Legislature(2009 - 2010)CAPITOL 120

03/25/2010 01:00 PM JUDICIARY


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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ HB 251 PRIORITY OF TOWING LIENS TELECONFERENCED
Moved CSHB 251(JUD) Out of Committee
+ SB 60 UNIFORM PROBATE CODE; TRUSTS, WILLS TELECONFERENCED
Moved Out of Committee
+ Bills Previously Heard/Scheduled TELECONFERENCED
+= HB 408 MISCONDUCT INVOLVING WEAPONS TELECONFERENCED
Moved CSHB 408(JUD) Out of Committee
<Bill Hearing Rescheduled from 03/24/10>
          SB 60 - UNIFORM PROBATE CODE; TRUSTS, WILLS                                                                       
                                                                                                                                
1:23:40 PM                                                                                                                    
                                                                                                                                
[Contains brief mention that the  committee had already heard and                                                               
passed out HB 144, the companion bill to CSSB 60(L&C).]                                                                         
                                                                                                                                
CHAIR RAMRAS announced that the  first order of business would be                                                               
CS FOR SENATE  BILL NO. 60(L&C), "An Act relating  to the Uniform                                                               
Probate  Code,  including  wills, trusts,  nonprobate  transfers,                                                               
augmented  estates, personal  representatives, and  trustees; and                                                               
amending Rules 3 and 8, Alaska  Rules of Civil Procedure, Rule 1,                                                               
Alaska Rules  of Probate Procedure,  and Rule 37.5,  Alaska Rules                                                               
of Administration."                                                                                                             
                                                                                                                                
CHAIR  RAMRAS noted  that  the companion  bill  to CSSB  60(L&C),                                                               
HB 144, had already passed from committee.                                                                                      
                                                                                                                                
1:24:25 PM                                                                                                                    
                                                                                                                                
ESTHER   CHA,  Staff,   Senator  Lesil   McGuire,  Alaska   State                                                               
Legislature,  presented  SB  60  on behalf  of  Senator  McGuire,                                                               
sponsor.  She concurred  that SB 60 is identical to  HB 144.  She                                                               
explained that SB  60 would amend the Uniform  Probate Code, with                                                               
the  aim  of  improving  the ease  of  administration  of  wills,                                                               
estates, and trusts  for Alaska residents.  She  relayed that the                                                               
Uniform Probate Code is a set  of laws that govern the affairs of                                                               
decedents  and their  estates.   She  said Alaska  is  one of  15                                                               
states to  have adopted the  code in its entirety;  the remaining                                                               
34 states have adopted only parts of the code.                                                                                  
                                                                                                                                
MS.  CHA said  the  climate  for trusts  and  estate planning  is                                                               
highly  competitive, and  the trust  business is  a multi-billion                                                               
dollar sector, which  often crosses state lines in  order to take                                                               
advantage of more  attractive state trust laws.   She stated that                                                               
most  of  the  amendments  made  through  SB  60  either  clarify                                                               
language  or eliminate  unnecessary  verbiage.   Further  changes                                                               
would:   create  a procedure  for the  establishment of  will and                                                               
trust validity  before death; add  provisions that would  allow a                                                               
settlor  of  a trust  to  designate  a representative  who  could                                                               
represent or  bind an incapacitated person  in future proceedings                                                               
relating  to  trust  administration; clarify  property  transfers                                                               
involving a deceased spouse; and  address the venue proceeding if                                                               
the decedent lived outside of  Alaska but held significant assets                                                               
within the state.                                                                                                               
                                                                                                                                
MS. CHA  said SB  60 is  part of an  ongoing effort  to modernize                                                               
Alaska's  trust laws,  thereby creating  more  jobs and  revenue,                                                               
while  diversifying the  state's economy.   She  said Alaska  has                                                               
directly received  millions of dollars through  insurance premium                                                               
taxes, and  many jobs  have been created  in the  trust, banking,                                                               
insurance,  and legal  professions  as a  result  of the  state's                                                               
competitive and contemporary trust laws.                                                                                        
                                                                                                                                
