Legislature(1999 - 2000)
03/06/2000 01:56 PM Senate JUD
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* first hearing in first committee of referral
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= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
SB 163-TRUSTS AND TRUSTEES
CHAIRMAN TAYLOR asked if SB 163 effects the ability of a
beneficiary from finding out about their interest.
MR. DOUGLAS BLATTMACHR, Alaska Trust Company, explained that SB 163
allows the settlor to decide if they would like to limit notice to
beneficiaries who are not entitled to a distribution or who have
not received a distribution for a period of time no longer than
[indisc] after their death or after becoming incapacitated. This
was done because a number of people who are setting up trusts are
doing them early in time because of the special advantages they
provide, and they do not want their young children to know they are
a beneficiary of trust.
MR. BLATTMACHR commented Alaska is unique in that it requires the
trustee to notify beneficiaries when a trust is set up. This bill
still provides the notification requirement if the grantor or
settlor does not ask to hold off for a period of time. After the
settlor dies or becomes incapacitated, the trustee has to notify
the beneficiaries. Beneficiaries have to be notified if they
receive a distribution or are entitled to a distribution. This
bill is only for a beneficiary not receiving a distribution or not
currently receiving a distribution.
CHAIRMAN TAYLOR asked where in the bill is it provided that the
limiting factor is disability or death of the grantor or principal
of the trust and what is the trigger for notification?
MR. BLATTMACHR stated in section 1, subsection (b) the language
says: The exemption may not exceed in duration the shorter of the
settlor's lifetime or a judicial determination of the settlor's
incapacity. This gives the settlor some privacy while letting him
take advantage of the tax laws and benefits.
CHAIRMAN TAYLOR asked if there is anything else in the legislation
that precludes notification to a vested beneficiary.
MR. BLATTMACHR responded no, if a person is a vested beneficiary
receiving distributions or is entitled to a mandatory distribution
of income on an annual basis, they have to be notified.
Number 1439
SENATOR DONLEY asked Mr. Blattmachr to elaborate on his last
response commenting that even if an individual is not entitled to
an annual distribution or guaranteed a final distribution, if the
settlor dies or there is a judicial determination of incapacity--
notice is required.
MR. BLATTMACHR responded yes, even if the grantor said "don't
notify my beneficiaries," if a beneficiary received a distribution
or if the trust said a distribution had to be made on an annual
basis, the beneficiary would still have to be notified at that
time.
SENATOR DONLEY stated his concern is that once the settlor's
lifetime has ended or there is a judicial determination of the
settlor's incapacity, that even if the settlor specifically asked
that the beneficiary not be notified, the law still requires the
beneficiary be notified.
MR. BLATTMACHR responded that is correct.
CHAIRMAN TAYLOR clarified further that even if the document says to
never notify the beneficiary, even after they are dead, the
beneficiary will still be notified.
MR. BLATTMACHR said they are bound by the original statute to
notify beneficiaries. No notification can only be granted during
the lifetime of the grantor, notification is automatic after a
death.
SENATOR DONLEY asked for Mr. Blattmachr to elaborate on the rest of
the bill.
Number 1275
MR. BLATTMACHR indicated the bill allows for judicial modification
of trusts if the original intent of the trust cannot be
accomplished or if tax laws change so they are able to either
terminate or modify the document. This allows the beneficiary to
go to court and say this trust no longer accomplishes the purpose
that was set forth or it does not accomplish the tax purpose
because of a change in law, allowing the judge to either modify or
terminate the document.
MR. DICK THWAITES, Alaska Trust Company, stated there is one other
change in CSSB 163, section 2 that says, or by a written document
after the trust is created, that some people in the trust industry
are concerned about. Individuals that are appointed as trustees
for their "good friend" very often do not know of the requirement
to notify the trustees. It is thought that a written document,
after the trust is created, should be sufficient notice to defer
the notification requirement until death or legal determination of
incapacity so that when the grantor dies, whether or not there is
a determination or notice, the corporate trustee must notify the
beneficiaries of their present or future interest.
CHAIRMAN TAYLOR asked if this is just to confirm the requirement
for existing trusts.
MR. THWAITES responded yes, the language was added because it is
thought to be an oversight. It is suspected that more than half of
the trusts in Alaska exist with non-professional trustees who are
not notifying beneficiaries--this needs to be clarified.
CHAIRMAN TAYLOR noted the clarification is that someone will notify
people at some point.
MR THWAITES stated it permits the person creating the trust to have
protection while leaving the basic statute in tact, which is that
notification must be given in all cases except where this specific
limited circumstance arises.
Number 1121
SENATOR DONLEY expressed his concern with the language in section
2 that reads: or by a written document after the trust is created,
relieve the trustee from the duty to provide notification or
information to a beneficiary in accordance with AS 13.36.080(b).
MR. THWAITES stated that AS 13.36.080(b) is limited to the
trustor's lifetime or his judicial incompetency.
SENATOR DONLEY noted that the language in AS 13.36.080(b), in
accordance, could be interpreted as relief from the requirements of
notification. The language should clearly state that a person has
to comply with the requirements.
CHAIRMAN TAYLOR suggested the words in accordance with should be
replaced with subject to.
SENATOR DONLEY moved to replace the wording in section 2, line 12,
in accordance with to subject to. There being no objection, the
motion carried.
SENATOR DONLEY moved CSSB 163 as amended from committee with
individual recommendations. There being no objections, the motion
carried.
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