02/03/2010 01:00 PM House JUDICIARY

            HB 146 - TRANSFER RESTRICTIONS ON TRUSTS                                                                        
                                                                                                                                
2:22:36 PM                                                                                                                    
                                                                                                                                
CHAIR RAMRAS announced that the  final order of business would be                                                               
HOUSE BILL NO. 146, "An  Act relating to transfer restrictions on                                                               
trust interests."                                                                                                               
                                                                                                                                
REPRESENTATIVE  GRUENBERG  indicated  that  he's  heard  concerns                                                               
regarding Section 3 of HB 146.                                                                                                  
                                                                                                                                
2:24:30 PM                                                                                                                    
                                                                                                                                
JANE W.  PIERSON, Staff, Representative Jay  Ramras, Alaska State                                                               
Legislature,  on behalf  of the  sponsor, Representative  Ramras,                                                               
explained that  HB 146 would  - by amending AS  34.40.110(b)(1) -                                                               
clarify that  a creditor must  establish by clear  and convincing                                                               
evidence that a  transfer of property in trust was  made with the                                                               
intent to defraud  him/her; would - by adding  a new subparagraph                                                               
(E) to AS 34.40.110(b)(3) -  clarify that a spendthrift provision                                                               
would  apply to  a  trust  if distributions  are  made under  the                                                               
exercise  of discretion  by a  trustee  who is  not the  settlor,                                                               
regardless of whether  the exercise of discretion  is governed by                                                               
a  standard; would  -  by adding  a new  subparagraph  (F) to  AS                                                               
34.40.110(b)(3)  -  provide that  a  spendthrift  provision in  a                                                               
trust applies  even though the  trustee may distribute  income or                                                               
principal to the  settlor or to pay income taxes;  and would - by                                                               
amending AS 34.40.110(l) - clarify  that a beneficiary's interest                                                               
in a trust, regardless of  whether it's vested, is not considered                                                               
a factor  or economic  circumstance in  the division  of property                                                               
subject  to divorce.   Additionally,  HB 146  makes a  conforming                                                               
change  to AS  34.40.110(b)(2)  to reflect  the  addition of  new                                                               
subparagraphs (E)  and (F) to  AS 34.40.110(b)(3); and  amends AS                                                               
34.40.110(h)  such that  a  transfer  restriction is  enforceable                                                               
even if  the settlor has the  authority to appoint or  remove and                                                               
replace a trustee, a trust protector, or an advisor.                                                                            
                                                                                                                                
REPRESENTATIVE GRUENBERG characterized the  proposed change to AS                                                               
34.40.110(l) -  via Section 3  of HB 146  - as a  complete change                                                               
rather  than  just a  clarification,  remarked  that he  and  the                                                               
attorneys who  practice divorce law  in Alaska have  concern with                                                               
Section 3,  and indicated  a belief that  it would  overrule some                                                               
supreme court cases.                                                                                                            
                                                                                                                                
MS. PIERSON surmised  that others could better  address that last                                                               
point.                                                                                                                          
                                                                                                                                
2:29:11 PM                                                                                                                    
                                                                                                                                
DANA  L.  OLSON indicated  a  belief  that  HB 146  as  currently                                                               
written  would  conflict with  federal  rules,  and would  create                                                               
problems for her.                                                                                                               
                                                                                                                                
[Chair Ramras turned the gavel over to Vice Chair Dahlstrom.]                                                                   
                                                                                                                                
MS. OLSON,  in response to  questions, recounted  further details                                                               
about her specific situation.                                                                                                   
                                                                                                                                
[Vice Chair Dahlstrom returned the gavel to Chair Ramras.]                                                                      
                                                                                                                                
MS. OLSON  then indicated a belief  that Representative Gruenberg                                                               
has  a conflict  of  interest, and  that  unless the  legislature                                                               
takes a deposition, HB 146 wouldn't apply to her.                                                                               
                                                                                                                                
REPRESENTATIVE GRUENBERG  offered his  understanding that  HB 146                                                               
would not affect Ms. Olson's  situation because the bill pertains                                                               
to private trusts.                                                                                                              
                                                                                                                                
