Legislature(2005 - 2006)CAPITOL 17
04/03/2006 03:15 PM House LABOR & COMMERCE
| Audio | Topic |
|---|---|
| Start | |
| SB298 | |
| HB480 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | SB 298 | TELECONFERENCED | |
| *+ | HB 494 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | HB 480 | TELECONFERENCED | |
SB 298-TRUSTS: CHALLENGES; CLAIMS; LIABILITIES CHAIR ANDERSON announced that the first order of business would be CS FOR SENATE BILL NO. 298(JUD), "An Act relating to loans from trust property; relating to a trustee's power to appoint the principal of a trust to another trust; relating to challenges to, claims against, and liabilities of trustees, beneficiaries, and creditors of trusts and of trusts and estates; relating to individual retirement accounts and plans; relating to certain trusts in divorce and dissolutions of marriage situations; and providing for an effective date." 3:27:47 PM SENATOR RALPH SEEKINS, Alaska State Legislature, Sponsor, explained that SB 298 is an improvement to the current trust system in the state. He said that, since 1997, the legislature has worked with individuals who are active in the field to update and improve the laws regarding the use and administration of trusts. As a result, Alaska is one of the premier trust jurisdictions in the country. However, he said, other states have enacted similar legislation in an attempt to take business away from Alaska. He said that the updates proposed in SB 298 are intended to help preserve the state's leading position as a trust provider. In addition, he said, the laws encourage Alaskans to keep their trust assets in the state, and attract capital from all over the country, which creates greater job and investment opportunities for residents of the state. In conclusion, he said, SB 298 clarifies prior trust legislation, making the administration of trusts more efficient and cost effective, which would help maintain Alaska as the jurisdiction of choice. 3:30:14 PM CHAIR ANDERSON opined that SB 298 is "timely," and surmised that the law would need to be updated every two years due to the growth of the field. 3:30:51 PM MARK A. AMES began by highlighting the six published goals of Alaska's state historic preservation plan. He then pointed out the claimant of interest in the May 1, 1968, trust. He continued by stating that there are premises within the City of Fairbanks "that a trust, with regard to the state of Alaska, regarding federal reserve lands, ... has been abused and violated." He said that [SB 298] does not include adequate protection from this. He stated that he is a claimant and has requested full investigation into the aforementioned trust. He expressed his belief that there was a violation of Sections 1-2 of the constitution. In conclusion, he said that [the state] needs to ensure that its current trusts are not being violated. 3:34:54 PM BETH CHAPMAN, Attorney at Law, Faulkner Banfield, PC, stated that she has been practicing law in Juneau for 18 years, focusing on trusts and estates. She said that she currently represents individual families, along with trustees and trust beneficiaries. She expressed her belief that SB 298 will provide the tools needed to assist clients with their estate planning goals. She said that this includes reducing administrative costs and aligning the trust and probate laws. Referring to Section 2 of the bill, she said that families need the ability to respond to changes in circumstance. This portion of the bill would allow the trustee to continue to hold assets in trust, with the same standards; however, they do not need court approval to do so. Moving on to Section 3, she said that this section relates to the statute of limitations, reducing it from three to one statute of limitations per report. She stated that the beneficiaries must be notified by the trustees of the length of the statute of limitations and informed of what they must do to assert their claims. 3:37:10 PM REPRESENTATIVE GUTTENBERG, referring to Section 2, asked for the reasoning behind changing "absolute discretion" to "authority," and "discretion" to "authority." 3:37:48 PM MS. CHAPMAN replied that under current law, no standard is needed and only a trustee with "absolute authority" is able to create a new trust for the benefit of the beneficiary. She said that a "typical standard" in a trust states that it can be invaded for the beneficiary's health or education. This change would allow a trust with this standard to create a new trust for the beneficiary, as long as the aforementioned standard is maintained. 3:38:32 PM REPRESENTATIVE GUTTENBERG, referring to page 2, line 10, asked for the definition of "inter vivos." MS. CHAPMAN answered that this means "during life." 3:39:08 PM DOUGLAS BLATTMACHR, President and Chief Executive Officer (CEO), Alaska Trust Company, began by noting his support of SB 298. He opined that it will "modernize" the state's trust laws and keep the state competitive. 3:39:30 PM REPRESENTATIVE ROKEBERG, referring to [pages 3-4], Section 7, noted that the statute of limitations on a claim is being changed from 24 months to 6 months. He asked if this is due to the competitive nature of the business and/or a policy call regarding the statute of limitation policy. MR. BLATTMACHR replied that both of these are involved. He said that the majority of the professional community wanted to make the timelines more consistent. In addition, he said, reducing the time [to] six months, along with a "bold" print, would cause the beneficiary to "have more of [an] urgency" in taking an action if a problem was detected. 3:40:30 PM REPRESENTATIVE GUTTENBERG, referring to Section 6, noted that the timeline for a claim has been reduced from 90 to 60 days. MR. BLATTMACHR said that this is consistent with the probate code, as is the change from 60 to 45 days. 3:40:59 PM REPRESENTATIVE ROKEBERG, referring to [Section 8], asked if the notification required is judicial notification. He noted that this is a significant difference in the amount of time allowed for filing a claim. 