Legislature(2009 - 2010)BUTROVICH 205
03/31/2009 01:00 PM Senate LABOR & COMMERCE
| Audio | Topic |
|---|---|
| Start | |
| Governor's Appointments | |
| SB170 | |
| SB60 | |
| SB149 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
| += | SB 149 | TELECONFERENCED | |
| += | SB 60 | TELECONFERENCED | |
| *+ | SB 170 | TELECONFERENCED | |
| + | TELECONFERENCED |
SB 60-UNIFORM PROBATE CODE; TRUSTS, WILLS
1:43:05 PM
CHAIR PASKVAN announced the consideration of SB 60.
TREVOR FULTON, staff to Senator McGuire, sponsor of SB 60,
explained that probate is the legal process in which a will is
reviewed to determine whether it is valid and authentic. Probate
also refers to the general administering of the 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. With a will during probate, much of the
estate is taken by taxes (mostly federal) and sometimes
attorneys. 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 deals specifically with trusts and the Uniform Probate
Code by clarifying, updating, and adding to existing Alaskan
probate laws with the aim of improving the ease of
administration of wills, estates and trusts for Alaskan
residents, and secondly with the aim of making Alaska a more
attractive place to do trust business.
Most of these changes involved either clarifying language or
omitting unnecessary verbiage. Other changes include clarifying
issues relating to representation of an incapacitated person,
clarifying property transfers involving a deceased spouse,
creating a procedure for the establishment of will and trust
validity before death and addressing the venue proceeding if a
decedent lives outside of Alaska, but held significant assets
within the state.
These changes in SB 60 were brought to him by experts in the
probate and trust field, and they had not received any negative
feedback on them. The trust business is a highly competitive,
multi-billion dollar sector that often crosses state lines in
order to take advantage of more attractive state trust laws. SB
60 makes Alaska a more attractive place to do trust business and
by doing so, creates jobs and revenue that would otherwise go
Outside.
The State of Alaska has directly received millions of dollars in
tax revenue and many Alaskan jobs have been created in trust
banking, insurance and legal professions due to its competitive
and contemporary trust laws. It diversifies the state's economy
and makes it an attractive place to invest.
1:47:38 PM
DAVID SHAFTEL, Estate Planning Attorney, said he is a member of
an informal group that has worked with the Alaska Legislature
since 1997 to improve the state's trust statutes. He is familiar
with all the provisions of SB 60.
Section 1 allows a person who creates a trust to designate a
representative who can represent incapacitated persons - for
example - miner children, unborn children or an incapacitated
adult. This provision was first drafted into Florida law a few
years ago.
Section 2 corrects a typo in existing law.
Sections 3 and 4 fix updates Alaska law that conforms with
language Delaware and New Hampshire have dealing with an
irrevocable trust that is created by a "seflor," someone who
could be a discretionary beneficiary of the trust. The seflor's
creditors couldn't reach the assets of the trust, but it would
be done well before the seflor has any claims against him. If
you do this with your spouse's consent or before you marry, then
your spouse has no claim against the assets in that trust.
Sections 5, 6 and 7 are technical provisions.
1:52:29 PM
Section 8 allows a person who has drafted a will or trust to
have it validated in court before he dies so that it can't be
challenged, by a family member, for instance. Several other
states have provisions like this, but not as well written.
1:54:17 PM
Section 9 updates the venue statute for probate of a will of a
person who is not a resident of Alaska when he dies. Examples
include people who move out of Alaska to a warmer place.
Sections 10 and 11 allow a fiduciary, personal representative or
trustee to consider discretionary distributions as coming from
capital gains. This is a provision that will result in better
tax planning for beneficiaries of estates and trusts, because of
the lower overall tax consequences of a distribution.
He noted that there were three other bills in this legislature
on the same subjects.
1:56:23 PM
SENATOR BUNDE asked if he said the changes created a typo in
section 2.
MR. SHAFTEL clarified that it corrected an existing typo in the
statute.
CHAIR PASKVAN asked if the irrevocable trust and the
discretionary beneficiary provision lessened the need for
prenuptial agreements.
MR. SHAFTEL answered yes; that is one of the functions this type
of trust can serve. If you want to make sure certain assets
would not be subject to divorce down the line, you could create
this type of a trust 30 days prior to marriage. It could be done
after marriage if the spouse consented to it.
CHAIR PASKVAN asked if this is intended to attract other people
to Alaska to use this type of irrevocable trust or is this for
Alaskans' needs.
MR. SHAFTEL responded that most of his clients from medium and
large estates almost take advantage of this kind of trust, which
is called a self-settled discretionary spend thrift trust. Many
Alaskans are using it, but it also has been an attraction for
non-residents. When Alaska created this law in 1997, it was the
first state to have a usable statute allowing for this kind of
trust; now there are 12 states. His office uses it primarily for
residents of Alaska.
CHAIR PASKVAN asked for a definition of medium and large asset
value clients.
MR. SHAFTEL replied his office defines "medium estates" as
starting with estates that are larger than the applicable credit
amount. That amount has increased from $1 million since 2001 to
$3.5 million in 2009; it was $2 million last year. The talk on
the street is that it would stay at $3.5 million and be indexed
in the future. He said that they are watching to see if Congress
does anything more with this definition. A "large estate" is
anything over that - about twice that amount. Typically a
married couple could protect twice that credit amount or $7
million.
