Legislature(2009 - 2010)BARNES 124
03/01/2010 03:15 PM House LABOR & COMMERCE
| Audio | Topic |
|---|---|
| Start | |
| HCR19 | |
| HB253 | |
| HB287 | |
| HB282 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB 253 | TELECONFERENCED | |
| *+ | HB 282 | TELECONFERENCED | |
| *+ | HB 287 | TELECONFERENCED | |
| += | HCR 19 | TELECONFERENCED | |
| + | TELECONFERENCED |
HB 287-UNIFORM ACT: PROPERTY INTEREST DISCLAIMER
4:37:39 PM
CHAIR OLSON announced that the next order of business would be
HOUSE BILL NO. 287, "An Act relating to the adoption of the
Uniform Disclaimer of Property Interests Act, and to the
disclaimer of property rights under the Uniform Probate Code."
4:37:45 PM
REPRESENTATIVE MAX GRUENBERG, Alaska State Legislature, speaking
as one of the joint prime sponsors, stated that this bill will
update the Uniform Disclaimer of Property Interests Act. A
provision in the Uniform Probate Code is repealed and is
replaced with the Act. The purpose of the Act is to set out the
rules for a disclaimer, a concept that is used in probate of
estates and trusts. He related that if someone inherits money,
or money is placed in a trust for the person, the party may
decide not to take money and suffer the tax consequences. In
that instance, the money will go to the next person in line,
usually a person in the family. He identified that this is
called a disclaimer. This bill is fairly technical and updates
or modernizes the disclaimer. The bill has been drafted by the
Commissioners on Uniform State Laws. The Alaska trust attorneys
have made some changes to comport with Alaska law. He suggested
one amendment will be offered in the next committee of referral,
the House Judiciary Standing Committee. He referred to page 4,
lines 16-19, will be replaced by the Uniform Acts provision. He
paraphrased from the sponsor statement, which follows [original
punctuation provided]:
HB 287 is a comprehensive collection of rules
outlining the types of property interests eligible for
disclaimer, the process by which property interests
may be disclaimed, and the effect of a disclaimer on
the interest itself.
The Uniform Disclaimer of Property Interests Act was
promulgated in 1999 and has already been adopted in 16
other states. There do not appear to be any reported
court cases construing this Act. There have been
several law review articles discussing the pros and
cons of the Uniform Act.
4:40:36 PM
TERRY THURBON, Delegate, National Conference of Commissioners on
Uniform State Laws (NCCUSL), Juneau Alaska, clarified that she
is testifying today on behalf of the Uniform Law Commission, not
on behalf of her position with the State of Alaska. She
explained that the state sends delegates to the NCCUSL to work
on Uniform Acts, and bring back Acts for consideration. The
changes made by the sponsors and the Alaska attorneys, who are
experts in this area, have been approved by the national
organization, with the one exception which will be offered as an
amendment in the House Judiciary Standing Committee. She
related that if the bill moves forward that it would be
considered substantially similar to Uniform Act.
4:42:29 PM
REPRESENTATIVE GRUENBERG related that the commissioners of the
NCCUSL have allowed this to be considered a Uniform Act and will
set out the differences between the Alaska version and the
Uniform Act.
4:43:21 PM
MICHAEL KERR, Legislative Director, Uniform Law Commission,
National Conference of Commissioners on Uniform State Laws
(NCCUSL), thanked the committee for hearing the bill.
4:44:10 PM
DAVID SHAFTEL, Attorney, Shaftel Law Offices, PC, stated that he
is an attorney and a member of an informal group of trust
officers. The language in this bill was initially introduced
several sessions ago, but the legislature did not have time to
consider. The same bill was reintroduced this legislative
session, but the Alaska group has recommended a number of minor
changes, which were previously addressed, and are all acceptable
by the NCCUSL.
