Legislature(2009 - 2010)CAPITOL 120
04/14/2010 01:00 PM House JUDICIARY
| Audio | Topic |
|---|---|
| Start | |
| SB244 | |
| SB63 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | SB 63 | TELECONFERENCED | |
| += | SB 244 | TELECONFERENCED | |
SB 63 - TRANSFER RESTRICTIONS ON TRUSTS
1:09:13 PM
CHAIR RAMRAS announced that the final order of business would be
CS FOR SENATE BILL NO. 63(JUD), "An Act relating to transfer
restrictions on trust interests."
CHAIR RAMRAS noted that SB 63 is the companion bill to HB 146,
which had been moved from the House Judiciary Standing Committee
on February 3, 2010.
1:09:42 PM
ESTHER CHA, Staff, Senator Lesil McGuire, Alaska State
Legislature, pointed out that trust and estate planning is
highly competitive. She explained that SB 63 pertains to
irrevocable trusts, designation of a discretionary beneficiary,
and spendthrift clauses to protect the assets from the settlor's
creditors. In trusts, there are three parties: the settlor,
also known as the trust maker, grantor or testitor; the trustee,
which can be an individual or institution; and the
beneficiaries. The settlor designates whether a beneficiary is
discretionary, which means the payment of distributions is
determined on the discretion of the trustee, instead of the
settlor. With discretionary beneficiaries, trustees may be
given standards for exercising discretion. She offered as an
example, the Health, Education, Maintenance and Support (HEMS)
standard. She detailed that a spendthrift provision protects
the trustee from paying directly to a creditor until the trustee
has paid the distribution to the beneficiary. She pointed out
that Alaska, in 1997, established that trusts would be protected
from a settlor's creditors, if he has established himself as a
discretionary beneficiary. She noted that 12 other states allow
this type of trust.
MS. CHA, in response to a question, offered her belief that
Alaska had developed this statute. She directed attention to
the Committee Substitute (CS) for SB 63(JUD) which she declared
would upgrade Alaska's trust statute and would clarify the
burden of proof for a creditor that a transfer was made with the
intent to defraud. It also "provides that a transfer
restriction on a beneficiary's trust interest is enforceable
even if the settlor has certain listed powers relating to the
appointment, removal, and replacement of a trustee, trust
protector, or an advisor." She clarified that "a spendthrift
provision will apply to a trust if distributions are made under
the exercise of discretion by a trustee who is not the settlor."
She detailed that the "spendthrift provision in a trust will
apply even though the trustee may distribute income or principal
to the settlor to pay income tax."
REPRESENTATIVE GRUENBERG asked about any differences between
CSSB 63(JUD) and CSHB 146(JUD).
MS. CHA replied that these are not identical. She explained
that the Senate Judiciary Standing Committee had removed
language from Section 1.
REPRESENTATIVE GRUENBERG specifically requested to affirm that
Section 3, which had been removed from CSHB 146(JUD), had not
been reinserted.
MS. CHAIR said that the aforementioned Section 3 was removed,
and in response to the earlier request by Representative
Gruenberg, explained the differences of the two bills, noting
that there were not any substantial changes. Referring to CSSB
63(JUD), page 2, lines 5-7, she pointed out that language
conflicting with the concept of the section had been removed and
placed in Section 3, beginning on page 3, line 15. She
responded that this was not a substantive change. She directed
attention to CSHB 146(JUD), page 3, lines 1-14, subsections (e)
and (f), and shared that both of these subsections had also been
moved to Section 3 of CSSB 63(JUD), with no substantive changes.
1:16:02 PM
JAN TEMPEL, Senior Trust Officer, Alaska USA Trust Company,
declared that her company is the trustee for both Alaska
residents and nonresidents who have trusts in Alaska. Alaska is
at the forefront of trust law, and she stated how important it
was for her company and the rest of the state that the trust
laws be up to date. She stated her support for SB 63.
