Legislature(2009 - 2010)BELTZ 105 (TSBldg)

02/01/2010 01:30 PM Senate JUDICIARY


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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ SB 60 UNIFORM PROBATE CODE; TRUSTS, WILLS TELECONFERENCED
Heard & Held
+ HB 186 AK FIREARMS EXEMPT FROM FED. REGULATION TELECONFERENCED
Heard & Held
+= HB 98 ALCOHOL: MINOR CONSUMING/LOCAL OPTION TELECONFERENCED
Moved CSHB 98(FIN) am Out of Committee
+ Bills Previously Heard/Scheduled TELECONFERENCED
                                                                                                                                
           SB  60-UNIFORM PROBATE CODE; TRUSTS, WILLS                                                                       
                                                                                                                                
1:36:34 PM                                                                                                                    
CHAIR  FRENCH announced  the  consideration of  SB  60. [CSSB  60                                                               
(L&C) was before the committee.]                                                                                                
                                                                                                                                
ESTHER CHA, Staff  to Senator McGuire, introduced SB  60 and read                                                               
the following into the record. Original punctuation provided.                                                                   
                                                                                                                                
     The  climate for  trust and  estate planning  is highly                                                                    
     competitive, and the  trust business is a  multi-billion                                                                   
     dollar sector that often crosses state lines in order to                                                                   
     take  advantage of  more  attractive state  trust laws.                                                                    
     Without changes in legislation, Alaska would not be able                                                                   
     to maintain  its position at the  forefront. Given this                                                                    
     competition, SB 60  seeks to amend  the Uniform Probate                                                                    
     Code.                                                                                                                      
     Probate is the legal process in which a will is reviewed                                                                   
     to determine whether it is valid and authentic. Probate                                                                    
     can also refer to the general administering of a deceased                                                                  
     person's will or the estate of a deceased person without                                                                   
     a will.                                                                                                                    
     A trust  is similar to  a will with  one very important                                                                    
     distinction. With a trust, your property won't go through                                                                  
     probate when you die. Whereas a will during probate much                                                                   
     of the estate is  taken by taxes, mostly at the federal                                                                    
     level, and  sometimes attorneys. So  when you  create a                                                                    
     trust you transfer your properties and assets to it while                                                                  
     you are  still alive and  it continues on  through your                                                                    
     death and  thus does  not need to  go through  the same                                                                    
     costly legal proceedings that a will does.                                                                                 
     SB 60 therefore clarifies, updates and adds to existing                                                                    
     Alaskan probate laws with the  aim of (1) improving the                                                                    
     ease of administration of wills, estates, and trusts for                                                                   
     Alaskan residents and (2) making Alaska a more attractive                                                                  
     place to do trust business.                                                                                                
     Most of these changes involve either clarifying language                                                                   
     or omitting unnecessary verbiage. Other changes include:                                                                   
     1)   Clarifying issues relating to representation of an                                                                    
     incapacitated person                                                                                                       
                                                                                                                                
     2)   Clarifying property transfers involving a deceased                                                                    
     spouse                                                                                                                     
                                                                                                                                
     3)   Creating a procedure for the establishment of will                                                                    
     and trust validity before death                                                                                            
                                                                                                                                
     4)   And addressing the venue proceeding if a decedent                                                                     
     lives outside of Alaska, but held significant assets                                                                       
     within the state                                                                                                           
                                                                                                                                
     The  changes in  SB  60  were brought  to  our office's                                                                    
     attention by experts in the probate and trust field, and                                                                   
     to my knowledge, our office has not received any negative                                                                  
     feedback on them.                                                                                                          
                                                                                                                                
     SB 60 is part of an ongoing effort to modernize our trust                                                                  
     laws and by doing so (1) to create jobs and revenue, (2)                                                                   
     to  diversify our economy,  and (3)  to make  Alaska as                                                                    
     attractive to trust business and investment as Delaware                                                                    
     is to credit card and banking business.                                                                                    
                                                                                                                                
1:40:28 PM                                                                                                                    
DOUGLAS  BLATTMACHR, President,  Alaska Trust  Company, said  his                                                               
company has worked  with trust attorneys to  enhance Alaska trust                                                               
laws. They support SB 60.                                                                                                       
                                                                                                                                
DAVE SHAFTEL, Attorney, said he's  part of an informal group that                                                               
has been  working since 1997  to improve Alaska estate  and trust                                                               
laws. Currently  Alaska is seen as  having the best laws  in this                                                               
field,  which  has  attracted significant  business  from  people                                                               
outside the state.                                                                                                              
                                                                                                                                
