Legislature(1999 - 2000)
05/03/1999 02:02 PM JUD
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
SENATE JUDICIARY COMMITTEE May 3, 1999 2:02 p.m. MEMBERS PRESENT Senator Robin Taylor, Chairman Senator Rick Halford, Vice-Chairman Senator Dave Donley Senator Johnny Ellis MEMBERS ABSENT Senator John Torgerson COMMITTEE CALENDAR SENATE JOINT RESOLUTION NO. 25 Relating to voluntary school prayer. -MOVED SJR 25 OUT OF COMMITTEE SENATE BILL NO. 162 "An Act relating to the rule against perpetuities, nonvested property interests, and powers of appointment; and providing for an effective date." -HEARD AND HELD SENATE BILL NO. 163 "An Act relating to a trustee's duties to inform and account to beneficiaries; relating to the revocation, modification, termination, reformation, construction, and trustees of trusts; and relating to transfer restrictions in trusts." -HEARD AND HELD CS FOR HOUSE BILL NO. 83(JUD)(title am) "An Act relating to certain securities occupations and investment pools; relating, with regard to the Alaska Securities Act, to federal covered securities, the registration of securities, the general exemptions for securities and transactions, Internet offers of securities and transactions, file confidentiality, petitions to superior court by the administrator to reduce civil penalties to judgment, time limits for bringing court actions for violations, administrator-established fees and administrator-required reimbursements, consent to service, title, sales, purchases, offers to sell, and offers to purchase; exempting certain violations of the Alaska Securities Act from criminal penalties; amending or repealing certain current definitions in the Alaska Securities Act; providing new Alaska Securities Act definitions for certain securities occupations, for certain federal statutes, and for the terms 'advisory client,' 'advisory fee,' 'advisory services,' 'clients who are natural persons,' 'federal covered security,' 'investment advisory business,' 'investment advisory contract,' 'NASDAQ,' 'notice filing,' 'place of business,' 'principal place of business,' 'securities business,' 'substantial portion of the business,' and 'supervised person'; and providing for an effective date." -HEARD AND HELD PREVIOUS SENATE COMMITTEE ACTION SJR 25 - No previous action to report. SB 162 - No previous action to report. SB 163 - No previous action to report. HB 83 - See Labor and Commerce minutes dated 4/20/99. WITNESS REGISTER Senator Jerry Ward State Capitol Juneau, AK 99801-1182 POSITION STATEMENT: Presented SJR 25 Mr. Jeff White PO Box 9148 Ketchikan, AK 99901 POSITION STATEMENT: Testified in support of SJR 25 Ms. Marsha George PO Box 7175 Ketchikan, AK 99901 POSITION STATEMENT: Testified in support of SJR 25 Ms. Beth Chapman 302 Gold Street Juneau, AK 99801 POSITION STATEMENT: Testified in support of SB 162 and SB 163 Ms. Mary Zemp 302 Gold Street Juneau, AK 99801 POSITION STATEMENT: Testified in support of SB 162 and SB 163 Mr. Dave Shaftel 550 W. 7th Ave. #705 Anchorage, AK 99501 POSITION STATEMENT: Testified in support of SB 162 and SB 163 Mr. Rich Hompesch 119 N. Cushman Suite 400 Fairbanks, AK 99701 POSITION STATEMENT: Testified in support of SB 162 and SB 163 Representative Norman Rokeberg State Capitol Juneau, AK 99801-1182 POSITION STATEMENT: Presented HB 83 Mr. Terry Elder Senior Securities Examiner Division of Banking, Securities and Corporations PO Box 110807 Juneau, AK 99801-0807 POSITION STATEMENT: Testified in support of HB 83 ACTION NARRATIVE TAPE 99-28, SIDE A Number 001 CHAIRMAN ROBIN TAYLOR called the Judiciary Committee meeting to order at 2:02 p.m. Present were Senators Halford, Donley, Ellis, and Chairman Taylor. The first order of business to come before the committee was SJR 25. SJR 25-VOLUNTARY SCHOOL PRAYER SENATOR JERRY WARD, sponsor, explained SJR 25 requests the Alaska congressional delegation to support the passage of HJR 7 and SJR 1, related to school prayer. Those resolutions read: Nothing in this Constitution shall be construed to prohibit individual or group prayer in public schools or other public institutions. No person shall be required by the United States of any other state to participate in prayer. Neither the United States nor any state shall compose the words of any prayer to be said in public schools. SENATOR WARD pointed out prayer in public schools occurred until 1962, at which time an unelected judge decided it was unconstitutional. He believes that decision was in error. SENATOR WARD said he introduced SJR 25 after watching a news story about the shootings at the Littleton, Colorado high