Legislature(2015 - 2016)BELTZ 105 (TSBldg)
03/16/2015 01:30 PM Senate JUDICIARY
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| Audio | Topic |
|---|---|
| Start | |
| HB5 | |
| SB47 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | SB 47 | TELECONFERENCED | |
| + | SB 43 | TELECONFERENCED | |
| + | HB 5 | TELECONFERENCED | |
| + | TELECONFERENCED |
SB 47-LIFE INSURANCE/ANNUITY EXEMPTIONS
2:23:17 PM
CHAIR MCGUIRE announced the consideration of SB 47. "An Act
relating to exemptions for cash surrender values, accrued
dividends, and loan values of life insurance and annuity
contracts." She noted that this was the first hearing.
SENATOR COGHILL, sponsor of HB 47, explained that the bill
amends Title 9 relating to exemptions on life insurance
annuities and accrued dividends. He deferred further
introduction to his intern.
2:24:32 PM
GERMAN BAQUERO, Intern, Senator John Coghill, introduced SB 47
speaking to the following sponsor statement: [Original
punctuation provided.]
Under the Alaska Exemptions Act under Chapter 38 of
Title 9 in the Code of Civil Protections there are
currently six exemptions that exist from attachment,
garnishment, or execution by a creditor in civil
actions. One of these exemptions under AS 09.38.025(a)
is an exemption of up to $500,000 on un-matured life
insurance. SB 47 goes in and repeals the $500,000
limit in AS 09.38.025(a).
In effect SB 47 brings AS 09.38.025(a) in line with
other exemptions found in the Alaska Exemption Act,
such as: burial plots, longevity bonuses, tuition
credits, the permanent fund dividend, medical
benefits, liquor licenses, payments found under the
Senior Benefits Payment Program, compensation of
benefits exempt under federal law, and retirement plan
interests and payments.
While the law currently provides protection of non-
estate assets up to $500,000, having a limit in the
first place clearly does not assist in the protection
of assets or pre-bankruptcy planning. While states
like South Carolina, Wisconsin, and New York expressly
define cash surrender values from life insurance as
exempt, still many states ultimately rely on judicial
interpretation of a debtor's intent. This bill will
provide people with a better security and planning for
their families after they have passed on.
This bill encourages personal responsibility and
protects the future of Alaskan families.
MR. BAQUERO highlighted the zero fiscal note and then addressed
the concern about the potential to use these policies to defraud
a creditor. He advised that these policies can be attached if
they're assigned as collateral, and Alaska's estate planning
laws do not protect individuals who engage in estate and
financial planning to willfully defraud a creditor. Also, the
four-year state look-back and the ten-year federal look-back to
review bankruptcy proceedings are ample to discourage fraudulent
activity. He suggested that Matt Blattmacher with the Alaska
Trust Company could expand on the explanation. Finally, AS
09.38.065 lists the gamut of opportunities for a creditor to
receive just restitution against exempt property.
He reiterated that this bill only says that unmatured life
insurance policies are secure and remain a safe financial tool
for families or an individual to provide for their beneficiaries
in the future.
2:31:37 PM
SENATOR WIELECHOWSKI asked how accessible an unmatured life
insurance policy is in an annuity contract. He explained he
doesn't want to establish a process for people to avoid their
personal debts or to shield their money from a lawsuit.
MR. BAQUERO deferred to Mr. Blattmachr.
MATTHEW BLATTMACHR, Alaska Trust Company, Anchorage, Alaska,
explained that the only value to an unmatured policy is the cash
value and only permanent types of insurance contracts have a
cash value, not term insurance. Also, Alaska law has a four-year
statute of limitations for bankruptcy look back. If someone were
to contribute a large amount of money to a life insurance policy
and then claim bankruptcy or have a creditor proceeding, the
state would have four years to look back at any transfer or
conveyance that individual made and determine whether or not it
intentionally had the malicious nature of being fraudulent. In
addition, the federal bankruptcy statutes provide a 10-year
window to look back.
