Legislature(2013 - 2014)BELTZ 105 (TSBldg)
03/21/2013 01:30 PM Senate LABOR & COMMERCE
Audio | Topic |
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Start | |
HB26 | |
SB65 | |
SB55 | |
SB52 | |
Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
*+ | SB 65 | TELECONFERENCED | |
+= | HB 26 | TELECONFERENCED | |
+= | SB 55 | TELECONFERENCED | |
+= | SB 52 | TELECONFERENCED | |
SB 65-RETIREMENT PLANS; ROTH IRAS; PROBATE 1:36:29 PM CHAIR DUNLEAVY announced the consideration of SB 65. "An Act relating to property exemptions for retirement plans, individual retirement accounts, and Roth IRAs; relating to transfers of individual retirement plans; relating to the rights of judgment creditors of members of limited liability companies and partners of limited liability partnerships; relating to the Uniform Probate Code, including pleadings, orders, liability, and notices under the Uniform Probate Code and the Alaska Principal and Income Act, the appointment of trust property, the Alaska Uniform Prudent Investor Act, co-trustees, trust protectors, and trust advisors; relating to the Alaska Principal and Income Act; relating to the Alaska Uniform Transfers to Minors Act; relating to the disposition of human remains; relating to insurable interests for certain insurance policies; relating to restrictions on transfers of trust interests; relating to discretionary interests in irrevocable trusts; relating to the community property of married persons; and amending Rule 64, Alaska Rules of Civil Procedure, and Rule 301(a), Alaska Rules of Evidence." This was the [first] hearing. 1:37:35 PM CHAD HUTCHISON, Staff, Senator Coghill, sponsor of SB 65, said he would present the bill with assistance from Beth Chapman and David Shaftel. He described these attorneys as the predominant engines behind the drafting of the bill. He noted that previous legislatures considered substantially similar versions of SB 65, but failed due to time constraints. He reviewed the bills from previous sessions. MR. HUTCHINSON explained that SB 65 focuses on trusts and updates trust law in Alaska. He reminded members that a trust is a legal relationship created at the direction of an individual, in which one or more people hold the individual's property, subject to certain duties, to use and protect it for the benefit of others. Trusts are useful planning tools that are created for the benefit of a child, for somebody who is unable to manage assets him or herself, to avoid probate proceedings, and to reduce estate taxes. He relayed that Alaska first modernized its trust statutes in 1997, which put Alaska at the forefront and resulted in commerce and jobs for Alaskans. People in the state and nationwide were able to plan their financial future and security in Alaska. Since 1997, some states have kept pace with Alaska trust law and some states have surpassed it. SB 65 seeks to update the statutes and again put Alaska at the cutting edge of trust law. SB 65 will encourage job growth, trust investments, banking, legal industries, and will diversify the economic portfolio of the state. It will show that Alaska can compete in the highly competitive financial planning sector. It will encourage both residents and nonresidents to plan their financial futures in this state. He deferred questions about specific sections of the bill to Ms. Chapman and Mr. Shaftel. 1:42:55 PM BETH CHAPMAN, Attorney, Juneau, AK, said she has practiced in the area of trusts and estates for 25 years, and has worked on this legislation for several years. It will provide flexibility in trust and estate laws to respond to changing circumstances so that families can protect their assets from generation to generation. She pointed out that the bill also adopts the Uniform Disposition of Remains Act. This law, which is new to Alaska, allows an individual to designate his or her own burial or cremation wishes and makes them legally binding. Alaska currently has no guidelines in this area and there has been litigation among family members about who had authority to make a burial decision. She noted that in many of these cases, the decedent's wishes were not followed. 1:44:09 PM SENATOR ELLIS asked if Alaska is updating its trust laws to address changing legal circumstances or to make Alaska more attractive than other jurisdictions for parking money and doing this kind of business. If Alaska is only competing to have the most attractive laws, he wondered at what point it would be good for just professionals, not consumers, and when common sense would dictate that it's enough. MS. CHAPMAN confirmed that the bill does have an element of trying to ensure that other states are not taking business from the state of Alaska. However, the provisions in SB 65 are dictated by common sense and, based on her practice, are not designed to compete with other states; they generally address problems that have arisen during litigation. More and more individuals and families are relying on trusts and it's important to continue to develop the law, she said. 1:46:50 PM SENATOR OLSON asked what the IRS consequences would be if this legislation were to become law. MS. CHAPMAN explained that the bill is written to provide safeguards against tax consequences. Many of the provisions update current statutes to ensure that an individual cannot inadvertently create a tax problem. SENATOR OLSON asked if she was saying that if he received assets from his parents' trust, that would not create adverse IRS consequences if he kept the assets or transferred them to his children. MS. CHAPMAN said it would depend on how the trust was written, but the proposed laws would allow parents to