1:27:11 PM                                                                                                                    
                                                                                                                                
MS.  CHA, in  response to  Representative Gatto,  explained again                                                               
that the basis of the bill  is to establish a pre-mortem validity                                                               
of  a will.    Further,  the bill  addresses  those residents  of                                                               
Alaska who have  moved out of the state or  a non-resident of the                                                               
state who has  established a trust in Alaska; it  would provide a                                                               
venue of proceeding.                                                                                                            
                                                                                                                                
1:29:29 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  GATTO  recounted  an incident  wherein  a  mother                                                               
died, and  the inheritance  was not  divided equally  between the                                                               
surviving  children.   Those who  received more  argued that  the                                                               
mother's wishes  were carried  out, while  the ones  who received                                                               
less claimed  the mother had not  known what she was  doing.  The                                                               
result was  that no one received  money, except the lawyers.   He                                                               
said he thinks the case  would have been resolved differently had                                                               
the siblings been  able to litigate prior to  the mother's death,                                                               
so that she could have seen  their point and responded.  He asked                                                               
if SB 60 would provide for that to happen.                                                                                      
                                                                                                                                
MS.CHA said she believes so.                                                                                                    
                                                                                                                                
1:30:56 PM                                                                                                                    
                                                                                                                                
RICHARD W.  HOMPESCH II,  Attorney at Law,  Hompesch &  Evans PC,                                                               
relayed  that the  proposed legislation  clarifies who  a trustee                                                               
should notify in  situations where the beneficiary is  a minor or                                                               
incapacitated.   In Section  1, the bill  would provide  that the                                                               
person setting  up the trust  can designate who should  be served                                                               
or  notified with  respect to  a minor,  child, or  incapacitated                                                               
person beneficiary.   He explained  the reason that  is important                                                               
is that without  such a designation, typically  the trustee would                                                               
have to  request that the court  appoint a guardian ad  litem for                                                               
the  minor,  child,  or incapacitated  beneficiary,  which  would                                                               
generally cost  a lot  more money than  had the  designation been                                                               
done in the trust instrument.                                                                                                   
                                                                                                                                
MR.  HOMPESCH concurred  with everything  Ms. Cha  said regarding                                                               
the lifetime  probate provision that  is in  Section 8.   He said                                                               
the disadvantage  that the proponent  of the challenged  will has                                                               
is  that the  essential  main witness,  unfortunately, is  always                                                               
dead.  Section  8 would allow the court to  ask questions of that                                                               
main witness  - the person who  wrote the will or  trust - before                                                               
he or she dies.  He  offered his understanding that this would be                                                               
the  first time  this has  ever been  done, and  he predicted  it                                                               
would minimize litigation.                                                                                                      
                                                                                                                                
1:35:08 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE GATTO related  that he and his wife have  set up a                                                               
will  through which  each child  will receive  equal assets,  but                                                               
none  will  receive any  assets  before  the youngest  child  has                                                               
graduated from  college, if he/she  desires to attend.   He asked                                                               
Mr. Hompesch if that is legal.                                                                                                  
                                                                                                                                
1:35:47 PM                                                                                                                    
                                                                                                                                
MR. HOMPESCH replied  that it is legal to hold  assets in a trust                                                               
until a child reaches a certain age.                                                                                            
                                                                                                                                
1:36:21 PM                                                                                                                    
                                                                                                                                
CHAIR  RAMRAS said  he's heard  concern  expressed regarding  how                                                               
such laws are  benefiting the state, where  employment rates have                                                               
risen,  which  banks  are becoming  the  depositories  for  these                                                               
funds, when this all began, and what the future potential is.                                                                   
                                                                                                                                