school. A teacher, who told the students to pray in a classroom for the other students during the incident, broke the law. He noted that prayer is the most powerful tool he is aware of. He feels that the debate about allowing prayer in public schools needs to occur on the federal level. He asked that the Alaska Legislature go on record in support of allowing prayer in public schools. Number 097 MR. JEFF WHITE, the principal of a private Christian school in Ketchikan, made the following comments via teleconference. He supports SJR 25 and believes that when prayer was no longer permitted in public schools, violence, teen pregnancy, drug and alcohol abuse escalated. The older generation benefitted from a school system that had prayer time. The Bible speaks of a generation that did not know God. We are raising a generation without the knowledge of God. Likewise, he believes reciting the Pledge of Allegiance instills in children a bond with their nation and a sense of patriotism. Teenagers learn to apply what they were taught as children and what we are seeing today is teenagers who have no standards to live by. Number 175 MARSHA GEORGE, affiliated with the Church of God in Ketchikan, stated that prayer, and volunteer and paid chaplains, are available to and the military and jail system, legislatures and Congress, and in some work places. She questioned why chaplains and prayer have been outlawed in public schools. Prayer has been outlawed yet abortion and gambling are legal in many states and many states are seriously considering legalizing euthanasia. She wishes the leadership of this country would do the right thing and legalize prayer in school. Number 234 SENATOR DONLEY stated that SJR 1 specifies that no person be required by the United States or any state to participate in prayer, and it says that neither the United States nor any state should compose the words of any prayer to be said in public schools. He questioned the constitutional interpretation of the words "any state" and whether a school district could required students to participate in prayer and could approve certain prayers. SENATOR WARD replied a school district could not. He noted SJR 1 is intentionally written to prohibit anyone from imposing his/her religious views on another. SENATOR DONLEY questioned how a school will determine what words are used in the prayer. SENATOR WARD answered the prayer would be silent. He explained silent prayer occurred in 1962 when the American Civil Liberties Union fought that activity in court and won. He pointed out the same court prohibited the posting of the Ten Commandments in a school, yet it decided that Larry Flint had the right of free speech. He asserted it is time that legislators have this debate on a national level to see what the country's moral compass is. He repeated nothing in SJR 1 or HJR 7 imposes any words of prayer or any specific religious beliefs. Number 282 SENATOR DONLEY noted he is trying to figure out how the proposed constitutional amendment will relate because while SJR 1 and HJR 7 appear to allow verbal prayers, they specify that neither the federal or state governments can compose the words of the prayer. He questioned who will determine what prayer will be said. CHAIRMAN TAYLOR agreed the issue is somewhat ambiguous but he pointed out that at times, not all legislators are in agreement with the prayer offered on the Senate floor, yet the carrying out of the law will have to be left to the person offering the ministerial service. He noted the chaplains in the Army are not instructed in the type of prayers they should offer so, in that setting, the prayer is often ecumenical. He hoped the people offering the prayer consider the congregation before them. Number 336 SENATOR ELLIS stated the type of lead-prayer, referred to by Chairman Taylor, when sponsored by the public school system, contradicts the sponsor's statement that silent, unlead-prayer would occur. CHAIRMAN TAYLOR said he was referring to the instances in government institutions today in which a person has to verbalize a prayer, and how that person has to make difficult decisions. He doubted that could occur in a school setting. SENATOR WARD pointed out that silent prayer occurred in Alaskan schools for the year preceding the 1962 decision for the reason that classrooms contained a diverse group of people. He noted the same resolution has been introduced every year in Congress since 1962. SENATOR DONLEY said, given our court system, he believes a stringent application of the constitutional amendment would be imposed to ensure that prayers are