HB 292 - PRINCIP.& INC/PROBATE/UTMA/RETIREMT/ETC. 2:13:36 PM VICE CHAIR THOMPSON announced that the final order of business would be HOUSE BILL NO. 292, "An Act relating to property exemptions for retirement plans; relating to pleadings, orders, liability, and notices under the Uniform Probate Code; relating to the Alaska Principal and Income Act; relating to the Alaska Uniform Transfers to Minors Act; relating to the disposition of human remains; relating to insurable interests for life insurance policies; relating to transfers of individual retirement plans; relating to the community property of married persons; and amending Rule 301(a), Alaska Rules of Evidence." [Before the committee was CSHB 292(L&C).] 2:13:49 PM JANE W. PIERSON, Staff, Representative Steve Thompson, Alaska State Legislature, on behalf of the sponsor, Representative Thompson, explained that HB 292 would extend protection for retirement-plan assets to the beneficiaries of retirement plans - often the surviving spouse; would provide means of representation for minors and incapacitated persons in dealing with settlements of accounts or settlement agreements; would amend the Alaska Principal and Income Act - AS 13.38 - to conform with current Internal Revenue Service (IRS) regulations; would provide rules concerning who may control the disposition of decedents' remains; would make conforming amendments to Alaska law regarding insurable interests in order to align with changes to the federal Uniform Trust Code (UTC); would provide that individual retirement account (IRA) interest can be voluntarily transferred to a family member or trust; would update and clarify provisions of the Alaska Community Property Act - AS 34.77 - regarding ownership of community property; and would allow a beneficiary to extend the time funds would be held in [an account under the Alaska Uniform Transfers to Minors Act]. 2:16:03 PM DAVID G. SHAFTEL, Attorney at Law - after mentioning that he practices in the field of estate planning and estate and trust administration, and is a member of an informal group of trust and estate planning attorneys and trust officers that periodically recommends updates to Alaska's trust and estate laws - characterized HB 292 as having a lot of very solid and important provisions. Section 1 of CSHB 292(L&C), he explained, addresses asset protection for inherited retirement plans; federal case law extends protection from creditors to beneficiaries of retirement plans, and Section 1 would codify that protection in Alaska statute. Sections 2 and 3 provide conforming and definition changes related to Section 1. [Sections 4 and 5 together] clarify that AS 13.06.120 - the statute pertaining to pleadings, to when parties are bound by orders, and to notice - also applies to "settlements that occur outside of court." MR. SHAFTEL explained that Sections 6-8 of CSHB 292(L&C) would update Alaska's statutes pertaining to modifying an existing trust, so that they closely track New York's recently-revised statutes, which have many built-in safeguards for beneficiaries; Alaska's statutes addressing such trust modifications were originally copied from New York's statutes, and currently 13 states have such provisions, and 3 more states are considering adding them. Sections 9-25 would update the Alaska Principal and Income Act to take advantage of new federal regulations pertaining to unitrusts, wherein a certain percentage of income is distributed annually to a current beneficiary. This update would provide trustees with more flexibility, provide a definition of unitrust income, provide for "ordering of distributions among the different types of income and principal," provide a five-year period for averaging assets, and clarify how the unitrust rules apply to retirement benefits. 2:25:57 PM MR. SHAFTEL explained that Sections 26-28 would update the Alaska Uniform Transfers to Minors Act - AS 13.46 - so that under certain circumstances, the age of distribution of assets could be extended; this update would address situations in which the beneficiary doesn't want, or isn't ready or able to manage his/her assets upon reaching the age of 18 or 21. He proffered that allowing for such extensions would be very helpful to many families. Section 29 adds a new Chapter 75 to Title 13 addressing the disposition of human remains; the proposed new chapter is necessary because existing state law doesn't address this issue and thus disputes over a decedent's remains have resulted. The bill's proposed AS 13.75 includes, among other things, provisions addressing directions by the decedent, persons authorized to control disposition, and the form of a disposition document; the need for proposed AS 13.75 was brought forth by Alaska's funeral parlor industry. MR. SHAFTEL indicated that Section 30 [clarifies that a person with an insurable interest may form a business entity for the purpose of purchasing, holding, and administering life insurance contracts]; Section 30's proposed changes reflect amendments made to the federal Uniform Trust Code (UTC) by the National Conference of Commissioners on Uniform State Laws (NCCUSL) in response to a federal case, Chawla, ex rel Giesinger v. Transamerica Occidental Life Ins. Co., [in which the court found that the law lacked provision specifying that trusts and business entities could have an insurable interest in the life or body of the insured]. Section 31 adds a new section 113 to AS 34.40 clarifying that a person may voluntarily transfer or assign his/her interest in an IRA. 2:34:38 PM MR. SHAFTEL explained that Sections 32-36 would update the Alaska Community Property Act by adding references to community property trusts; providing a new statute of limitations for beginning action based on a claim of wrongful transfer of community property; clarifying that property which both spouses agree is community property [shall be treated as such] regardless of the form of title to the property; providing a rebuttable presumption that beneficiary designations or survivor-ownerships were made or provided for with the consent of both spouses, and that beneficiary designations are effective for only the half interest that is being designated; and providing remedies and limitation periods to address improper transfers. MR. SHAFTEL, in conclusion, stated that [HB 292's] proposed changes constitute very important improvements that will impact a large number of Alaskans. 2:38:27 PM DOUGLAS J. BLATTMACHR, President and CEO, Alaska Trust Company, characterized HB 292 as a good piece of legislation that would modernize Alaska's trust laws, and stated that the Alaska Trust Company strongly supports HB 292. 2:39:22 PM REPRESENTATIVE KELLER moved to report CSHB 292(L&C) out of committee with individual recommendations and the accompanying zero fiscal note. There being no objection, CSHB 292(L&C) was reported from the House Judiciary Standing Committee.