HB 146 - TRANSFER RESTRICTIONS ON TRUSTS  2:22:36 PM CHAIR RAMRAS announced that the final order of business would be HOUSE BILL NO. 146, "An Act relating to transfer restrictions on trust interests." REPRESENTATIVE GRUENBERG indicated that he's heard concerns regarding Section 3 of HB 146. 2:24:30 PM JANE W. PIERSON, Staff, Representative Jay Ramras, Alaska State Legislature, on behalf of the sponsor, Representative Ramras, explained that HB 146 would - by amending AS 34.40.110(b)(1) - clarify that a creditor must establish by clear and convincing evidence that a transfer of property in trust was made with the intent to defraud him/her; would - by adding a new subparagraph (E) to AS 34.40.110(b)(3) - clarify that a spendthrift provision would apply to a trust if distributions are made under the exercise of discretion by a trustee who is not the settlor, regardless of whether the exercise of discretion is governed by a standard; would - by adding a new subparagraph (F) to AS 34.40.110(b)(3) - provide that a spendthrift provision in a trust applies even though the trustee may distribute income or principal to the settlor or to pay income taxes; and would - by amending AS 34.40.110(l) - clarify that a beneficiary's interest in a trust, regardless of whether it's vested, is not considered a factor or economic circumstance in the division of property subject to divorce. Additionally, HB 146 makes a conforming change to AS 34.40.110(b)(2) to reflect the addition of new subparagraphs (E) and (F) to AS 34.40.110(b)(3); and amends AS 34.40.110(h) such that a transfer restriction is enforceable even if the settlor has the authority to appoint or remove and replace a trustee, a trust protector, or an advisor. REPRESENTATIVE GRUENBERG characterized the proposed change to AS 34.40.110(l) - via Section 3 of HB 146 - as a complete change rather than just a clarification, remarked that he and the attorneys who practice divorce law in Alaska have concern with Section 3, and indicated a belief that it would overrule some supreme court cases. MS. PIERSON surmised that others could better address that last point. 2:29:11 PM DANA L. OLSON indicated a belief that HB 146 as currently written would conflict with federal rules, and would create problems for her. [Chair Ramras turned the gavel over to Vice Chair Dahlstrom.] MS. OLSON, in response to questions, recounted further details about her specific situation. [Vice Chair Dahlstrom returned the gavel to Chair Ramras.] MS. OLSON then indicated a belief that Representative Gruenberg has a conflict of interest, and that unless the legislature takes a deposition, HB 146 wouldn't apply to her. REPRESENTATIVE GRUENBERG offered his understanding that HB 146 would not affect Ms. Olson's situation because the bill pertains to private trusts. 2:37:10 PM DOUGLAS J. BLATTMACHR, President and CEO, Alaska Trust Company, said the Alaska Trust Company supports HB 146, believing it will keep Alaska in the forefront of states providing for trusts. He indicated that both his company and the State have benefited from nonresidents setting up trusts in Alaska. REPRESENTATIVE GRUENBERG asked whether Section 3 would have the effect of overruling some Alaska Supreme Court decisions. MR. BLATTMACHR surmised that others could better address that point. 2:39:31 PM DAVID G. SHAFTEL, Attorney at Law, after noting that he's a member of an informal group that's recommended changes to Alaska's trust laws to the legislature, and that he was involved in drafting HB 146, indicated that Section 3 is meant to address a potential problem with existing AS 34.40.110(l), which, he posited, was intended to ensure that trust assets of a divorcing beneficiary wouldn't be given to his/her soon-to-be-ex spouse, and that such trust assets can't even be considered as assets for purposes of property division in a divorce. [Chair Ramras turned the gavel over to Vice Chair Dahlstrom.] MR. SHAFTEL explained that "a practitioner" in Colorado has recommended that AS 34.40.110(l) be bolstered, and so that's the intent of adding the language, "a factor or economic circumstance in the division of" to AS 34.40.110(l). He then referred to the Alaska Supreme Court's 2006 decision in Krize v. Krize, 145 P.3d 481, and offered a hypothetical example wherein a beneficiary's trust assets do get considered during a divorce. REPRESENTATIVE GRUENBERG indicated a belief that adoption of Section 3 would have the effect of overturning more than one court case, that existing law is sufficient to address Mr. Shaftel's concerns, and that the circumstances in Mr. Shaftel's hypothetical example are unlikely to occur. 2:52:37 PM MICHAEL A. GERSHEL, Attorney at Law, expressed concern that Section 3's proposed change would have a detrimental effect, and concurred that existing law is sufficient. 2:56:55 PM JACOB A. SONNEBORN, Attorney at Law, indicated concurrence with Mr. Gershel and Representative Gruenberg that existing law is sufficient. [Vice Chair Dahlstrom returned the gavel to Chair Ramras.] CHAIR RAMRAS questioned what would occur if Section 3 were deleted. MR. SHAFTEL indicated that existing AS 34.40.110(l) would simply remain un-clarified. CHAIR RAMRAS surmised that without Section 3, HB 146 would have the support of the committee. CHAIR RAMRAS closed public testimony on HB 146. 3:00:54 PM REPRESENTATIVE DAHLSTROM made a motion to adopt Amendment 1, to delete Section 3 of HB 146. There being no objection, Amendment 1 was adopted. 3:01:34 PM REPRESENTATIVE DAHLSTROM moved to report HB 146, as amended, out of committee with individual recommendations and the accompanying fiscal notes. There being no objection, CSHB 146(JUD) was reported from the House Judiciary Standing Committee.