ecumenical and to protect the religious beliefs of all denominations. SENATOR HALFORD moved SJR 25 from committee with individual recommendations. SENATOR ELLIS objected because he had not had a chance to review the copy of the materials before Congress. The motion to pass SJR 25 from committee carried with Senators Halford, Donley and Taylor voting "yea," and Senator Ellis voting "nay." HB 83-ALASKA SECURITIES ACT REPRESENTATIVE NORM ROKEBERG, sponsor of HB 83, made the following comments. HB 83 amends the Alaska Security Act to mainline with the National Security Marketing Improvement Act. Alaska has until October 1999 to enact HB 83 or it will lose over $4 million in revenue from the registered security industry from program receipts. Forty states have adopted similar legislation. The major banking institutions in the state are in agreement with this legislation. HB 83 preempts from registration a new class of securities, called federal covered securities. Without this legislation, investment advisors and their agents would be totally unregulated. HB 83 has been thoroughly reviewed by three committees already. Number 414 SENATOR DONLEY asked why Alaska will lose $4 million in revenue if HB 83 is not enacted. REPRESENTATIVE ROKEBERG explained the revenue is comprised of registration fees from, primarily, the mutual fund industry. Every mutual fund and registered agent must pay a registration fee. SENATOR DONLEY asked if that money would come to the state to help regulate the industry. REPRESENTATIVE ROKEBERG replied that is correct. Number 427 TERRY ELDER, Director of the Division of Banking, Securities and Corporations, Department of Commerce and Economic Development (DCED), informed committee members that HB 83 will bring Alaska into compliance with the National Securities Market Improvement Act (NSMIA) which passed in October of 1996. That Act created federal covered securities and federal covered advisors. NSMIA preempted state registration of those but provided that the states, in order to be revenue neutral, could continue to collect fees and require notice filings for those securities. The states were given three years to bring their securities acts into compliance with federal law. State laws were to cover securities and advisors and could continue to require the filing of notices and the payment of fees. In Alaska, the fees equal about $4 million. The Investment Company Institute, the major association representing the mutual fund industry, has provided a letter of support for HB 83. The Institute expects the fees collected to be used to regulate the securities industry, however Alaska, like almost every other state, does not spend as much as it collects on regulation. The House passed HB 83 with a unanimous vote as did the Senate Labor and Commerce Committee. The bill has broad bipartisan support and essentially no opposition. Number 452 MR. ELDER said because passage of NMSIA required a substantial re- write of the Alaska Securities Act, other improvements were made to the Alaska Securities Act as well. First, an accredited investor exemption was added to the list of those exempted from registration. The language was drafted by the North American Securities Administrators' Association. Its purpose is to allow Alaskan businesses to use the Small Business Administration's ACENET program which is an electronic matching service. Second, HB 83 exempts transactions conducted solely within a family. Third, HB 83 contains a provision to allow the division to go to court to reduce a fine to a judgment when a final order has been made. That provision will help the division go after out-of-state people who cheat Alaskans. In addition, changes were made to the recision provisions for securities sold without registration. Under current law, one who sells securities in Alaska without registration is liable to the buyer for a period of three years. The buyer could sue for the cost of the securities plus six percent interest per year. The new proposal changes the six percent interest rate to eight percent or the stated rate on the note, whichever is less. The three year time period remains unless the transaction was fraudulent, in which case an additional two years to sue, from the date of which the fraud became known, will be allowed. SENATOR DONLEY asked what the time limit is for an unlicensed sale. MR. ELDER replied if the seller is unregistered but the transaction is not fraudulent, the time limit is three years. Number 472 SENATOR DONLEY asked if an unlicensed person committed fraud, and the seller was aware of the fraud