Legislature(2003 - 2004)

03/17/2004 08:02 AM Senate JUD

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                                                                                                                                
               TRUSTS/ESTATES/PROPERTY TRANSFERS                                                                            
                                                                                                                                
MR.  BRIAN HOVE,  staff to  Senator Seekins,  sponsor of  SB 344,                                                               
read the following sponsor statement.                                                                                           
                                                                                                                                
     A vital characteristic of  our highly developed economy                                                                    
     is the  ease with  which financial resources  flow from                                                                    
     one  market   to  another.  In  fact   the  magnet-like                                                                    
     attraction between and the market  that offers the most                                                                    
     advantageous  terms  is,   perhaps,  best  demonstrated                                                                    
     within the financial services industry itself.                                                                             
                                                                                                                                
     Over  the  years  the   Alaskan  banking  industry  has                                                                    
     attracted  funds  to  our  state as  the  result  of  a                                                                    
     particular niche  we have successfully developed  in an                                                                    
     obscure  corner  of the  industry  known  as trust  and                                                                    
     estate   services.  Much   of  this   success  can   be                                                                    
     attributed to the foresight  demonstrated by the Alaska                                                                    
     State Legislature.                                                                                                         
                                                                                                                                
     Since 1997,  the legislature has passed  numerous bills                                                                    
     effectively  making Alaska  a premier  jurisdiction for                                                                    
     this  financial  specialty.  Just   last  year,  SB  87                                                                    
     adopted a more recent  version of the Uniform Principal                                                                    
     &  Income Act.  And HB  212 updated  other portions  of                                                                    
     Alaska's  trust laws.  Both were  signed into  law last                                                                    
     summer.                                                                                                                    
                                                                                                                                
     While  SB   344  may  not   be  as  far   reaching,  it                                                                    
     accomplishes the  same purpose. It does  this by making                                                                    
     a  host   of  small  technical  revisions   to  current                                                                    
     statutes.  It updates  provisions  relating to  virtual                                                                    
     representation.  It clarifies  when  a  trustee can  be                                                                    
     relieved  of its  liability.  And  it adds  provisions,                                                                    
     which other jurisdictions have already adopted.                                                                            
                                                                                                                                
     Keeping  our trust  statutes current  has had  a direct                                                                    
     positive  impact  on  our  state's  economy.  Over  the                                                                    
     years, these  periodic revisions  have helped  to bring                                                                    
     hundreds of  millions of dollars  of trust  assets into                                                                    
     the  state and  added tens  of millions  of dollars  to                                                                    
     local  bank  deposits.  Furthermore, it  has  increased                                                                    
     business  activity  for  attorneys,  accountants,  life                                                                    
     insurance agents  and brokerage  firms. This,  in turn,                                                                    
     creates jobs.                                                                                                              
                                                                                                                                
     Necessity,   ingenuity   and    routine   advances   in                                                                    
     technology  collaborate on  a daily  basis to  reinvent                                                                    
     the world of financial  products and services. To date,                                                                    
     Alaska  has successfully  staked  out a  place in  this                                                                    
     world through our contemporary set  of trust and estate                                                                    
     laws. SB  344 seeks  to preserve  our position  in what                                                                    
     amounts to  a highly fluid marketplace  unrestricted by                                                                    
     geographical  boundaries. It  seems reasonable  to keep                                                                    
     that money flowing this direction.                                                                                         
                                                                                                                                
He noted that Beth Chapman and Doug Blattmacher were available                                                                  
to speak to the technical portions of the bill.                                                                                 
                                                                                                                                
SENATOR  FRENCH commented  that legislators  have been  told that                                                               
the growth of this industry has  had a net positive effect on the                                                               
general fund.  He asked  if the Department  of Revenue  (DOR) has                                                               
any documentation to back that up.                                                                                              
                                                                                                                                
MR. HOVE said he has not seen any documentation but believes it                                                                 
is reasonable that bringing that money to this jurisdiction                                                                     
would have a net positive impact on Alaska's economy.                                                                           
                                                                                                                                
CHAIR  SEEKINS  pointed  out that  last  year,  when  considering                                                               
another trust bill, he saw  that premium taxes alone on insurance                                                               
policies were significant.                                                                                                      
                                                                                                                                
MR. DOUG BLATTMACHER added:                                                                                                     
                                                                                                                                