4:45:34 PM
MR. SHAFTEL provided a section-by-section analysis of HB 287, as
follows:
Section 13.70.020 is a default statute as other law
will supplement this bill. This section basically
provides that if matters are not covered in the
instrument, including the will, trust, or other
instrument, these provisions will apply.
Section 13.70.030 covers the power to disclaim, and
provides the general rules about a disclaimer. When a
person disclaims something, they basically say that
they do not want it. In those instances the person
would be treated as though he/she has predeceased the
benefactor, and it reverts to the instrument, and the
inheritance is distributed according to directions in
the instrument, or default rules apply.
Section 13.70.040 covers the basic rules if a
disclaimer is made.
Section 13.70.050 establishes rules for disclaiming
interests in jointly held property, which was an area
of controversy for many years in the tax law. This
statute helps significantly in this area.
Section 13.70.060, allows for a disclaimer of a
survivorship interest in property held as a tenancy by
the entirety. A number of states have this provision,
which is limited to married couples.
Section 13.70.065 addresses the disclaimers of
interest by trustees and when a trustee may disclaim.
Section 13.70.070 establishes general rules for
disclaimers of a powers of appointment, which are
often used and really means a person may draft a will
or trust, but the person may give their spouse or
child the power to make changes. Those powers of
appointment can be disclaimed.
Section 13.70.080 similarly addresses disclaimer by
the object of a power of appointment.
Section 13.70.090 indicates when a disclaimer takes
effect if a fiduciary disclaims a power held in a
fiduciary capacity. A trustee or personal
representative will have powers that perhaps for tax
reasons are harmful, and this allows the trustee to
disclaim powers.
4:49:14 PM
MR. SHAFTEL continued providing a section-by-section
analysis, by stating:
Section 13.70.100 deals with how notice of the
disclaimer is given and [whom] it should be given to
and provides helpful rules for notice. He offered
that it may be a complex provision, but it is very
helpful.
Section 13.70.110 pertains to when a disclaimer is
permitted or not permitted. For example, if a person
is given property and accepts the property, the person
can no longer disclaim, since that must happen prior
to acceptance.
Section 13.70.120 pertains to tax qualified
disclaimers. The Internal Revenue Code deals
explicitly with disclaimers and are often used to
correct situations and establishes a nine month limit,
but relaxes some provisions.
Section 13.70.130 relates to recording the disclaimer.
Section 13.70.140 relates to the application of this
statute to existing situations.
Section 13.70.190 provides helpful definitions.
4:51:10 PM
MR. SHAFTEL related that considerable time has been made to
consider changes for Alaska. Speaking for his informal group,
he asked to recommend this bill for members' serious
consideration as it will help all Alaskans.
4:51:45 PM
REPRESENTATIVE CHENAULT referred to proposed Section 13.70.030,
which allows a parent to disclaim for a child. He asked for an
example.
MR. SHAFTEL offered that a classic example would be a situation
in which a child wants to disclaim so the assets would then go
to the surviving parent who needs them.
4:53:49 PM
REPRESENTATIVE CHENAULT suggested a grandparent leave $1 million
to grandchild; by this provision would that allow the parent to
disclaim the interest and receive the $1 million.
MR. SHAFTEL stated no, only if parent received the interest,
then it would go to the grandchild.
REPRESENTATIVE CHENAULT expressed concern that if the money went
to the parent the grandchild would not receive the inheritance.
4:55:17 PM
REPRESENTATIVE CHENAULT, in response to Mr. Shaftel, clarified
that he was not referring to the bill but to the November 30,
2009 letter from Shaftel Law Offices, P.C, which was in members'
packets.
4:55:43 PM
MR. SHAFTEL then referred to page 2, lines 15-21 of HB 287,
which read:
(2) in the absence of a court appointed guardian a
natural guardian may disclaim on behalf of a minor
child of the natural guardian, in whole or in part,
any interest in or power over property, including the
power of appointment, that the minor child is to
receive solely as a result of another disclaimer, but
only if the interest or power disclaimed by the
natural guardian does not pass to or for the benefit
of the natural guardian as a result of the disclaimer.
