Legislature(2009 - 2010)BELTZ 211
04/16/2009 03:45 PM LABOR & COMMERCE
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SB 60-UNIFORM PROBATE CODE; TRUSTS, WILLS 3:50:30 PM CHAIR PASKVAN announced SB 60 to be up for consideration. [CSSB 60, labeled 26-LS0320\E, had been adopted on 3/31/09.] TREVOR FULTON, staff to Senator McGuire, sponsor of SB 60, said he was available to answer questions. DAVID SHAFTEL, attorney in private practice, said his office works with estate planning and estate and trust administration. For 12 years he has been a member of an informal group of attorneys and trust officers who have worked with the Alaska Legislature on bills in this area. He summarized that SB 60 has a provision to allow the designation of a representative for incapacitated people, it updates and correlates a provision relating to the augmented estate so it is consistent with other provisions relating to self-settled discretionary spend-thrift trusts. 3:53:00 PM SENATOR DAVIS joined the committee. MR. SHAFTEL continued explaining that SB 60 enacts a new provision dealing with the pre-mortem process of establishing capacity of a person who has drafted a trust and where there are issues concerning whether that person had capacity or whether there was duress or undue influence, fraud or similar claims. That person under this bill can file an action in court and have a proceeding to determine that the capacity and the lack of those improper influences so that the will or trust would be upheld as valid. That person can participate in the process while he or she is alive and has the best evidence available concerning capacity and intent rather than waiting for the person to die to go through the process. 3:55:24 PM The bill also provides a venue provision for probate of the will of a non-resident who may have property in the state or not. It also allows a personal representative or trustee to make a designation about discretionary distributions that are coming from capital gains rather than principal, which allows for income tax planning, and that the legislature knows affects every resident in the state. 3:57:31 PM SENATOR THOMAS said the court can establish validity of the will and make other findings. Can the court find it invalid, as well? MR. SHAFTEL replied yes; they could find a lack of capacity or some other event took place and the instrument should not be given legal effect in that case. CHAIR PASKVAN said his question deals with section 4 and the exclusion from the augmented estate of an irrevocable trust with the settlor designating himself as a discretionary beneficiary. He asked what policy reason there is for excluding that from the augmented estate. MR. SHAFTEL replied that this trust is created before a marriage. For example if someone creates an irrevocable trust for children from a first marriage, it would be treated the same as if the property were transferred before marriage. The augmented estate is property that the spouses have during marriage; and that is what a spouse can collect against after the death of his spouse rather than what he/she was left in the will. For instance, he could choose to take a third of an augmented estate rather than what was left in the will. So, this provision says if you create this trust 30 days before marriage, it will be excluded from the estate. It is an irrevocable trust with an independent trustee and while the trustee could make distributions to the person who created it, it is treated as property that was not acquired during a marriage. Eleven other states have excluded it along with Alaska. This is not a manipulative tool to hide assets from your spouse after you are married. It would have had to be created before marriage. CHAIR PASKVAN asked what prompted the change in policy if a settlor is a beneficiary under the trust they themselves established. He asked if it is includable in the augmented estate currently. 4:02:54 PM MR. SHAFTEL replied that it is included, and he said section 2 (page 2) clarifies if it's done prior to marriage it is consistent with what law is today. CHAIR PASKVAN asked if this change would apply to Alaskans only or could it be used by non-residents to create trusts in Alaska and have that potentially affect an augmented estate analysis in another state. MR. SHAFTEL replied it applies to probate in Alaska; this provision couldn't apply in any other state. CHAIR PASKVAN asked if the exclusion from the augmented estate would apply only to Alaska residents. MR. SHAFTEL replied that would be his understanding. 4:04:58 PM CHAIR PASKVAN asked him to clarify the intent of excluding the surviving spouse and child from the augmented estate. MR. SHAFTEL replied that existing statute requires that in any probate proceeding the surviving spouse and child will receive notice of everything. CHAIR PASKVAN asked if the irrevocable trust with the settlor as a discretionary beneficiary is includable within the probated estate. MR. SHAFTEL replied, "No it would not be, if it was done before marriage." 4:08:47 PM SENATOR THOMAS remarked that the hearing and notice section on page 11, AS 13.12.565, indicates that the spouse, the children, the heirs of the testator and settlor shall be notified. 4:09:58 PM DOUG BLATTMACHR, President and CEO, Alaska Trust Company, supported SB 60. 4:10:57 PM RICH HOMPESCH, Fairbanks attorney, supported SB 60. 4:11:44 PM CHAIR PASKVAN closed the public hearing. SENATOR THOMAS moved to report CS SB 60(L&C) from committee with individual recommendations and attached zero fiscal note. There were no objections and it was so ordered.