when the transaction occurred, whether the time period would be two or three years. MR. ELDER replied if an element of fraud can be proved, then the longer time period would be appropriate. He clarified that the bill provides for whichever time period is longer. CHAIRMAN TAYLOR noted the time period is a minimum of three years, but if fraud is involved an additional two years would be allowed. SENATOR DONLEY asked what types of investment professionals, not currently licensed, will be required to get licensed if HB 83 passes. MR. ELDER said no one who is not currently licensed will be licensed under this bill. SENATOR DONLEY asked if the revenue will be in the form of federal funds. MR. ELDER stated the revenue will come from filing notice and registration fees that are collected from the industry. SENATOR DONLEY questioned whether that is current practice, however the new federal law removes the state's authority to continue to do so without adopting the Uniform Act. MR. ELDER said that is correct. SENATOR DONLEY asked if the fees will increase. MR. ELDER said the fees are set by state regulation so they can change periodically. CHAIRMAN TAYLOR maintained that by regulation, Alaska could increase the notice and registration fees paid by municipal funds, and yet it would not have the authority under federal law to enforce those regulations. MR. ELDER stated if HB 83 is not enacted, Alaska could adopt a fee structure but it would not have the authority to take action if the fee was not paid. CHAIRMAN TAYLOR pointed out the real policing mechanism is found with the citizen's ability to file a civil action against the seller. He asked if the division has enforcement mechanisms. MR. ELDER replied the division has enforcement mechanisms but federal law preempts registration and allows notice filings, but the fact that the investment advisor or mutual fund filed a notice makes them subject to Alaska's anti-fraud rules. Federal law continues to give the states authority to investigate fraud. CHAIRMAN TAYLOR announced the committee would take up SB 162. SB 162-RULE AGAINST PERPETUITIES BETH CHAPMAN, an attorney with the law firm of Faulkner Banfield, stated she is testifying on behalf of herself and her colleagues, Mary Zemp and Eric Keifner. They have an extensive practice in trust and estate law, and have seen significant movement in that area by the Legislature in the last several years. SB 162 will make a technical correction to the Alaska Trust Act, adopted on April 2, 1977. That Act effectively repealed the rule against perpetuities, a rule rooted in the common law that prohibits trusts from existing for longer than approximately 90 to 110 years. The legislature repealed that rule so that trusts, established pursuant to that act, could be created to allow families to pass assets down through the generations. Unfortunately, the Alaska Trust Act did not deal with perpetual charitable lead trusts which are established to provide income to a charity for a specified term. When the Alaska Trust Act was enacted to repeal the rule against perpetuities, it focused on persons living at the time, so it does not apply to charities. She noted people would like to establish charitable lead trusts in Alaska but are unable to do so. SENATOR HALFORD asked for a description of a charitable lead trust. MS. CHAPMAN explained an individual may establish a trust and choose to pay all of of the trust's income to a charity for the first 20 years. After 20 years, the money can revert to the grantor or possibly to the grantor's heirs. Charitable lead trusts are established pursuant to the Internal Revenue Code and qualify for the charitable deduction. SENATOR DONLEY asked if the full value of the trust can be taken as a tax deduction. MS. CHAPMAN answered no, the actuarial value is taken as a deduction. CHAIRMAN TAYLOR asked if that is because it will be tied up for the 20 year period. MS. CHAPMAN said that is correct, and explained that the income generated by the trust is deducted because it is paid to a charity. MS. CHAPMAN pointed out the Alaska Trust Act was established to generate business and make Alaska a favored location for trusts, so, while many people have expressed interest in establishing charitable lead trusts in Alaska, they cannot because of the technical problem regarding the rule against perpetuities. CHAIRMAN TAYLOR asked Ms. Chapman to testify on SB 163 while she was present. SB 163-TRUSTS AND TRUSTEES MS. BETH CHAPMAN, an attorney with the law firm of Faulkner Banfield, explained that SB 163 is additional trust legislation designed to