MR. SHAFTEL explained that this means the guardian can disclaim
for the minor child, when the minor child receives an interest
as a result of another disclaimer. Most often that is the
interest of a parent. He described an instance in which this
paragraph would apply, such as when a minor child has received
an interest since someone else, the primary beneficiary said, "I
don't want it." Usually, that person is the parent, but it
might be someone else. He described another scenario in which
he would leave $100,000 to his brother, but if his brother
disclaims, or has predeceased him, the interest would go to his
sister's minor child. However, his sister could disclaim. His
brother may have disclaimed because he thought the inheritance
should go to Dave's wife since she needs the $100,000. Normally
if the brother disclaimed, the $100,000 would go to his sister's
child, but his sister, who is the natural guardian of the minor
child could then disclaim, because she believes it should go
back to Dave's surviving spouse.
4:58:22 PM
REPRESENTATIVE CHENAULT expressed concern if the parent has
disclaimer rights over their child that the parent could bypass
the child. He asked whether he is talking about two different
things.
MR. SHAFTEL agreed that those would be two different things.
4:59:22 PM
MR. KERR commended the sponsor for bringing this forward. He
related that this set of amendments is largely in response to
changes since the Act was first promulgated in 1999. The
Internal Revenue Code, Section 25.18 clarified the rules for a
qualified disclaimer and these amendments ensure that "people
don't get trapped." He urged approval of HB 287.
5:00:27 PM
REPRESENTATIVE GRUENBERG referred to the language on page 2,
lines 15-25, and to Representative Chenault's question. He
asked whether this language was provided by the Alaskan
attorneys reviewing the suggested updates to the Uniform Act,
but is not in the Uniform Act.
MR. KERR agreed that is correct.
MR. KERR, in response to Representative Gruenberg, agreed that
the Uniform Law Commission does not have any objection to the
change. He referred to the top of page 4 of the bill, and
stated this language is only applicable when it is the result of
another disclaimer. So this answers the earlier question, which
asked whether "this is two different situations." It is not as
though the parent can disclaim on behalf of the child and then
receive the inheritance or interest. Because of that and since
the term "natural guardian" comes from Alaskan practice, the ULC
does not envision a problem.
5:02:19 PM
REPRESENTATIVE GRUENBERG pointed out that a natural guardian has
a fiduciary duty to the child and cannot steal from the child.
Thus, if the guardian is misusing the trust, the child would be
able to maintain a cause of action against the natural guardian,
which is the protection for the child.
MR. SHAFTEL answered yes, that was his understanding.
5:02:56 PM
CHAIR OLSON, after first determining no one else wished to
testify, closed public testimony on HB 287.
5:03:07 PM
REPRESENTATIVE CHENAULT asked for a layman's definition of a
natural guardian.
REPRESENTATIVE GRUENBERG believed that the rules to determine
who is the natural guardian of a child are located on page 2,
lines 22-31, and page 3, lines 1-7.
5:04:22 PM
REPRESENTATIVE CHENAULT asked whether that also would apply to
adoption.
REPRESENTATIVE GRUENBERG stated that if a person adopts a child
that person, he/she becomes the legal mother and father. He
referred to Page 2, lines 24-25 of HB 287, and clarified that
the legal mother and father would be the birth mother and father
or an adoptive mother and father. In further response to
Representative Chenault, he pointed out that the provisions that
apply are contained in the adoption code, which states that the
effect of the adoption decree is to provide all the rights and
responsibilities of a birth parent.
5:05:57 PM
REPRESENTATIVE T. WILSON moved to report HB 287 out of committee
with individual recommendations and the accompanying fiscal
notes. There being no objection, HB 287 was reported from the
House Labor and Commerce Standing Committee.
5:06:46 PM
The committee took an at-ease from 5:06 p.m. to 5:08 p.m.