     We know that from the  insurance premiums that we had -                                                                    
     of the premium  payments that we had  made, we estimate                                                                    
     that we've  spent about  a million  and a  half dollars                                                                    
     additional  premium taxes  in the  state over  the last                                                                    
     couple of years and that  continues to - we continue to                                                                    
     get  these  large  insurance policies,  which  generate                                                                    
     additional premium dollars in the state.                                                                                   
                                                                                                                                
MR. STEVE  GREER, an estate-planning attorney  in Anchorage, said                                                               
he  and  a   group  of  other  estate   planning  attorneys  have                                                               
approached the legislature each  year with legislation to improve                                                               
existing  legislation.   He  noted  that  Ms.   Chapman  was  the                                                               
principal drafter of SB 344.                                                                                                    
                                                                                                                                
MS.  BETH  CHAPMAN,  an attorney  with  Faulkner  Banfield,  told                                                               
members she  has practiced  primarily in the  area of  trusts and                                                               
estates for the  past 16 years. She stated support  for SB 344 as                                                               
it will  update Alaska law so  that Alaska will continue  to have                                                               
prominence  as  the  state  in which  individuals  will  want  to                                                               
deposit their  trust assets and  a place where residents  want to                                                               
retain their assets.   She explained SB 344 has  four main parts.                                                               
The  first part  contains  technical corrections  to the  Uniform                                                               
Income Act,  which was  adopted last year.  The second  part adds                                                               
additional trusts  to the  types of  trusts recognized  under the                                                               
spendthrift  provisions.  These  trusts  are  commonly  used  and                                                               
recognized  under  the  Internal  Revenue Code.  The  third  part                                                               
expands  the Doctrine  of Subsequent  Notice found  under current                                                               
Alaska law so  that trustees and trust  beneficiaries have easier                                                               
access  to  the  courts.  Last,   it  establishes  a  statute  of                                                               
limitations for claims against trustees.  Current law contains no                                                               
statute  of  limitations  against   a  trustee  until  the  trust                                                               
relationship  is  terminated.  Alaska law  now  allows  perpetual                                                               
trusts, so that relationship could last  for a very long time and                                                               
stale  claims  could  be  brought  at any  time  in  the  future.                                                               
Enacting  a  statute  of  limitations will  allow  claims  to  be                                                               
brought when necessary soon after they  occur or when notice of a                                                               
claim  has been  made  known to  a beneficiary.  It  also adds  a                                                               
provision  to notify  beneficiaries of  their limitation  period,                                                               
which she believes  will be more helpful to  beneficiaries. If no                                                               
notification occurs, the statute of limitation will not run.                                                                    
                                                                                                                                
SENATOR THERRIAULT asked how long the statute of limitations is.                                                                
                                                                                                                                
MS.  CHAPMAN told  members under  current  law, a  claim must  be                                                               
brought within six months after  the final account. The six month                                                               
period will continue to be used,  but it will run from any report                                                               
that  discloses  the   nature  of  the  claim  so   long  as  the                                                               
beneficiary is notified of the six-month time limit.                                                                            
                                                                                                                                
SENATOR  FRENCH referred  to page  2 of  the sectional  analysis,                                                               
which addresses changing the trust  situs to Alaska. He asked how                                                               
one  locates a  trust in  Alaska and  whether the  money must  be                                                               
physically present in an Alaska bank.                                                                                           
                                                                                                                                
MS.  CHAPMAN said  some  of the  funds do  have  to be  deposited                                                               
within the  state of Alaska  in an  Alaska bank. Also,  the trust                                                               
must  have an  Alaska trustee  and the  trust must  be registered                                                               
with the Alaska Court System.                                                                                                   
                                                                                                                                
SENATOR  FRENCH asked  how small  of a  sum would  qualify for  a                                                               
deposit.                                                                                                                        
                                                                                                                                
MS. CHAPMAN  thought the  amount is not  defined in  the statute.                                                               
She noted,  however, in  her experience deposits  have been  of a                                                               
significant amount.                                                                                                             
                                                                                                                                
SENATOR THERRIAULT  stated, for  the record, that  his wife  is a                                                               
trust attorney and  participates in the Alaska  Trust Council. He                                                               
then moved SB 344 from  committee with individual recommendations                                                               
and the attached zero fiscal notes.                                                                                             
                                                                                                                                
CHAIR  SEEKINS  announced  that  without  objection,  the  motion                                                               
carried.                                                                                                                        

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