2:01:45 PM
SENATOR THOMAS asked if the venue section refers to wills only,
but to trusts as well.
MR. SHAFTEL answered that this section of the work draft only
deals with wills. Another venue provision deals with pre-mortem
proceedings that he described before dealing with validating a
will or trust.
SENATOR THOMAS said he was looking at section 8. The real
question is if it says the original court proceedings would take
place in a particular state that may not be the person's
residence; and if that is the case, what happens if the State of
California, for instance, had similar laws that required that
all people residing in their state, regardless of such a term in
a will or trust, would be settled in that state.
MR. SHAFTEL replied that his first question deals with "pre-
mortem proceedings" in section 8, which covers venue for both
wills and trusts. Regarding his second question, he was not
aware of any state saying a person's estate must be probated in
that state. He remembered when a number of states fought over
the right to tax Howard Hughes property. It was very complicated
and the states eventually agreed to divide up the state taxing
power for that instance.
2:05:28 PM
CHAIR PASKVAN asked if a non-domiciled person could in the
document, itself, establish Alaska as the venue for resolution
of these trust and will issues.
MR. SHAFTEL answered yes. The new provision (section 8) allowing
for establishment of the validity of a will or trust before
death anticipates that the person who created that document if
they weren't a resident of Alaska, would come to Alaska to file
the proceeding.
CHAIR PASKVAN said his concern was focused on the cost to the
court system.
2:07:21 PM
MR. SHAFTEL said he could only give his opinion, but four other
states have this or similar processes, so it's not as if Alaska
would have a monopoly. This particular statute is written
particularly well, and he thought it would be copied by a number
of other states. This provision will serve Alaskan residents and
some people who decide to choose to have this proceeding in
Alaska. He reminded them that a lot of people view Alaska as
being "a tremendous distance away," and he thought that most
people would probably go to other states that are closer. He
thought that the costs of people who come up here and use the
state's professional services would at least match and probably
be significantly greater than the cost to the court system.
2:08:51 PM
SENATOR BUNDE noted that there is a zero fiscal cost to the
state, but he thought maybe the Department of Revenue should
give them a ballpark figure for what the state is making off of
the trust arena.
2:10:14 PM
MR. SHAFTEL commented that he didn't want to leave them with the
wrong impression. The estate statutes they have been working on
for 12 years primarily benefit Alaskans. It has only been made
available to other non-residents.
2:11:52 PM
SENATOR THOMAS asked if the venue aspect is available to people
who have no assets in Alaska, but simply want their will
probated or the procedures for the trust to happen here.
MR. SHAFTEL answered yes. "The statement of trust, for example,
makes it clear that a person can choose what state's trust law
they want to have apply to their trust." So, there is a lot of
crossing of state lines by persons using estate and trust laws.
2:13:17 PM
DOUGLAS BLACKMACHER, Alaska Trust Company, supported SB 60. They
know the state has received a number of millions of dollars over
the last 10 years because of these changes to its estate
statutes. He hasn't noticed a significant increase in use of the
Alaska court system, however.
2:14:59 PM
CHAIR PASKVAN closed public testimony.
MR. FULTON noted CS SB 60(), labeled 26-LS0320\E.
2:16:59 PM
SENATOR MEYER moved to bring version E before the committee.
There were no objections and it was so ordered.
SENATOR BUNDE wanted to hear about the substantial differences
between the original SB 60 and the CS.
MR. FULTON explained that changes came from continued
conversations between Mr. Shaftel and Terry Bannister, LAA
attorney.
2:18:47 PM
He explained section 1 changed "represent or bind" to "represent
and bind" when you are the designated representative. In section
2 the "decedent" replaces "self"; there were no changes in
section 3.
2:22:02 PM
The only substantive change is the venue change that was already
discussed in section 9.
2:23:24 PM
CHAIR PASKVAN closed public testimony on the CS.
2:23:57 PM
SENATOR MEYER asked if this would require a 2/3 vote - referring
to section 12, page 14, lines 23-26.
2:25:18 PM
MR. SHAFTEL said his understanding is because this is a venue
provision that affects the rules of the court it requires a 2/3
vote.
SENATOR MEYER asked for the effective date.
MR. FULTON answered they didn't request an effective date.
CHAIR PASKVAN held CSSB 60, version E, for further thought.
| Document Name | Date/Time | Subjects |
|---|---|---|
| Governor's Appointments.pdf |
SL&C 3/26/2009 1:30:00 PM SL&C 3/31/2009 1:00:00 PM |
|
| CSSB 149 version E.pdf |
SL&C 3/31/2009 1:00:00 PM |
SB 149 |
| SB 149 Bill Packet.pdf |
SL&C 3/19/2009 1:30:00 PM SL&C 3/31/2009 1:00:00 PM |
SB 149 |
| SB 60 Bill Packet.pdf |
SL&C 3/24/2009 1:30:00 PM SL&C 3/31/2009 1:00:00 PM SL&C 4/16/2009 1:00:00 PM |
SB 60 |
| SB 170 Bill Packet.pdf |
SL&C 3/31/2009 1:00:00 PM |
SB 170 |