2:37:10 PM                                                                                                                    
                                                                                                                                
DOUGLAS J.  BLATTMACHR, President and CEO,  Alaska Trust Company,                                                               
said the Alaska Trust Company  supports HB 146, believing it will                                                               
keep Alaska in the forefront of  states providing for trusts.  He                                                               
indicated  that both  his company  and the  State have  benefited                                                               
from nonresidents setting up trusts in Alaska.                                                                                  
                                                                                                                                
REPRESENTATIVE GRUENBERG  asked whether Section 3  would have the                                                               
effect of overruling some Alaska Supreme Court decisions.                                                                       
                                                                                                                                
MR.  BLATTMACHR surmised  that others  could better  address that                                                               
point.                                                                                                                          
                                                                                                                                
2:39:31 PM                                                                                                                    
                                                                                                                                
DAVID  G. SHAFTEL,  Attorney at  Law,  after noting  that he's  a                                                               
member  of  an  informal  group  that's  recommended  changes  to                                                               
Alaska's trust laws to the  legislature, and that he was involved                                                               
in drafting HB 146, indicated that  Section 3 is meant to address                                                               
a  potential problem  with existing  AS  34.40.110(l), which,  he                                                               
posited, was intended to ensure  that trust assets of a divorcing                                                               
beneficiary wouldn't  be given  to his/her  soon-to-be-ex spouse,                                                               
and that  such trust  assets can't even  be considered  as assets                                                               
for purposes of property division in a divorce.                                                                                 
                                                                                                                                
[Chair Ramras turned the gavel over to Vice Chair Dahlstrom.]                                                                   
                                                                                                                                
MR.  SHAFTEL  explained that  "a  practitioner"  in Colorado  has                                                               
recommended that AS 34.40.110(l) be  bolstered, and so that's the                                                               
intent   of  adding   the  language,   "a   factor  or   economic                                                               
circumstance in  the division  of" to AS  34.40.110(l).   He then                                                               
referred to the Alaska Supreme  Court's 2006 decision in Krize v.                                                             
Krize, 145 P.3d  481, and offered a  hypothetical example wherein                                                             
a beneficiary's trust assets do get considered during a divorce.                                                                
                                                                                                                                
REPRESENTATIVE  GRUENBERG indicated  a  belief  that adoption  of                                                               
Section  3 would  have the  effect of  overturning more  than one                                                               
court  case,  that existing  law  is  sufficient to  address  Mr.                                                               
Shaftel's concerns,  and that the circumstances  in Mr. Shaftel's                                                               
hypothetical example are unlikely to occur.                                                                                     
                                                                                                                                
2:52:37 PM                                                                                                                    
                                                                                                                                
MICHAEL  A.  GERSHEL, Attorney  at  Law,  expressed concern  that                                                               
Section 3's proposed change would  have a detrimental effect, and                                                               
concurred that existing law is sufficient.                                                                                      
                                                                                                                                
2:56:55 PM                                                                                                                    
                                                                                                                                
JACOB A.  SONNEBORN, Attorney at Law,  indicated concurrence with                                                               
Mr.  Gershel and  Representative Gruenberg  that existing  law is                                                               
sufficient.                                                                                                                     
                                                                                                                                
[Vice Chair Dahlstrom returned the gavel to Chair Ramras.]                                                                      
                                                                                                                                
CHAIR  RAMRAS  questioned what  would  occur  if Section  3  were                                                               
deleted.                                                                                                                        
                                                                                                                                
MR. SHAFTEL indicated that existing  AS 34.40.110(l) would simply                                                               
remain un-clarified.                                                                                                            
                                                                                                                                
CHAIR RAMRAS surmised  that without Section 3, HB  146 would have                                                               
the support of the committee.                                                                                                   
                                                                                                                                
CHAIR RAMRAS closed public testimony on HB 146.                                                                                 
                                                                                                                                
3:00:54 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE DAHLSTROM made  a motion to adopt  Amendment 1, to                                                               
delete  Section  3  of  HB   146.    There  being  no  objection,                                                               
Amendment 1 was adopted.                                                                                                        
                                                                                                                                
3:01:34 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE DAHLSTROM moved to report  HB 146, as amended, out                                                               
of   committee   with    individual   recommendations   and   the                                                               
accompanying  fiscal  notes.   There  being  no  objection,  CSHB
(JUD)  was   reported  from   the  House   Judiciary  Standing                                                               
Committee.