3:41:49 PM MITCHELL GANS, Law Professor, Hofstra University School of Law, in regard to the statute of limitations, said that Florida currently uses the six month timeframe. He said that from a policy perspective, it is more appropriate to shorten the statute of limitations. He explained that a trustee can shorten the amount of time he/she is liable by "commencing a judicial accounting." This, however, involves an expense which is borne by the beneficiary of the trust. He characterized it as inefficient and inequitable. He said that a judicial accounting results in a shorter statute, while an informal accounting results in a much longer statute, and added that he does not see a "good reason" for this. Finally, a shorter statute of limitations is more likely to result in the beneficiary focusing more carefully on his/her rights. He said that these reasons show that the [six-month] timeframe is a "very good idea." 3:44:37 PM DAVID SHAFTEL, Estate Planning Attorney, Law Offices of David G. Shaftel, PC, informed the committee that he is involved with a group of individuals that has worked with the legislature since 1997 regarding the state's trust statutes. He mentioned that he assisted drafting several sections of SB 298, and offered his belief that [SB 298] contains provisions that are "very helpful," for residents of the state. In addition, nonresidents who are using Alaska law for their estate planning will also benefit from this legislation. In regard to the statute of limitations, he stated that the uniform probate code also provides for a process which has a six-month statute of limitations. He said that he supports SB 298. REPRESENTATIVE ROKEBERG asked what kind of impact previous changes have had on Mr. Shaftel's business, and on the "Alaska Trust business" in general. MR. SHAFTEL said: For example: the ... optional community property system, which the legislature has enacted; the ability to extend [a] trust's duration for as long as the trusts have assets; the ability to create trusts that will be able to allow Alaska residents to save considerable estate taxes and allow other nonresidents to use those kinds of trusts; [these] have ... been very, very beneficial to my clients. ... We use all of [the aforementioned benefits] for all of our clients. Our clients at our practice here in Anchorage are medium to large estates and ... have lived here in Anchorage for a long time. ... They are very appreciative of being able to do this kind of planning. So, it's been a great benefit .... Indirectly, ... there are ... four institutions here in Anchorage which provide ... trustee services for these kinds of trusts, and I know that there's been a very substantial use of these vehicles. 3:48:34 PM MR. SHAFTEL went on to say that in addition to in-state use, many out-of-state individuals are using Alaska's financial resources. He opined that this can "only be good" in terms of developing the state as a financial center. 3:48:46 PM RICHARD THWAITES, Chairman of the Alaska Trust Company, said that he is in support of SB 298. 3:49:20 PM MR. THWAITES, in response to a question from Representative Rokeberg, said that many of his clients have found the statutory provisions useful. In particular, he said, his clients have used the optional community property act. He gave an example of a client whose spouse passed away, resulting in a step-up in tax basis for the surviving spouse. He said that the aforementioned client was able to save over $1 million in savings on the state tax, which would have otherwise fallen to the children of the family. He added that, regarding income tax, there was considerable savings between the death of the mother and father. MR. THWAITES went on to say that the Alaska Trust Company has had 1,000 or more trusts, 10 percent of which are in-state. He said that at least $2 million has gone to the state treasury from the increased premium tax. In addition, jobs have been provided to residents of the state. 3:51:18 PM REPRESENTATIVE GUTTENBERG asked if the ability of the legislature to be proactive has kept Alaska "ahead of the wave." MR. THWAITES replied yes, adding that the legislature has developed a "very good" rapport with practitioners in the state. He noted that while it took Alaska [4 years] to pass the initial legislation, Delaware was able, in 16 weeks, to pass an act that mimics the Alaska statutes. He explained that the Delaware act stated that it was "an effort to copy the Alaska statutes recently enacted to keep Delaware the number one in trusts." However, the aforementioned legislation did not include provisions considered "crucial" by the Internal Revenue Service. This discrepancy allowed Alaska to stay ahead in this area. He said "Clearly, the ... legislature in Juneau has ... facilitated that with their ... willingness to listen to these modifications as we go through." 3:53:12 PM CHAIR ANDERSON closed public testimony. REPRESENTATIVE ROKEBERG said that he was "pleased to hear" that the state received $2 million in premium tax insurance receipts. He reminded the committee that this was due to the legislature limiting the tax on the [trust industry], which increased the investment in the state. He opined that this is a "good exercise" that should be kept in mind. 3:54:19 PM CHAIR ANDERSON agreed. REPRESENTATIVE ROKEBERG moved to report CSSB 298(JUD) out of committee with individual recommendations and the accompanying fiscal notes. There being no objection, CSSB 298(JUD) was reported from the House Labor and Commerce Standing Committee. [The committee returns to SB 298 later in the meeting.] 3:54:46 PM SB 298-TRUSTS: CHALLENGES; CLAIMS; LIABILITIES CHAIR ANDERSON returned the committee's attention to SB 298. He explained that the bill was moved from committee prior to the adoption of a committee substitute. 4:00:12 PM REPRESENTATIVE ROKEBERG made a motion to rescind the committee's action in reporting CSSB 298(JUD) from the House Labor and Commerce Standing Committee. There being no objection, CSSB 298(JUD) was back before the committee. REPRESENTATIVE ROKEBERG moved to adopt HCS CSSB 298, Version 24- LS1113\S, Bannister, 3/31/06, as the working document. There being no objection, Version S was before the committee. REPRESENTATIVE ROKEBERG requested a brief explanation of the changes made by Version S. 4:01:00 PM BRIAN HOVE, Staff to Senator Ralph Seekins, Alaska State Legislature, speaking on behalf of Senator Seekins, sponsor, explained that on page 2, line 20, of Version S "beneficiary" is changed to "beneficiaries." 4:01:28 PM REPRESENTATIVE ROKEBERG moved to report HCS CSSB 298, Version 24-LS1113\S, Bannister, 3/31/06, out of committee with individual recommendations and the accompanying fiscal notes. There being no objection, HCS CSSB 298(L&C) was reported from the House Labor and Commerce Standing Committee. 4:01:44 PM
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