provide guidance to individuals who are establishing trusts, to attorneys who are drafting trusts, and to the courts who administer trusts if litigation arises. Current statute requires a trustee to inform and to account to beneficiaries of the trust. The term "current beneficiary" is used in statute to refer to who is to be notified when a trust is registered, however, that term is not defined in statute. SB 163 defines a "beneficiary" as "a person who sees a mandatory distribution of income or principal from a trust," which is how practitioners throughout the state have interpreted that term. The court recently used a different interpretation; an interpretation contrary to the grantor's intent when the trust was established. MS. CHAPMAN maintained that a statutory definition is needed to limit the beneficiary to someone who receives a mandatory distribution of income or principal because attorneys know who that individual is and who the obligation runs to. The court has interpreted a beneficiary to be any discretionary beneficiary under a trust. That interpretation will require attorneys to locate beneficiaries who never receive any income or corpus of the trust, including future unborn heirs. It is also unclear whether the guardian of a minor has to be notified. The definition in SB 163 is designed to provide guidance to the practitioners and to the courts. TAPE 99-29, SIDE B MS. CHAPMAN said she has personally been involved in litigation that has focussed on this particular statute, in which the grantor established a trust for the benefit of his surviving spouse. The trust was registered and the two children were listed as contingent beneficiaries to receive the corpus when the surviving spouse passed away. The children were not notified of the existence of the trust, which is consistent with the interpretation used by practitioners throughout the state. Years later, a lawsuit ensued, and the court decided the trustee had breached her obligation by not notifying the discretionary beneficiary. When the discretionary beneficiary was notified, a lengthy lawsuit ensued, and the trustee was stripped of her obligations for doing what every practitioner considered to be the proper interpretation of the statute. However, the court disagreed. SENATOR DONLEY asked whether the children had a survivor or immediate interest in the trust. MS. CHAPMAN answered they had a survivor interest, therefore the trust could have been expended entirely for the benefit of the surviving spouse which is a typical estate planning technique. CHAIRMAN TAYLOR pointed out the children had an expectancy: first they had to out-live the primary beneficiary, and then the trust had to contain enough money to make it worthwhile. MS. CHAPMAN said that is correct. She explained in this instance, one of the children went to court and argued that the money was improperly expended for the benefit of the surviving spouse. That caused family disharmony and expensive and lengthy litigation. She repeated the court needs guidance in the area of notification of beneficiaries. SENATOR DONLEY asked what guidance Ms. Chapman is proposing. MS. CHAPMAN replied she is proposing that the current beneficiary be defined as a person entitled to a mandatory distribution of income or principal from a trust. SENATOR DONLEY said that proposal cuts out the children. MS. CHAPMAN clarified only for the purpose of notification when the trust is established. SENATOR DONLEY asked Ms. Chapman if she believes the children should know. MS. CHAPMAN said she does not. SENATOR DONLEY said he totally disagrees because the children have a survivor's expectation of preservation of the corpus, and they ought to be involved depending on how it is written. MS. CHAPMAN said the problem is that most trusts are written to give the surviving spouse sole discretion. A person with a mere expectancy can cause the grantor's intent to be undermined when the contingent beneficiaries are notified that the trust has been established and a conflict ensues. SENATOR DONLEY maintained SB 163 is designed to make things simple for trust lawyers and to get around the intent of the grantors. He pointed out the only reason a trust like that is created is to benefit the children in the long run while maintaining support of the spouse for his/her lifetime. He stated the corpus should be preserved, otherwise the grantor would not bother to create a trust, he/she would bequest the entire amount to the spouse. MS. CHAPMAN responded some trusts are set up for that purpose, but the majority of trusts are bypass trusts that are not