MR. SHAFTEL reviewed four subject areas  in SB 60. Section 1 adds                                                               
a procedure for making changes  in documents where it's necessary                                                               
to give notice  and have all interested  parties participate. The                                                               
law  has  always recognized  that  someone  with capacity  and  a                                                               
similar   interest  can   represent  and   incapacitated  person.                                                               
Subparagraph (G) on page 3,  line 10, adds language to facilitate                                                               
this type of  representation. It allows the person  whose will or                                                               
trust it is to designate a representative.                                                                                      
                                                                                                                                
Section 2  makes an  adjustment to the  "widow's election"  in an                                                               
estate. If  the surviving spouse  doesn't like what  the deceased                                                               
spouse left him or  her in the will, he or  she can elect against                                                               
what  was  left  and  instead  take  one-third  of  the  mutually                                                               
combined assets. This is a  common provision in separate property                                                               
states.                                                                                                                         
                                                                                                                                
Section 3  amends AS 13.12.205(2)(A).  Alaska has  a self-settled                                                               
discretionary  spendthrift trust  whereby a  person can  create a                                                               
trust for him  or herself and members of their  family. The trust                                                               
assets will be protected from  creditors and won't be taxed under                                                               
the federal estate tax when the person dies.                                                                                    
                                                                                                                                
CHAIR  FRENCH asked  if  the  only change  in  Section  3 is  the                                                               
deleted language on page 6.                                                                                                     
                                                                                                                                
1:46:58 PM                                                                                                                    
MR.  SHAFTEL  replied  Section  4  is  related;  it  adds  a  new                                                               
subsection (b) to  the same statute. It's a  fair limitation that                                                               
basically  says that  if  you  and your  spouse  agree that  your                                                               
spouse cannot  elect to give the  lifetime trust that you  set up                                                               
for the family,  or if you set  this trust up 30  days before you                                                               
are married, then  the assets in this trust won't  be included in                                                               
pool  of assets  that your  spouse could  elect to  give at  your                                                               
death if  your spouse  didn't like  what you left  him or  her in                                                               
your will. This  brings Alaska law into conformity  to what other                                                               
states have done.                                                                                                               
                                                                                                                                
1:47:58 PM                                                                                                                    
SENATOR WIELECHOWSKI joined the committee.                                                                                      
                                                                                                                                
CHAIR FRENCH  asked for  an example of  how the  widow's election                                                               
works.                                                                                                                          
                                                                                                                                
MR.  SHAFTEL posed  a hypothetical  example that  in your  estate                                                               
planning  you decide  that  when you  die you  want  to leave  90                                                               
percent of  your assets to your  children and 10 percent  to your                                                               
wife. Then  you die  and your  wife decides  she is  unhappy with                                                               
your will.  The law  allows her  to elect  against your  will and                                                               
instead  get one-third  of the  assets in  the augmented  estate.                                                               
That is  a technical  term for  the assets  the husband  and wife                                                               
have accumulated  over their lifetime.  Thus, your wife  will end                                                               
up with one-third  of the family's assets instead  of 10 percent.                                                               
SB 60  says that  if during  the marriage  both spouses  agree to                                                               
create  a  special  trust,  the  surviving  spouse  cannot  elect                                                               
against that particular asset.                                                                                                  
                                                                                                                                
CHAIR FRENCH observed  that, that can only come  into being given                                                               
her consent while she was alive.                                                                                                
                                                                                                                                
MR. SHAFTEL agreed.                                                                                                             
                                                                                                                                
1:50:59 PM                                                                                                                    
SENATOR COGHILL asked why it  is necessary to delete from Section                                                               
3 the language  that references an irrevocable  transfer in trust                                                               
with a transfer restriction under AS 34.40.110(a).                                                                              
                                                                                                                                
MR.  SHAFTEL explained  that when  this trust  law was  initially                                                               
drafted  it  included  this  particular  kind  of  trust  in  the                                                               
augmented  estate. Other  states  have said  that  if the  spouse                                                               
consented to  the trust  or if it  occurred before  the marriage,                                                               
then it doesn't  make sense to include that trust  as part of the                                                               
augmented estate. This is a  continuing and growing area and this                                                               
change  takes advantage  of that  new learning  and thinking,  he                                                               
said.                                                                                                                           
                                                                                                                                
CHAIR  FRENCH asked  if  the widow's  election  pertains in  non-                                                               
community states only or if it pertains in all states.                                                                          
                                                                                                                                
MR. SHAFTEL  replied it's only in  non-community property states;                                                               
in community  property states  both spouses own  half of  all the                                                               
assets.                                                                                                                         
                                                                                                                                
CHAIR FRENCH said Alaska is a non-community property state.                                                                     
                                                                                                                                