MR.  HOMPESCH  proffered  that   the  Revised  Limited  Liability                                                               
Company  and  Limited  Partnership   Act  of  1997  made  limited                                                               
liability and  partnership laws the  most attractive in  the U.S.                                                               
Prior to that Act,  no one ever came to Alaska  to form a limited                                                               
liability  company or  limited partnership,  or if  they did  the                                                               
business was so  inconsequential no one kept track of  it.  After                                                               
the   bill  was   passed,  in   conjunction   with  other   trust                                                               
legislation,  Mr.  Hompesch said  he  heard  there were  so  many                                                               
attorneys from  out of state  that wanted to form  Alaska limited                                                               
liability companies  that an online  filing process  was started.                                                               
The state received  a $250 filing fee for  each limited liability                                                               
company.    There  was  substantial  work  for  the  Division  of                                                               
Corporations,  Business, and  Professional  Licensing, and  there                                                               
were substantial fees to the state.   He said there is a biennial                                                               
tax  of  $100 that  is  paid  every  two  years by  each  limited                                                               
liability  company.    He  said  that  is  one  example,  and  he                                                               
suggested the committee could get  more accurate information from                                                               
the  Department of  Commerce, Community,  & Economic  Development                                                               
(DCCED).                                                                                                                        
                                                                                                                                
MR.  HOMPESCH  offered  another  example, which  was  a  bill  of                                                               
several years ago,  which changed the excise tax  that is charged                                                               
on  life insurance  premiums.   He  explained that  the State  of                                                               
Alaska  charges an  excise tax  on every  life insurance  premium                                                               
that  is paid.    However, before  the  aforementioned bill,  the                                                               
state was charging approximately 2  percent on premiums in excess                                                               
of $100,000, and  there were so few of those  the state was never                                                               
getting any  money from those  large premiums.  The  bill reduced                                                               
the excise  tax down to one  quarter of a percent  of any premium                                                               
over $100,000.   As a  result, many  individuals in the  Lower 48                                                               
who  would have  bought their  life insurance  elsewhere, started                                                               
buying  premiums from  Alaska,  and the  state started  receiving                                                               
hundreds  of thousands  of  dollars  of extra  premium  tax as  a                                                               
result of  that change.   Mr.  Hompesch said  a third  example is                                                               
that he  is contacted each  week by lawyers  in the Lower  48 who                                                               
have clients  interested in creating  trusts under Alaska  law to                                                               
be  administered  by  trust  companies in  Alaska,  and  that  is                                                               
something that did not happen prior to 1997.                                                                                    
                                                                                                                                
1:41:52 PM                                                                                                                    
                                                                                                                                
JONATHAN G.  BLATTMACHR, Attorney at Law,  Milbank, Tweed, Hadley                                                               
& McCloy  LLP, concurred with the  comments of Mr. Hompesch.   He                                                               
said there  has been an  addition of 15-20 management  level jobs                                                               
in Alaska as a result of the  legislation that began in 1997.  He                                                               
said  those  are  relatively high-paying  jobs  that  have  "made                                                               
Alaska look  better."  He  said this  is just another  example of                                                               
where Alaska  is at the  forefront of  one part of  the financial                                                               
services  industry.   He  said  Delaware has  got  the corner  on                                                               
forming corporations,  but now Alaska  is doing well  in relation                                                               
to limited  liability companies.   Mr.  Blattmachr said  with the                                                               
right  backing of  the legislature,  he thinks  this could  be an                                                               
enormous  industry for  the State  of Alaska.   He  listed states                                                               
that  vie  with Alaska,  including  Delaware,  South Dakota,  and                                                               
Utah, and  said "our  group" gets  together each  year to  try to                                                               
come  up  with  the  most creative  ideas  to  obtain  additional                                                               
business for the state.                                                                                                         
                                                                                                                                
MR.  BLATTMACHR related  that  his brother  is  president of  the                                                               
Alaska Trust Company, and he knows  that that company has tens of                                                               
millions  of  dollars on  deposit  in  various banks,  which  are                                                               
available to  loan to Alaska  businesses to  help them grow.   He                                                               
said there  are about  a dozen other  states that  are constantly                                                               
imitating Alaska's  law, which  is a  compliment.   He encouraged                                                               
the committee to support the proposed legislation.                                                                              
                                                                                                                                