2:35:55 PM
SENATOR WIELECHOWSKI asked if an unmatured multimillion dollar
life insurance policy would be protected if the insured was
found responsible for a car accident that resulted in the death
of another person.
MR. BLATTMACHR answered he didn't know if a court has the
ability to enforce it, but he sees no reason that the policy
couldn't be assigned to pay off a judgement once the insured
passes. He suggested that Linda Holbert might be able to
describe other options.
SENATOR MICCICHE asked what proportion of unmatured life
insurance policies and annuity contracts are worth over $0.5
million.
MR. BLATTMACHR surmised it's a fairly high percentage. Life
insurance is a growing form of estate and retirement planning
and $0.5 million would be quickly reached if someone were to
calculate the cost a premature death would have on their family,
even if they didn't have a high annual income.
SENATOR WIELECHOWSKI asked if a lot of people with large
unmatured life insurance policies and annuity contracts are
declaring bankruptcy and if it makes sense to raise the cap to
$2 million.
MR. BLATTMACHR reiterated that more of these policies are being
purchased and they're for larger face values. A lot of times
it's done for business planning purposes, because it could make
the difference between success and failure for a company if a
key person were to suffer an untimely death. He noted that some
local banks voiced concern that this legislation would prohibit
using the policies as collateral, but that's not accurate. The
bill just provides some protection in the event the policy is
not assigned.
2:41:52 PM
LINDA HULBERT, Agent, New York Life Insurance, Fairbanks,
Alaska, stated that she has worked with families in the
insurance industry for the last 25 years helping them pass along
their assets to their children and family. She offered to answer
questions.
SENATOR WIELECHOWSKI asked what problem this legislation seeks
to fix.
MS. HULBERT explained that this change will help Alaska stay on
par with the other states that offer this type of protection.
The financial world is changing and a pension through an
employer or Social Security isn't necessarily secure today. This
is one way to help individuals and small businesses plan for the
future for their families and retirement. Addressing the
question about increasing the cap, she pointed out that 10 or 15
years ago $0.5 million sounded like a lot, but in an annuity at
five percent that might only yield $50,000 per year. She
described the legislation as a good tool of public policy that
does not change Alaska's strong fraudulent transfer rules. The
assets of anyone who has committed a crime would be reachable,
just as they are today. This is a planning tool for individuals
to plan for a secure future for their family and a secure future
for themselves in retirement.
2:45:53 PM
SENATOR COGHILL asked if there are limitations on state or
federal annuities or pensions.
MS. HULBERT explained that each state governs insurance and
annuities so the federal government doesn't enter in. About 10
states offer this type of planning tool that allows people to
place their money in these instruments so it will be available
for their family in the event of their death or they'll have the
cash value of the policy to help for retirement.
SENATOR COGHILL asked if state SBS annuities are affected by
this legislation.
MS. HULBERT said she didn't know for certain, but the Division
of Insurance supports the bill as good public policy. She added
that she believes this will raise revenue for the state because
2.7 percent of every life insurance policy or annuity contract
goes into the state coffer.
SENATOR WIELECHOWSKI asked if there's is a provision that allows
someone to pierce the exemption when there has been illegal
activity such as driving drunk and killing someone or rape or
murder.
MS. HULBERT offered her understanding that a person's assets
would be reachable if they committed a crime.
SENATOR WIELECHOWSKI asked what sort of claims are involved to
get the assets.
MS. HULBERT said she didn't know, but many other states and the
Division of Insurance feel this is a legitimate planning tool.
She wasn't aware of any way that people could be wronged by it.
SENATOR COGHILL suggested he and Senator Wielechowski could look
into the fraud protections and bring the information to the
committee. He asked if insurance contracts are written to
include fraud protections or if it's in state law.
MS. HULBERT advised that fraudulent transfer provisions and
insurance are governed by state law.
2:53:08 PM
LORI WING-HEIER, Director, Division of Insurance, Department of
Commerce, Community and Economic Development (DCCED), clarified
that the bill is written for Title 9, not Title 21. She
explained that life insurance is a simple tool for retirement
planning that some people find easier to understand than working
with a financial planner on annuities and a mixed plan. Often
the life insurance product is their sole retirement plan, which
is probably why the sponsor is trying to remove the $0.5 million
cap. Addressing Senator Wielechowski's question, she said her
understanding is that this is for civil matters.