MR. SHAFTEL  said that is  the default classification,  but since                                                               
1998 Alaskans can  elect into a community  property system, which                                                               
is helpful  from a  tax standpoint. SB  62 makes  improvements in                                                               
that area.                                                                                                                      
                                                                                                                                
1:54:07 PM                                                                                                                    
SENATOR MCGUIRE joined the committee.                                                                                           
                                                                                                                                
MR. SHAFTEL  said Section 8  adds a  new Article 5A  dealing with                                                               
establishing the  validity of  a will or  trust before  death. It                                                               
addresses  the problem  of a  person who  dies after  executing a                                                               
will or  trust only to  have their  family say that  the decedent                                                               
had been incapacitated or unduly  influenced or under duress when                                                               
the will or  trust was executed. This establishes  a procedure to                                                               
petition the  court to determine  that your will is  valid before                                                               
you death.                                                                                                                      
                                                                                                                                
1:57:29 PM                                                                                                                    
SENATOR WIELECHOWSKI  asked what  other states have  adopted this                                                               
kind of provision and how much litigation has derived from it.                                                                  
                                                                                                                                
MR. SHAFTEL replied  three other states have this kind  of law or                                                               
will allow  this type  of litigation.  In these  situations there                                                               
will be litigation  one way or the other, but  it's more accurate                                                               
if it's done  up front when the testator or  settlor of the trust                                                               
is available  to be a  witness. This type  of law will  allow for                                                               
resolution of a  controversy that will occur one  time or another                                                               
anyway.                                                                                                                         
                                                                                                                                
2:00:26 PM                                                                                                                    
SENATOR EGAN asked how power of attorney is related.                                                                            
                                                                                                                                
MR. SHAFTEL  replied a durable  power of attorney  doesn't really                                                               
deal with  what happens  to a person's  property after  they die.                                                               
This provision establishes a procedure  for determining whether a                                                               
person had  the capacity to understand  what he or she  was doing                                                               
when he  or she  signed their  will or trust  and that  it wasn't                                                               
signed under undue influence or duress.                                                                                         
                                                                                                                                
2:02:28 PM                                                                                                                    
CHAIR  FRENCH  asked when  the  other  three states  passed  this                                                               
provision into law.                                                                                                             
                                                                                                                                
MR. SHAFTEL replied Ohio has  had proceedings like this for 10-15                                                               
years, but no state has a  statute that lays out the step-by-step                                                               
procedure  for doing  this. He  and others  have been  working on                                                               
this provision for 3-4 years.                                                                                                   
                                                                                                                                
CHAIR FRENCH asked if there  have been arguments advanced against                                                               
this and, if so, what form the take.                                                                                            
                                                                                                                                
2:04:30 PM                                                                                                                    
MR. SHAFTEL replied  there could be a concern  that more hearings                                                               
would result.                                                                                                                   
                                                                                                                                
CHAIR FRENCH asked  if he agrees that the person  that brings the                                                               
suit bears the  cost. The testator would bear the  cost of asking                                                               
the court to validate their will or trust before their demise.                                                                  
                                                                                                                                
MR. SHAFTEL  agreed; the burden  of proof  is on the  person that                                                               
brings the challenge.                                                                                                           
                                                                                                                                
SENATOR COGHILL  pointed out that  the testator has the  right to                                                               
change their will or trust  after having received court approval.                                                               
He asked  if people who are  subject to the trust  could use this                                                               
to intimidate the testator.                                                                                                     
                                                                                                                                
MR. SHAFTEL  answered the settlor  has to give their  consent for                                                               
someone other than the personal  representative, the testator, or                                                               
the settlor to bring an action.                                                                                                 
                                                                                                                                
2:07:18 PM                                                                                                                    
CHAIR FRENCH  referenced page 9,  line 9, and clarified  that the                                                               
testator is the person whose will  it is. It is only the testator                                                               
or  the  person  they  nominated   to  serve  as  their  personal                                                               
representative who can seek one of these court declarations.                                                                    
                                                                                                                                
MR. SHAFTEL agreed.                                                                                                             
                                                                                                                                
CHAIR FRENCH asked if it works the same way for trusts.                                                                         
                                                                                                                                
MR. SHAFTEL said in the case  of trusts either the trustee or the                                                               
settlor  can  bring  an  action.  Responding  to  a  request,  he                                                               
explained that the settlor is the person whose trust it is.                                                                     
                                                                                                                                
2:08:15 PM                                                                                                                    
SENATOR MCGUIRE said  that however messy it may  be, she'd prefer                                                               
to  let a  challenge play  out so  people don't  feel that  their                                                               
rights are abridged.                                                                                                            
                                                                                                                                
