04/28/1998 01:35 PM Senate L&C

                   SB 353 - PROPERTY EXEMPTIONS                                
                                                                               
CHAIRMAN LEMAN brought SB 353, sponsored by the Senate Judiciary               
Committee, before the committee as the final order of business.                
                                                                               
MEL KROGSENG, staff to Senator Robin Taylor, said SB 353 seeks to              
update the exemptions which are presently allowed Alaska residents             
for a family home and insurance.  The legislation, although not                
granting an unlimited exemption for the family home, would at least            
put the family home on par with the new federal income tax capital             
gain exclusion.  Given the growing popularity of trusts as estate              
planning tools, a section is added to give individuals who have                
their assets placed in the name of a trust, the same protection                
that would exist had the assets been in the individuals' own names.            
This would apply only to those trusts where the trust income is                
still taxable to the grantor.                                                  
                                                                               
In addition, the bill adds three new exemptions: (1) for the                   
reserves set aside for condominium associations; (2) a limited                 
exemption for annuities; and (3) for the new Roth IRA.                         
                                                                               
The exemption provided for condominium reserves is meant to protect            
the many individuals who reside in condominiums in Alaska.  The                
bill assures them that the money which they have paid in the form              
of monthly dues will continue to be used for the purposes for which            
they were intended, i.e., ongoing maintenance and repairs.                     
                                                                               
MS. KROGSENG said the bill would protect insurance policies and                
their related cousin, annuities (up to $100,000) from unforeseen               
financial disasters.  She noted that the states of Alabama, New                
York, Florida, California, Missouri, New Mexico, North Carolina,               
Oregon, and Texas have seen fit to give its citizens an unlimited              
exemption for insurance policies.                                              
                                                                               
Number 385                                                                     
                                                                               
CHAIRMAN LEMAN inquired as to the current value of the homestead               
exemption.                                                                     
                                                                               
STEVE GREER, an Anchorage attorney who has worked on the                       
legislation, said with respect to the indexing of the homestead                
exemption, it is now $62,100.                                                  
                                                                               
CHAIRMAN LEMAN said he could understand the reason for increasing              
a homestead exemption, but he questioned why the big jump to                   
$250,000 for an individual and $500,000 for a couple.  MR. GREER               
pointed out that a lot of states allow unlimited homestead                     
exemptions.  This legislation was meant to try put to Alaska, not              
at the top of ladder, but at least higher than where it is right               
now, and it was felt that the previous amount in the law was                   
exceptionally low.  He noted that with respect to the homestead                
exemption, banks are still going to request in their deed of trust             
language that the individual who gets a loan waive that right to               
that homestead exemption, so the banks' interests are still going              
to be protected.  It was felt that this legislation would be of                
great benefit to the majority of Alaskans.                                     
                                                                               
CHAIRMAN LEMAN asked if other people besides the banks can ask that            
the homestead exemption be waived when they set up loan agreements.            
MR. GREER acknowledged that was correct.  He added that what this              
bill is really meant to protect against is the unforeseen financial            
disaster that might occur such as a huge medical bill, a lawsuit,              
etc.                                                                           
                                                                               
MR. GREER spoke to the importance of the exemption for the reserves            
set aside for condominium associations, as well as Section 11,                 
relating to the treatment of certain trusts, which is meant to                 
assure the fact that if an individual retitles his asset in the                
name of his revokable trust, that the same type of exemption                   
protection is going to be given to that individual as if he had                
just kept the asset in his own individual name.                                
                                                                               
CHAIRMAN LEMAN said recent studies have indicated that the CPI                 
overstates inflation, and he asked Mr. Greer if in using that it is            
creating limits that are higher than what we really want to create.            
MR. GREER replied that the present $54,000 puts Alaska in  the                 
lower half of the states that protect its citizens against claims,             
and Alaska is one of the more expensive states in the union, where,            
if anything, the protection should be higher and not lower.                    
                                                                               
CHAIRMAN LEMAN commented there are two sides to that because it may            
protect the citizens against claims, but raising those limits would            
not protect the person making the claim.                                       
                                                                               
Number 234                                                                     
                                                                               
LINDA HULBERT, a licensed insurance agent living in Fairbanks,                 
voiced her strong support for the provision in the bill that would             
protect insurance policies from unforeseen financial disasters.                
Many times life insurance is the only asset there to protect the               
spouses and children.  She said she represents a lot of life                   
insurers in the state and, with those agents, works with hundreds              
and hundreds of people every year who in good faith get a permanent            
policy to protect their families.                                              
                                                                               
Number 192                                                                     
                                                                               
CHAIRMAN LEMAN stated it was his intent to hold the legislation                
over, but he wanted to get a sense of the committee regarding the              
amounts proposed in the legislation.                                           
                                                                               
SENATOR HOFFMAN said he would like to see the amounts for the                  
homestead exemption and the insurance policy protection as close as            
possible  so that it is not protecting one group of people at a                
higher level, because many families might only have life insurance             
as their asset.                                                                
                                                                               
There being no further testimony on SB 353, CHAIRMAN LEMAN said the            
legislation would be worked on for the next couple of days to see              
if a consensus could be reached on the limits in the bill and to               
craft something that everyone could support.