SB 353 - PROPERTY EXEMPTIONS CHAIRMAN LEMAN brought SB 353, sponsored by the Senate Judiciary Committee, before the committee as the final order of business. MEL KROGSENG, staff to Senator Robin Taylor, said SB 353 seeks to update the exemptions which are presently allowed Alaska residents for a family home and insurance. The legislation, although not granting an unlimited exemption for the family home, would at least put the family home on par with the new federal income tax capital gain exclusion. Given the growing popularity of trusts as estate planning tools, a section is added to give individuals who have their assets placed in the name of a trust, the same protection that would exist had the assets been in the individuals' own names. This would apply only to those trusts where the trust income is still taxable to the grantor. In addition, the bill adds three new exemptions: (1) for the reserves set aside for condominium associations; (2) a limited exemption for annuities; and (3) for the new Roth IRA. The exemption provided for condominium reserves is meant to protect the many individuals who reside in condominiums in Alaska. The bill assures them that the money which they have paid in the form of monthly dues will continue to be used for the purposes for which they were intended, i.e., ongoing maintenance and repairs. MS. KROGSENG said the bill would protect insurance policies and their related cousin, annuities (up to $100,000) from unforeseen financial disasters. She noted that the states of Alabama, New York, Florida, California, Missouri, New Mexico, North Carolina, Oregon, and Texas have seen fit to give its citizens an unlimited exemption for insurance policies. Number 385 CHAIRMAN LEMAN inquired as to the current value of the homestead exemption. STEVE GREER, an Anchorage attorney who has worked on the legislation, said with respect to the indexing of the homestead exemption, it is now $62,100. CHAIRMAN LEMAN said he could understand the reason for increasing a homestead exemption, but he questioned why the big jump to $250,000 for an individual and $500,000 for a couple. MR. GREER pointed out that a lot of states allow unlimited homestead exemptions. This legislation was meant to try put to Alaska, not at the top of ladder, but at least higher than where it is right now, and it was felt that the previous amount in the law was exceptionally low. He noted that with respect to the homestead exemption, banks are still going to request in their deed of trust language that the individual who gets a loan waive that right to that homestead exemption, so the banks' interests are still going to be protected. It was felt that this legislation would be of great benefit to the majority of Alaskans. CHAIRMAN LEMAN asked if other people besides the banks can ask that the homestead exemption be waived when they set up loan agreements. MR. GREER acknowledged that was correct. He added that what this bill is really meant to protect against is the unforeseen financial disaster that might occur such as a huge medical bill, a lawsuit, etc. MR. GREER spoke to the importance of the exemption for the reserves set aside for condominium associations, as well as Section 11, relating to the treatment of certain trusts, which is meant to assure the fact that if an individual retitles his asset in the name of his revokable trust, that the same type of exemption protection is going to be given to that individual as if he had just kept the asset in his own individual name. CHAIRMAN LEMAN said recent studies have indicated that the CPI overstates inflation, and he asked Mr. Greer if in using that it is creating limits that are higher than what we really want to create. MR. GREER replied that the present $54,000 puts Alaska in the lower half of the states that protect its citizens against claims, and Alaska is one of the more expensive states in the union, where, if anything, the protection should be higher and not lower. CHAIRMAN LEMAN commented there are two sides to that because it may protect the citizens against claims, but raising those limits would not protect the person making the claim. Number 234 LINDA HULBERT, a licensed insurance agent living in Fairbanks, voiced her strong support for the provision in the bill that would protect insurance policies from unforeseen financial disasters. Many times life insurance is the only asset there to protect the spouses and children. She said she represents a lot of life insurers in the state and, with those agents, works with hundreds and hundreds of people every year who in good faith get a permanent policy to protect their families. Number 192 CHAIRMAN LEMAN stated it was his intent to hold the legislation over, but he wanted to get a sense of the committee regarding the amounts proposed in the legislation. SENATOR HOFFMAN said he would like to see the amounts for the homestead exemption and the insurance policy protection as close as possible so that it is not protecting one group of people at a higher level, because many families might only have life insurance as their asset. There being no further testimony on SB 353, CHAIRMAN LEMAN said the legislation would be worked on for the next couple of days to see if a consensus could be reached on the limits in the bill and to craft something that everyone could support.