MR.  SHAFTEL said  the  last change,  on page  13,  adds a  venue                                                               
provision  for probate  proceedings  in Alaska.  If the  decedent                                                               
wasn't domiciled  in the state  at the  time of their  death, the                                                               
probate  proceeding can  be  brought in  the  district where  the                                                               
fiduciary resides or has a principal place of business.                                                                         
                                                                                                                                
SENATOR COGHILL asked  if the venue provision could be  used as a                                                               
way to leverage the estate.                                                                                                     
                                                                                                                                
MR. SHAFTEL replied  this provision simply fills a  gap in Alaska                                                               
law.                                                                                                                            
                                                                                                                                
CHAIR FRENCH thanked Mr. Shaftel for his testimony.                                                                             
                                                                                                                                
2:13:10 PM                                                                                                                    
JONATHAN  BLATTMACHR, Member,  Alaska  Bar Association,  reported                                                               
that his intent in proposing the  provision to validate a will or                                                               
trust before  death was  to reduce  litigation. He  expressed the                                                               
view  that this  is the  best bill  of its  kind in  the country;                                                               
Arkansas and  Ohio have  adopted a  similar provision,  but their                                                               
procedures   are  unclear.   Responding   to  Senator   Coghill's                                                               
question, he said  he doesn't believe that this would  be used to                                                               
leverage  anybody because  a judge  will  make the  determination                                                               
about validity.  However, he  said, a codicil  to the  will would                                                               
knock that proceeding  out of the way. This is  a great bill that                                                               
keeps  Alaska  in the  forefront  of  estate  and trust  law,  he                                                               
stated.                                                                                                                         
                                                                                                                                
2:15:41 PM                                                                                                                    
SENATOR MCGUIRE  commented that circumstances change  through the                                                               
years and it would give peace of  mind to know that your frame of                                                               
mind and your wishes are a matter of record.                                                                                    
                                                                                                                                
SENATOR WIELECHOWSKI asked  if this might bring  people to Alaska                                                               
to validate their wills from other states.                                                                                      
                                                                                                                                
MR. J. BLATTMACHR replied it is  possible. Alaska, New York and a                                                               
few other  states have specific statutes  that allow nonresidents                                                               
to have their wills admitted to  original probate in the state in                                                               
which they  are not  a resident. He  anticipates this  will bring                                                               
some business to Alaska in that regard.                                                                                         
                                                                                                                                
2:18:08 PM                                                                                                                    
SENATOR  WIELECHOWSKI  said  he hopes  everyone  understands  the                                                               
ramifications. This could  be good for Alaska  business, but some                                                               
of the complex cases could consume considerable court time.                                                                     
                                                                                                                                
DANA L.  OLSON, representing herself, expressed  concern with the                                                               
breadth  of SB  60; it  covers too  many topics.  Also, the  bill                                                               
violates  individual privacy  and presents  constitutional issues                                                               
related to Article  8, Section 17. She understands  the desire to                                                               
address  this business  model, but  security isn't  consistent in                                                               
this state and the bill doesn't  address that. She said she would                                                               
send her written comments.                                                                                                      
                                                                                                                                
2:24:02 PM                                                                                                                    
CHAIR FRENCH asked her to send  her comments to his office and he                                                               
would make  sure that  all committee members  receive a  copy. He                                                               
closed public testimony and held SB 60 for a future hearing.                                                                    
                                                                                                                                
At ease 2:24 p.m. to 2:25 p.m.                                                                                                  
                                                                                                                                

Document Name Date/Time Subjects
SB 60 Sponsor Statement.pdf SJUD 2/1/2010 1:30:00 PM
SB 60
SB60 Sectional Summary.pdf SJUD 2/1/2010 1:30:00 PM
SB 60
SB 60 Uniform Probate Code Description.pdf SJUD 2/1/2010 1:30:00 PM
SB 60
CSHB186 (FIN) sponsor statement.pdf SJUD 2/1/2010 1:30:00 PM
HB 186
CSHB186 Sectional Summary.pdf SJUD 2/1/2010 1:30:00 PM
HB 186
Firearms Act map.pdf SJUD 2/1/2010 1:30:00 PM
HB 186
Montana Lawsuit Press Release.pdf SJUD 2/1/2010 1:30:00 PM
HB 186
Montana Lawsuit.pdf SJUD 2/1/2010 1:30:00 PM
HB 186
ATF OPen Letters to Licensees Montana, Tennessee.pdf SJUD 2/1/2010 1:30:00 PM
HB 186
ATF Prohibited Persons and Licensee Requirements.pdf SJUD 2/1/2010 1:30:00 PM
HB 186