draft a trust to pass assets from generation to generation without any additional estate or gift tax. SENATOR OLSON asked how that is different from current law. MS. CHAPMAN said Sections 9-11 provide an example of the safeguards the bill provides. These sections relate to modifications of trusts, referred to as decanting. This is a provision that allows a trustee to extend the term of a trust when it is deemed necessary. For example, a parent has established a trust for a child that terminates at age 25, but the child has developed significant substance abuse problems and the parent does not want to give the child the money. The decanting provision allows the trust to continue. The concern with the current statute is that the IRS potentially could argue that it gives the trustee too much power. The bill addresses this by focusing on how much power a trustee can be given to ensure that it does not conflict with the IRS code and accidentally invoke an estate or gift tax. 1:49:10 PM SENATOR OLSON asked if a beneficiary could use trust assets as collateral for a loan. MS. CHAPMAN said it would depend on how the trust is written. If it is a spendthrift trust, which is designed to protect the assets from the beneficiary's creditors, the individual would not be able to pledge the assets of the trust for a personal loan. However, the trust could borrow the money from a commercial institution in which case the trust assets would be pledged as collateral. SENATOR OLSON asked what the bill does to protect the beneficiary when the writer of the trust dies and has creditor claims. MS. CHAPMAN explained that if the trust was established as irrevocable (meaning that the writer could not take the money back) the creditors of the decedent would not be able to attach the funds in the trust. The funds would pass on to the beneficiary free of those claims, because it is considered a completed gift at the time the trust is established. SENATOR OLSON asked what protection a creditor has in that circumstance. MS. CHAPMAN explained that if it is a spendthrift trust and there are outstanding creditors, there is a statute of limitations for when claims can be presented. However, if the assets in the trust were pledged as security, the trust cannot defeat a perfected security interest. DAVID SHAFTEL, Attorney, Anchorage, AK, said he practices in the area of estate planning and trust and estate administration. He related that he is a member of a group of attorneys and trust officers that, since 1997, have suggested improvements to Alaska's trust and estate laws. Responding to Senator Ellis, he said there are 17 subjects in this bill that this group has worked on for about three years. As Mr. Hutchinson indicated, most of the provisions were reviewed by both the Senate and House last year, but didn't make it through the process due to time considerations. He offered his belief that 80 percent of the provisions are designed to assist Alaskan residents with Alaska trust and estate law, not to attract business from other jurisdictions. The provisions are intended to upgrade and improve Alaska statutes for administration of trusts and estates and for estate planning purposes. For example, in 2003, the legislature adopted the Alaska Uniform Principal and Income Act and the IRS has since issued final regulations. Sections 16-32 of the original bill propose amendments based on those regulations that will allow Alaska to take advantage of the flexibility that Congress has approved for trusts. MR. SHAFTEL explained that Sections 1-3 conform Alaska law to the majority rule among the states to exempt the beneficiary's interest in a retirement plan or IRA under state law. In Section 43, there is a new provision that allows for the transfer of an IRA interest. This will give Alaska residents (and residents of other states who want to take advantage of it) the ability to transfer an IRA interest to a trust. Section 37 contains provisions to update the insurable interest provision in Alaska law. He explained that it is common for a person to buy an insurance policy and place it in a trust so that the proceeds won't be taxable under the estate tax when the insured dies. This clarifies that it is still an insurable interest and valid under state law. He noted that the current law does not address that. MR. SHAFTEL said his practice is similar to Ms. Chapman's in the respect that about 95 percent of his clients are Alaska residents. The legislature's continuing efforts to update these laws is for the benefit of all Alaskans, he said. 1:58:19 PM DOUGLAS BLATTMACHR, President and CEO, Alaska Trust Company (ATC), Anchorage, AK, said ATC strongly supports SB 65, which updates Alaska trust laws. In the past these laws have helped create jobs and commerce and have helped bring revenue to the state. SENATOR OLSON asked if the bill would affect the cost of establishing a trust. MR. BLATTMACHR said ATC bases its fees on the facts and circumstances of a particular individual or family situation. The bill does not address those fees; it simply modernizes the law. 2:00:02 PM BRET S. KOLB, Director, Division of Insurance, Department of Commerce, Community and Economic Development (DCCED), Anchorage, AK, offered to answer questions on SB 65. SENATOR OLSON asked why this legislation hasn't made it through the process in previous years if it's such a good law. MR. KOLB offered his understanding that it was a matter of timing, not the merits of the bill. 2:01:08 PM CHAIR DUNLEAVY found no further questions or public testimony. He announced he would hold SB 65 in committee and continue to take public testimony at a subsequent meeting.
