1996-10-21                     House Journal                      Page 4737
HB 459                                                                       
The following letter, dated May 23, 1996, was received:                        
                                                                               
Dear Speaker Phillips:                                                         
                                                                               
Under the authority of art. II, sec. 15 of the Alaska Constitution, I have     
vetoed the following bill:                                                     
                                                                               
CS FOR HOUSE BILL NO. 459(JUD) am                                             
An Act relating to the jurisdiction governing a trust, to challenges          
to trusts or property transfers in trust, to the validity of trust             
interests, and to transfers of certain trust interests.                        
                                                                               
While this Administration applauds innovation and imaginative efforts          
to attract business opportunities, I am concerned that the potential           
benefits of this bill are outweighed by its inadvertent consequences to        
the people of Alaska.  Therefore, I find it necessary to veto this bill.       
                                                                               
This legislation would make a dramatic change in our trust laws and            
policy.  In fact, these changes to Alaska law would make this the only         
state to espouse such public policy.  The bill raises many questions and       
concerns which  require a level of consideration and analysis that,            
frankly, was not received with just one hearing before each body of the        
Legislature.                                                                   
                                                                               

1996-10-21                     House Journal                      Page 4738
HB 459                                                                       
Specifically, one of the chief concerns I have about this bill is that it      
would shift the burden of proving intent to defraud onto creditors,            
spouses, and children of the settlor.  Currently, if one transfers assets      
into a trust of which the settlor is a beneficiary, the trust is void as to    
present or future creditors.  Under the terms of this bill, the burden of      
proof is shifted so that a creditor or a spouse in a divorce setting           
would have to litigate to prove the settlors fraudulent intent before the      
trust assets could be invaded to meet those interests.                         
                                                                               
Another important concern is the bills provision that a trust cannot be        
set aside on the grounds it defeats an interest conferred by a marital or      
similar relationship.  Thus, a settlor could disinherit his or her spouse.     
Upon the settlors death, the spouse would be unable to obtain the              
normal elective share (usually one-third) of the estate.  The same             
would be true for surviving children who would be unable to reach              
these assets in payment of child support arrears.  This provision              
contradicts the legislatures action on another bill passed this year           
updating Alaskas probate code.                                                 
                                                                               
I realize this trust law is meant to mirror laws common in some                
offshore jurisdictions, such as Bermuda and the Cayman Islands.                
However, parts of this bill, particularly the provision to prevent the         
spousal elective share of a trust, go even further than the offshore trust     
laws.                                                                          
                                                                               
There may be aspects of this proposal that could benefit Alaskas               
economy by attracting financial investments without harming the                
public good.  I would welcome further work in this area with the               
understanding that any future changes in our trust laws undergo                
thorough scrutiny and public hearings.                                         
                                                                               
							Sincerely,                                                              
							/s/                                                                     
							Tony Knowles                                                            
							Governor