Legislature(2005 - 2006)BUTROVICH 205
03/02/2006 08:30 AM Senate JUDICIARY
| Audio | Topic |
|---|---|
| Start | |
| SB249 | |
| SB284 | |
| HB92 | |
| SB298 | |
| HB318 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | SB 298 | TELECONFERENCED | |
| + | HB 92 | TELECONFERENCED | |
| + | HB 318 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| = | SB 284 | ||
| = | SB 249 | ||
SB 298-TRUSTS: CHALLENGES; CLAIMS; LIABILITIES
9:26:25 AM
CHAIR RALPH SEEKINS announced SB 298 to be up for consideration.
BRIAN HOVE, Staff to Senator Seekins, introduced SB 298. The
bill revises Titles 13 and 34 pertaining to the administration
of trust assets.
Updates incorporated into Title 13 include the addition of
clarifying language relating to the various powers conferred
upon the trustee; trustee reporting requirements; and claims
made against trust assets.
Updates integrated into Title 34 include language pertaining to
the exemption from transfer provisions for certain IRA trust
assets; technical corrections made to AS 34.40.110(b); and the
handling of trust assets in cases of divorce or dissolution.
Since 1997, the Alaska State Legislature has consistently worked
to update and improve laws regarding the use and administration
of trusts. As a result, Alaska is considered one of the premier
trust jurisdictions in the country. The updates proposed in SB
298 are in keeping with revisions made to Alaska's trust laws in
1997 and 2003. They are intended to preserve Alaska's leading
position within the universe of products and services offered
nationwide.
9:28:50 AM
The bill clarifies prior trust legislation, makes the
administration of trusts in Alaska more efficient and cost
effective, and will keep Alaska as the jurisdiction of choice
for trust administration. Mr. Hove offered to answer general
questions.
9:29:48 AM
BETH CHAPMAN described herself as a private practice attorney
working in estates and trusts. She represents individual
families, individuals who service trustees, and beneficiaries of
trust. She said she supports the bill because it brings trust
business and revenues to Alaska and helps protect families.
The first provision to discuss is in Sections 2 and 3 and is
designed to clarify a trustee's powers to appoint trust assets.
Simply put, it is designed to improve the administration of
trusts so that trustees have flexibility to respond to changing
circumstances in the family.
CHAIR SEEKINS interrupted Ms. Chapman to ask the committee to
adopt the current version of the bill.
9:30:58 AM
SENATOR CHARLIE HUGGINS moved to adopt 24-LS1113\ Y as the
working document before the committee. Hearing no objection, the
motion carried.
CHAIR SEEKINS explained the Y version replaces the word "from"
on page 2 line 1 with "or" after the word "income."
MS. CHAPMAN continued the bill allows the trustee to respond to
changes in circumstances. Many times families establish
irrevocable trusts and then circumstances arise with regard to
beneficiaries. The provision would allow the trustee to continue
the trust under terms that are beneficial to the beneficiary,
does not impact their interest in the trust, and yet does so
without the need to involve a court proceeding.
9:32:38 AM
MS. CHAPMAN continued the second provision concerns the statute
of limitations for claims against a trustee. Currently Alaska
law has three different statutes of limitations for claims
against a trustee brought by a beneficiary. This leads to
confusion and works to the disadvantage of trust beneficiaries.
The proposed changes would eliminate the different time periods
for interim reports and final reports. It would eliminate the
difference so that there would be one statute of limitations for
all types of claims relating to a report given by a trustee. It
would also impose additional obligations on the trustees to
ensure that the beneficiaries are aware of the time limitation.
The statute would require that the trustee use 14-point pitch to
clearly communicate the limitation period to the beneficiary.
9:33:51 AM
The other amendment to the statute of limitations corrects the
time periods for notices when a trustee decides to use the court
to approve a report. Currently there is an inconsistency
regarding when those notices must be provided. The probate and
trust codes are designed to protect beneficiaries by ensuring
that claims are handled in an expeditious manner so that assets
can be distributed to beneficiaries free of potential claims.
The amendment balances expeditious resolution of claims with the
rights of beneficiaries to adequate disclosure regarding trust
assets and the right to bring claims arising from a trust
report. The limitation periods proposed in SB 298 are longer
than the limitation periods currently in the probate code that
apply to estates but they are fair and provide a good balance
between the needs for administration of a trust in an
expeditious manner yet protect beneficiaries rights, she said.