1:45:39 PM                                                                                                                    
                                                                                                                                
CHAIR RAMRAS asked  what the trust community's goal  is in coming                                                               
back  to  the legislature  year  after  year to  update  Alaska's                                                               
statutes.                                                                                                                       
                                                                                                                                
MR. BLATTMACHR replied  that the other states are  trying to make                                                               
their laws  better than Alaska's  laws, and every once  in awhile                                                               
another state comes up with an  idea that will be more attractive                                                               
to individuals  who may want to  create a trust or  buy insurance                                                               
policies in  a tax efficient  manner.  He  said, "So, we  keep on                                                               
those, and we come back and ask that  we be able to be as good as                                                               
any other  state in  some areas.   And we also  come back  to ask                                                               
that we be better than any other  state in other areas."  He said                                                               
the group puts  in hundreds of hours each year  to figure out how                                                               
to  make  Alaska the  best  state  in  the  country to  do  trust                                                               
business.   He noted that  the aforementioned  legislation Alaska                                                               
passed in  1997 was  just adopted  about a year  ago by  Nevada -                                                               
over a decade later.                                                                                                            
                                                                                                                                
MR.  BLATTMACHR   indicated  that  the  trust   community,  which                                                               
considers  these   matters,  spends  time  each   year  debating,                                                               
drafting,  speaking  with  legal scholars,  and  considering  the                                                               
impact of  ideas on the  state.  He said  the group thinks  SB 60                                                               
will significantly  reduce the  burden on  the court,  because it                                                               
will "stamp  out any likely will  contest that would arise."   He                                                               
indicated that people have a pretty  good idea when there will be                                                               
a contested  will, and the  proposed legislation would  head that                                                               
off and allow an arrangement to  be made and the will admitted to                                                               
probate.   He said  he anticipates that  the trust  business will                                                               
continue to grow  throughout the U.S., and he wants  Alaska to be                                                               
a major part of that business.                                                                                                  
                                                                                                                                
1:48:47 PM                                                                                                                    
                                                                                                                                
CHAIR  RAMRAS, after  ascertaining  that no  one  else wished  to                                                               
testify, closed public testimony on CSSB 60(L&C).                                                                               
                                                                                                                                
1:48:58 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  HERRON  moved  to  report  CSSB  60(L&C)  out  of                                                               
committee  with individual  recommendations and  the accompanying                                                               
fiscal  notes.    There  being no  objection,  CSSB  60(L&C)  was                                                               
reported from the House Judiciary Standing Committee.                                                                           

Document Name Date/Time Subjects
HB408 Proposed CS version K 3.24.10.pdf HJUD 3/25/2010 1:00:00 PM
HB 408
01 SB60 Sponsor Statement.pdf HJUD 3/25/2010 1:00:00 PM
SB 60
02 SB60 Bill L&C CS v. S.pdf HJUD 3/25/2010 1:00:00 PM
SB 60
03 SB60 Sectional Analysis.pdf HJUD 3/25/2010 1:00:00 PM
SB 60
04 SB60-2-1-021010-LAW-N.pdf HJUD 3/25/2010 1:00:00 PM
SB 60
01 HB251 Proposed CS version E.pdf HJUD 3/25/2010 1:00:00 PM
HB 251
02 HB251 Sponsor Statement.pdf HJUD 3/25/2010 1:00:00 PM
HB 251
03 HB251-1-1-031110-CED-N.pdf HJUD 3/25/2010 1:00:00 PM
HB 251
04 HB251-2-1-031110-DOT-N.pdf HJUD 3/25/2010 1:00:00 PM
HB 251
05 HB251 version R.pdf HJUD 3/25/2010 1:00:00 PM
HB 251
06 HB251 Support documents.pdf HJUD 3/25/2010 1:00:00 PM
HB 251