MS. TEMPEL, in response to a question from Chair Ramras, relayed
that her company administered more than $7 billion in assets,
though the majority of this is unrelated to these types of
trusts. She estimated that her company has 200-250 of these
trusts, and that the majority are from out of state, as a result
of Alaska's trust laws. She reiterated that it is important for
Alaska to stay in the forefront of the trust laws. In response,
she noted that Alaska USA Trust Company is located in Anchorage,
and although a wholly owned subsidiary of Alaska USA Federal
Credit Union, it is a separate corporation.
MS. TEMPEL, in response to Representative Gatto, pointed out
that companies which offer deeply discounted trusts and wills
are usually referring to revocable living trusts, which are a
completely different trust than what is addressed by SB 63. She
opined that the Alaska trusts are generally for those that have
more assets, and interested in more complex estate planning for
family members and future generations.
REPRESENTATIVE GRUENBERG, noting that the general standard for
proving fraud required clear and convincing evidence from the
creditor, asked if Title 9 requires this same standard.
MS. TEMPEL, in response, offered her belief that this was the
usual standard, and that this was added to SB 63 for conformity.
REPRESENTATIVE GRUENBERG asked if SB 63 created any more
difficulty for the collection of child support through these
trusts.
MS. TEMPEL replied that SB 63 would not protect the trust assets
if child support is already owed and she opined that SB 63 would
not make any difference to the existing law. She offered her
belief that the provision for "clear and convincing evidence"
was not adding anything new, but simply clarifying what was
already in Alaska law.
1:26:11 PM
DOUGLAS BLATTMACHR, President & CEO, Alaska Trust Company,
stated his support for SB 63. He declared that Alaska is the
premier jurisdiction for financial and estate planning. He
estimated that more than 10,000 Alaskans have taken advantage of
Alaska's trust laws, and that it creates additional jobs and
additional revenue for the state.
REPRESENTATIVE GRUENBERG asked if there is anything in SB 63 to
create additional difficulty for the collection of unpaid child
support.
1:28:14 PM
RICHARD HOMPESCH, Attorney, Hompesch & Evans, in response to a
question from Representative Gruenberg, said that if the settlor
of a trust owes child support, the trust cannot be set up under
Alaska law. Each settlor is required to sign a statement that
they are not in arrears for child support.
REPRESENTATIVE GRUENBERG asked if this is the same when a
beneficiary owes child support.
MR. HOMPESCH said that the bill doesn't change the law with
respect to child support owed by a beneficiary of a trust.
REPRESENTATIVE GRUENBERG asked whether the settlor or
beneficiary could shield their money from future child support
obligations.
MR. HOMPESCH said that he did not know of any way that a
beneficiary can shield any assets through a trust, as the
beneficiary only asks distributions from the trust.
REPRESENTATIVE GRUENBERG asked if a settlor could take money to
set up a trust to protect the beneficiary from paying future
child support from those trust assets.
MR. HOMPESCH replied that if a beneficiary of a trust has child
support obligations, those trust assets could be shielded.
REPRESENTATIVE GRUENBERG opined that SB 63 did not include any
further protection for a recipient of child support.
MR. HOMPESCH agreed.
1:31:39 PM
REPRESENTATIVE GRUENBERG, offering a hypothetical example that
he owed child support, asked whether he could put all his money
in a trust so that the obligee could not get any of the money.
He asked if SB 63 offers any enhancement to his ability to
shield the money from future child support payment.
MR. HOMPESCH replied that Section 1 of the bill speaks to the
issue of intent to defraud a creditor.
The committee took a brief at-ease.
REPRESENTATIVE GRUENBERG asked if there was any other protection
beyond clear and convincing evidence.
MR. HOMPESCH said that there was none other than that listed in
Section 1, subsection (b)(1).
CHAIR RAMRAS, after ascertaining that no one else wished to
testify, closed public testimony on SB 63.
1:34:02 PM
REPRESENTATIVE HERRON moved to report CSSB 63(JUD) out of
committee with individual recommendations and the accompanying
fiscal notes. There being no objection, CSSB 63(JUD) was
reported from the House Judiciary Standing Committee.
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