Legislature(2009 - 2010)BUTROVICH 205

03/31/2009 01:00 PM Senate LABOR & COMMERCE

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01:08:00 PM Start
01:10:29 PM Governor's Appointments
01:13:09 PM SB170
01:43:05 PM SB60
02:27:07 PM SB149
02:58:44 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
-- Time & Location Change --
+ Confirmation of Governor's Appointments TELECONFERENCED
Heard & Held
Heard & Held
Moved SB 170 Out of Committee
+ Bills Previously Heard/Scheduled 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                                                              
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                                                              
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                                                              
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                                                              
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                                                              
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