at death.  He said those                                                              
rights can  be waived  by a  written waiver  signed by  the spouse                                                              
and it does not require a notary.                                                                                               
                                                                                                                                
2:56:22 PM                                                                                                                    
CHAIR COGHILL  said Section 4, requires  both spouses to  sign the                                                              
promise  to  transfer a  gift.  The  document  must be  signed  in                                                              
writing and delivered to the trustee.                                                                                           
                                                                                                                                
MR. DELMAN  said  he thinks  that is right.  If a  spouse makes  a                                                              
promise   using    marital   assets,    they   would    want   the                                                              
contemporaneous consent of his or her spouse.                                                                                   
                                                                                                                                
2:57:24 PM                                                                                                                    
SENATOR REINBOLD  said she would  like to help protect  vulnerable                                                              
spouses. She  asked whether  this Amendment  would help  close any                                                              
loopholes.                                                                                                                      
                                                                                                                                
MR.  DELMAN  answered yes.  If  a  spouse  would like  to  promise                                                              
marital property, the other spouse has to consent in writing.                                                                   
                                                                                                                                
2:58:43 PM                                                                                                                    
SENATOR KIEHL offered his support for Amendment 6.                                                                              
                                                                                                                                
SENATOR  REINBOLD   asked  for  the  difference   between  express                                                              
written  consent and  the  spouse's acknowledged  express  written                                                              
consent. She  wondered if  it should still  require a  notary. She                                                              
said  she understood  the  ultimate  goal of  SB  191  is to  take                                                              
advantage of tax savings.                                                                                                       
                                                                                                                                
2:59:47 PM                                                                                                                    
CHAIR COGHILL  stated that he would  fold the two  amendments into                                                              
a new committee substitute for the committee to review.                                                                         
                                                                                                                                
3:00:24 PM                                                                                                                    
SENATOR MICCICHE withdrew his objection to Amendment 6.                                                                         
                                                                                                                                
There being no further objection, Amendment 6 was adopted.                                                                      
                                                                                                                                
3:00:31 PM                                                                                                                    
CHAIR COGHILL  stated that SB 191  would be held in  committee and                                                              
public testimony would remain open.                                                                                             
                                                                                                                                
3:01:02 PM                                                                                                                    
At-ease.                                                                                                                        
                                                                                                                                
^CONFIRMATION HEARING(S)                                                                                                        
                    CONFIRMATION HEARING(S)                                                                                 
                                                                                                                                
3:01:16 PM                                                                                                                    
CHAIR  COGHILL   reconvened  the   meeting  and  stated   that  in                                                              
accordance  with  AS  39.05.080,  the  Senate  Judiciary  Standing                                                              
Committee reviewed  the following and recommends  the appointments                                                              
be forwarded to a joint session for consideration:                                                                              
                                                                                                                                
State Board of Parole                                                                                                         
Leitoni "Lei" Tupou - Juneau                                                                                                    
                                                                                                                                
Alaska Commission on Judicial Conduct                                                                                         
Jane Mores - Juneau                                                                                                             
Robert Shelton-Anchorage                                                                                                        
                                                                                                                                
SENATOR  MICCICHE  reminded  members   that  signing  the  reports                                                              
regarding  appointments  to  boards  and  commissions  in  no  way                                                              
reflects  individual  members'  approval  or  disapproval  of  the                                                              
appointees;  the  nominations are  merely  forwarded  to the  full                                                              
legislature for confirmation or rejection.                                                                                      
                                                                                                                                
3:02:17 PM                                                                                                                    
There being no further business to come before the committee,                                                                   
Chair Coghill adjourned the Senate Judiciary Standing Committee                                                                 
meeting at 3:02 p.m.                                                                                                            

Document Name Date/Time Subjects
CS SB8 Version S.pdf SJUD 3/6/2020 1:30:00 PM
SB 8
CS SB191 Version M.pdf SJUD 3/6/2020 1:30:00 PM
SB 191
SB 191 Amendment M.1 3.6.2020.pdf SJUD 3/6/2020 1:30:00 PM
SB 191
SB 191 Amendment A.7 3.6.2020.pdf SJUD 3/6/2020 1:30:00 PM
SB 191