Document Name | Date/Time | Subjects |
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SB52_Amendments_3-18-13.pdf |
SL&C 3/21/2013 1:30:00 PM |
SB 52 |
CS_SB52_VersionN.pdf |
SL&C 3/21/2013 1:30:00 PM |
SB 52 |
SB52_CS_Sectional_Analysis_VersionN.pdf |
SL&C 3/21/2013 1:30:00 PM |
SB 52 |
SB52_Mar 19 Memo re Amendments.pdf |
SL&C 3/21/2013 1:30:00 PM |
SB 52 |
SB52_markup Version N.pdf |
SL&C 3/21/2013 1:30:00 PM |
SB 52 |
SB65_Bill_VersionU.pdf |
SL&C 3/21/2013 1:30:00 PM |
SB 65 |
SB 65 Sectional Analysis AMENDED.docx |
SL&C 3/21/2013 1:30:00 PM |
SB 65 |
SB65_Sponsor_Statement.pdf |
SL&C 3/21/2013 1:30:00 PM |
SB 65 |
SB65_Key_Terms_for_Trust_Bill.pdf |
SL&C 3/21/2013 1:30:00 PM |
SB 65 |
SB65_FiscalNore_DOL_CIV.pdf |
SL&C 3/21/2013 1:30:00 PM |
SB 65 |
SB65_FiscalNote-DCCED-DOI-03-15-13.pdf |
SL&C 3/21/2013 1:30:00 PM |
SB 65 |
SB65_FiscalNote-DOA-DRB-3-15-13.pdf |
SL&C 3/21/2013 1:30:00 PM |
SB 65 |
SB65_FiscalNote-DOR-TRS-03-16-13.pdf |
SL&C 3/21/2013 1:30:00 PM |
SB 65 |
SB65_FiscalNote-LAW-CIV-03-19-13.pdf |
SL&C 3/21/2013 1:30:00 PM |
SB 65 |
SB65_ABA Letter of Support for.pdf |
SL&C 3/21/2013 1:30:00 PM |
SB 65 |
SB 65 Support Letter.pdf |
SL&C 3/21/2013 1:30:00 PM |
SB 65 |
HB026 text.pdf |
SL&C 3/21/2013 1:30:00 PM |
HB 26 |
HB 26 Sponsor Statement.pdf |
SL&C 3/21/2013 1:30:00 PM |
HB 26 |
HB 26 Full Audit CPA Board.pdf |
SL&C 3/21/2013 1:30:00 PM |
HB 26 |
HB 26 Summery Audit of CPA Board.pdf |
SL&C 3/21/2013 1:30:00 PM |
HB 26 |
HB026-DCCED Fiscal note.pdf |
SL&C 3/21/2013 1:30:00 PM |
HB 26 |
SB65_Support_AK Trust Laws from Joe Beedle.PDF |
SL&C 3/21/2013 1:30:00 PM |
SB 65 |
SB65_support_AKUSA.pdf |
SL&C 3/21/2013 1:30:00 PM |
SB 65 |
SB052_Fiscal Note_DCCED-DOI-03-19-13.pdf |
SL&C 3/21/2013 1:30:00 PM |
SB 52 |