SENATOR WIELECHOWSKI said it would ease his concerns if she
would point to the specific provision in the law.
MS. WING-HEIER agreed to follow up with the information.
SENATOR COGHILL clarified that the intent is to give people a
legitimate reason to invest in estate planning.
SENATOR WIELECHOWSKI asked if an insurance contract would be
shielded in a drunk driving incident when the family files a
civil lawsuit.
MS. WING-HEIER offered to seek clarification from the Department
of Law (DOL) and follow up at the next hearing.
SENATOR MICCICHE interpreted AS 09.38.030 to mean that payments
on a criminal offense are not shielded.
SENATOR WIELECHOWSKI said his reading is that restitution
ordered by the court could possibly pierce this exemption, but
he didn't know how that applies to civil lawsuits.
CHAIR MCGUIRE asked Ms. Wing-Heier if she could provide
clarification from Department of Law in short order.
MS. WING-HEIER replied she'd try to get it this week.
2:57:11 PM
SENATOR WIELECHOWSKI asked if the legislation was necessary as
opposed to raising the cap to $1 million or $2 million.
MS. WING-HEIER replied the Division of Insurance has not had the
cap brought forward as an issue. She didn't know what Title 9
issues had been brought before the Department of Law.
SENATOR COGHILL related that this legislation is an effort to
respond to the changing world of investment and provide
legitimate protections for people.
MR. BAQUERO highlighted that the state collects 2.7 percent on
life insurance policies that are below $100,000. He also
mentioned other legislation he is carrying for the sponsor.
SENATOR COGHILL stated that it's a legitimate point that the
exemption can be penetrated for the right reasons.
3:02:15 PM
CHAIR MCGUIRE announced she would hold SB 47 in committee for
further consideration.
| Document Name | Date/Time | Subjects |
|---|---|---|
| 1 SB47 Sponsor Statement.pdf |
SJUD 3/16/2015 1:30:00 PM |
SB 47 |
| 2 SB47 Version A.pdf |
SJUD 3/16/2015 1:30:00 PM |
SB 47 |
| 3 SB47 Sectional Analysis.pdf |
SJUD 3/16/2015 1:30:00 PM |
SB 47 |
| 4 SB47 Supporting Research Alaska Exemptions Act.pdf |
SJUD 3/16/2015 1:30:00 PM |
SB 47 |
| 5 SB47 Supporting Research Insurance Fraud.pdf |
SJUD 3/16/2015 1:30:00 PM |
SB 47 |
| 1 SB43 Sponsor Statement.pdf |
SJUD 3/16/2015 1:30:00 PM |
SB 43 |
| 2 SB43 Version H.pdf |
SJUD 3/16/2015 1:30:00 PM |
SB 43 |
| 3 SB43 Summary of Changes Version W to H.pdf |
SJUD 3/16/2015 1:30:00 PM |
SB 43 |
| 4 SB43 Letter of Support Fire Chiefs Assoc.pdf |
SJUD 3/16/2015 1:30:00 PM |
SB 43 |
| 4.1 SB43 Letter of Support FNSB.pdf |
SJUD 3/16/2015 1:30:00 PM |
SB 43 |
| 4.2 SB43 Letter of Support Interior Fire Chiefs.pdf |
SJUD 3/16/2015 1:30:00 PM |
SB 43 |
| 1 HB5 Sponsor Statement.pdf |
SJUD 3/16/2015 1:30:00 PM |
HB 5 |
| 2 HB5 Version W.pdf |
SJUD 3/16/2015 1:30:00 PM |
HB 5 |
| 3 HB5 Letter of Support ACOA.pdf |
SJUD 3/16/2015 1:30:00 PM |
HB 5 |
| 4 HB5 Letter of Support AARP.pdf |
SJUD 3/16/2015 1:30:00 PM |
HB 5 |