set up for the preservation of the corpus for the children. They are designed primarily and solely for the benefit of the surviving spouse and are used as an estate tax savings device. Number 542 MS. CHAPMAN discussed additional aspects of SB 163, relating to the rules regarding modification and revocation of trusts. At present, Alaska has no statutory provisions regarding modification or termination of trusts. The courts must look to the common law. SB 163 will allow the court to modify or terminate trusts under certain stated rules. Many times, trusts need to be modified because of unexpected events that arise after the trust is established, particularly in cases in which a trust was established for estate tax savings or for the care of minor children. For example, a minor child may become disabled and unable to handle the trust when he/she comes of age, however, under current law, the trust cannot be modified. SB 163 will allow the court to modify trusts if consistent with the grantor's intent. SENATOR DONLEY asked whether Section 2 applies to all kinds of trusts. MS. CHAPMAN answered Section 2 applies to all trusts. SENATOR DONLEY said he cannot support this legislation. Number 524 CHAIRMAN TAYLOR discussed a scenario in which a couple set up a trust naming the surviving spouse as the beneficiary. The couple established the trust to avoid probate, and with the intent that the surviving spouse would use the money to live on, and that any remaining money, if any, would be split among the children after the spouse's death. If each spouse has stepchildren, the family is set up for immediate litigation under current law. The stepchildren's expectancy might lead them to dictate how the surviving spouse spends his/her money. He said he would hate to see a child be able to sue a parent over what should be left in the estate. MS. CHAPMAN said that is what happened in the case she referred to earlier. CHAIRMAN TAYLOR pointed out if a trust was set up assuring the children a percentage of the estate, the children would be a mandated beneficiary and would have to receive notification. If a trust is not set up in that manner, the children are given an expectancy only. MS. CHAPMAN said the beneficiaries who have the expectancy are not prevented from suing. SENATOR DONLEY indicated the beneficiaries should not be prevented from knowing about the trust. The problem is that notification for all trusts will be wiped out based on one case. He noted Section 2 is not targeted toward the problem identified in that case; it will undo notification for people who reasonably should be notified and who should have a reasonable expectation of survival of the corpus. MS. CHAPMAN repeated a current beneficiary who is entitled to a mandatory distribution will receive notice. SENATOR DONLEY said Ms. Chapman is anticipating that the spouses will write the children in as co-beneficiaries, which they do not tend to do even though they do intend that the corpus survive. He repeated he disagrees with this policy. SENATOR DONLEY noted one has to have an estate valued at $650,000 before taxes become a problem and suggested that estates below that value be excluded. CHAIRMAN TAYLOR maintained $650,000 is below the value of the average person's house on the hillside. SENATOR DONLEY contended this bill will make life easy for tax lawyers and that it would be much more fair to include a provision allowing the grantor to specify the potential beneficiaries and to waive the notification requirement within the trust document. He repeated Section 2 goes too far. Number 449 MARY ZEMP, an attorney with Faulkner Banfield, clarified that lack of notification does not mean a beneficiary cannot get information because trusts must be registered and anyone can look at the court record. In the particular litigation referred to by Ms. Chapman, MS. ZEMP explained the father, who set up the trust for his wife, specifically stated it was not his intent to preserve the trust for the benefit of the remainderman. Also, the trust specifically said the trustee did not need to account to anyone other than the surviving spouse. His daughter sued and each client spent at least $200,000 in legal fees. SENATOR DONLEY said we should make that the law rather than cutting everyone out from the notification requirement. MS. ZEMP said the trust may say the opposite. CHAIRMAN TAYLOR asked how one is to know who the potential beneficiaries could be and how they are to be notified. SENATOR DONLEY replied a lot of them will be known up front, but the law can be written so that the trustee must use his/her