9:35:11 AM
SENATOR HOLLIS FRENCH asked Ms. Chapman what the statute of
limitations would be if the bill were to pass.
MS. CHAPMAN responded the bill would reduce the process to two
statutes of limitations. The first would be an ultimate
limitation of three years. That would be from any report that a
trustee provides to a beneficiary. The second limitation period
would be six months. That applies to final reports and proposes
to eliminate a longer statute of limitations that applies to
interim reports, which is two years.
SENATOR FRENCH asked Ms. Chapman to describe under which
circumstances when, in the life of a trust, a final report is
issued.
MS. CHAPMAN said a final report is issued when the trust
relationship is going to be terminated either because the trust
is to be terminated and the assets distributed or a new trustee
will be taking over the duties of administration.
SENATOR FRENCH clarified in the notice of the final report there
would be delivery of notice to the beneficiary that they have
six months to act should there be any dispute.
MS. CHAPMAN agreed.
9:37:29 AM
RICH HOMPESCH, described himself as an attorney in private
practice who does estate planning, probate, and trust
administration. He testified in support of the bill and agreed
with the testimony of Ms. Chapman.
DICK THWAITS, Attorney and Chairman of the Board of Alaska Trust
Company, testified in support of the bill and agreed with the
testimony of Ms. Chapman. He said often times a trustee can
anticipate when a trust terminates and can start in motion the
six-month statute and make the distribution immediately.
9:39:40 AM
SENATOR FRENCH asked him to restate his point regarding the
distribution to beneficiaries and the issuance of report.
MR. THWAITS said:
Oftentimes as a trust comes to its termination, that
is, the children are reaching the age at which the
trust can be distributed to them, it is advantageous
to then issue a preliminary report as to what assets
are there, what has been done with the assets, and how
the assets are going to distribute. Each beneficiary
would then have a six-month period with which to
respond or reply.
9:41:09 AM
MR. BLATTMACHR, President and CEO of Alaska Trust Company,
expressed strong support for SB 298.
DAVID SHAFTEL identified himself as an attorney who works in the
estate and trust arena and a member of attorneys and trust
officers who have worked to improve estate statutes since 1997.
He testified in support of SB 298.
STEVE GREER identified himself as an attorney whose practice was
limited to estate and trust work. He testified in support of SB
298.
9:43:39 AM
JONATHON BLATTMACHR, Attorney, said although he is a member of
the Alaska Bar, he practices primarily in New York. He was
involved in the development of the Alaska trust legislation and
said it was a pro-consumer bill. He testified in support of SB
298.
CHAIR SEEKINS closed public testimony.
SENATOR GRETCHEN GUESS asked Ms. Chapman to walk the committee
through how Section 11 would work.
MS. CHAPMAN said Section 11 was designed to parallel the claims
procedure reviews for probates when there is an estate involved.
An irrevocable trust doesn't go through the court probate
process and there has been uncertainty regarding how creditors
can assert claims against the revocable trusts.
When the settlor dies, the trustee can publish notice similar to
the notice published for an estate. That notice has a four month
statute of limitations and it adopts the probate procedures that
are contained in AS 13.16.450-525. They also can file a petition
with the superior court for the determination of claims if there
are any issues regarding those claims.
She said:
So what happens is you file a public notice in the
newspaper. Claims come in from creditors. The trustee
can either allow them or deny them pursuant to the
probate code. If a claim is disallowed then we have to
give them additional notice and allow them the right
to petition the court for determination and validity
of the claim. If there are no claims or if we've
resolved all claims within four months, then no
further claims can be asserted against the assets of a
revocable trust just as that happens with an estate,
and then the assets can be distributed to the
beneficiaries knowing that all claims of the deceased
have been satisfied.
9:47:41 AM
SENATOR CHARLIE HUGGINS related an anecdote about a probate
judge in Georgia who used his position to accumulate a lot of
land. He asked her whether there was a liability in Alaska for
that scenario to happen.
MS. CHAPMAN said she did not believe Alaska runs that risk.
Other than Anchorage, the state does not have probate judges.
The courts do not oversee the administration of the estates;
they are there only as needed for resolving disputes.
9:49:47 AM
SENATOR HUGGINS moved CSSB 298(JUD) from committee with
individual recommendations and attached fiscal notes. Hearing no
objections, the motion carried.
9:50:10 AM
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