best effort. CHAIRMAN TAYLOR asked at what point the beneficiaries must be notified. MS. ZEMP replied when the trust is established, Alaska law requires that the trust be registered and that notification of registration be sent to current beneficiaries. Alaska trusts can be established for ten generations. Determining whether one made a reasonable effort will give rise to litigation. SENATOR DONLEY repeated that the law should require that the person setting up the trust specify whether the purpose is to save the corpus for future beneficiaries, such as children. Number 408 DAVE SHAFTEL, a member of an informal group of estate planning and business attorneys in Anchorage, made the following comments. His group has participated in the drafting of SB 162, and is strongly in favor of it, particularly the rule against perpetuities issue. The rule was essentially abolished in previous legislation yet some technical remnants remain, making the elimination of the rule awkward. One example is with a charitable lead trust, a second example is with trusts for children. SB 162 will clarify the abolishment of the rule. The purpose of SB 163 is to provide a statutory provision that allows for the reformation or termination of trusts where their purposes are not being met. Sometimes the intent of the person who created the trust cannot be met due to mistake of facts, mistake of law, or changed circumstances. In such cases, the trust needs to be changed. Many other states have similar legislation. These provisions track the restatement of trust and the Uniform Trust Act. He stated SB 163 will establish good, solid law for the State of Alaska. MR. SHAFTEL suggested, if the committee continues to have concerns about the notification issue, the burden should be placed on the party who drafted the trust to state, with an introductory phrase, that unless the trust instrument states otherwise, the duty to inform and account applies. That would allow the person who sets up the trust, at the time it is drafted, to say he/she does not want to put the burden to inform contingent beneficiaries or remainder persons of the trust's registration. Current statute provides that notification is a mandatory obligation so one cannot draft around it. He noted the mandatory requirement places a tremendous administrative burden on trustees and a way needs to be found to alleviate that burden if the trustor so chooses. Number 345 CHAIRMAN TAYLOR thanked Mr. Shaftel and asked him to contact Senator Donley directly with his suggestions. Number 338 RICH HOMPESCH, a Fairbanks attorney, said he agrees with the comments of previous speakers about SB 162 and SB 163. He directed his comments to Section 2, regarding the duty to account. He has drafted many trusts since the Alaska Trust Act passed two years ago. Most of his clients tell him they do not want the trustee to go to the expense of notifying all of the beneficiaries of the trust. Most clients only want the trustee to notify and account to the individual who is receiving the current income and corpus. When he informs his clients of the statute's mandate regarding notification, it causes a lot of problems. As written, Section 2 contemplates that unless the trust otherwise specifies, the rule requiring that all beneficiaries be notified applies. CHAIRMAN TAYLOR asked Ms. Chapman if any judgment was rendered when the case she referred to was settled. He questioned whether that case will set precedent. MS. CHAPMAN replied it is not precedential. No judgment was rendered in that case; interlocutory orders were issued. CHAIRMAN TAYLOR said the judge stepped out on a very thin reed and does not realize the impact that type of decision may have across the board on all kinds of documents. MS. CHAPMAN said she agrees, and that the judge may have understood the ramifications after having then seen how far that litigation continued on before it finally settled. She stated she does believe Senator Donley's concerns can be addressed with language allowing the grantor to except the trustee from the mandatory requirement of notification. CHAIRMAN TAYLOR said that would be far superior to what Mr. Hompesch said people are now doing, that is drafting trust documents that hold the trustee harmless from lack of enforcement of the law. Number 271 CHAIRMAN TAYLOR asked those interested in seeing this legislation move to talk to Senator Donley about his concerns, and to update Senators Torgerson and Halford as well. He hoped to get a quorum on Wednesday. He thanked all participants for their input and adjourned the meeting at 3:20 p.m.