SB 60 - UNIFORM PROBATE CODE; TRUSTS, WILLS  1:23:40 PM [Contains brief mention that the committee had already heard and passed out HB 144, the companion bill to CSSB 60(L&C).] CHAIR RAMRAS announced that the first order of business would be CS FOR SENATE BILL NO. 60(L&C), "An Act relating to the Uniform Probate Code, including wills, trusts, nonprobate transfers, augmented estates, personal representatives, and trustees; and amending Rules 3 and 8, Alaska Rules of Civil Procedure, Rule 1, Alaska Rules of Probate Procedure, and Rule 37.5, Alaska Rules of Administration." CHAIR RAMRAS noted that the companion bill to CSSB 60(L&C), HB 144, had already passed from committee. 1:24:25 PM ESTHER CHA, Staff, Senator Lesil McGuire, Alaska State Legislature, presented SB 60 on behalf of Senator McGuire, sponsor. She concurred that SB 60 is identical to HB 144. She explained that SB 60 would amend the Uniform Probate Code, with the aim of improving the ease of administration of wills, estates, and trusts for Alaska residents. She relayed that the Uniform Probate Code is a set of laws that govern the affairs of decedents and their estates. She said Alaska is one of 15 states to have adopted the code in its entirety; the remaining 34 states have adopted only parts of the code. MS. CHA said the climate for trusts and estate planning is highly competitive, and the trust business is a multi-billion dollar sector, which often crosses state lines in order to take advantage of more attractive state trust laws. She stated that most of the amendments made through SB 60 either clarify language or eliminate unnecessary verbiage. Further changes would: create a procedure for the establishment of will and trust validity before death; add provisions that would allow a settlor of a trust to designate a representative who could represent or bind an incapacitated person in future proceedings relating to trust administration; clarify property transfers involving a deceased spouse; and address the venue proceeding if the decedent lived outside of Alaska but held significant assets within the state. MS. CHA said SB 60 is part of an ongoing effort to modernize Alaska's trust laws, thereby creating more jobs and revenue, while diversifying the state's economy. She said Alaska has directly received millions of dollars through insurance premium taxes, and many jobs have been created in the trust, banking, insurance, and legal professions as a result of the state's competitive and contemporary trust laws. 1:27:11 PM MS. CHA, in response to Representative Gatto, explained again that the basis of the bill is to establish a pre-mortem validity of a will. Further, the bill addresses those residents of Alaska who have moved out of the state or a non-resident of the state who has established a trust in Alaska; it would provide a venue of proceeding. 1:29:29 PM REPRESENTATIVE GATTO recounted an incident wherein a mother died, and the inheritance was not divided equally between the surviving children. Those who received more argued that the mother's wishes were carried out, while the ones who received less claimed the mother had not known what she was doing. The result was that no one received money, except the lawyers. He said he thinks the case would have been resolved differently had the siblings been able to litigate prior to the mother's death, so that she could have seen their point and responded. He asked if SB 60 would provide for that to happen. MS.CHA said she believes so. 1:30:56 PM RICHARD W. HOMPESCH II, Attorney at Law, Hompesch & Evans PC, relayed that the proposed legislation clarifies who a trustee should notify in situations where the beneficiary is a minor or incapacitated. In Section 1, the bill would provide that the person setting up the trust can designate who should be served or notified with respect to a minor, child, or incapacitated person beneficiary. He explained the reason that is important is that without such a designation, typically the trustee would have to request that the court appoint a guardian ad litem for the minor, child, or incapacitated beneficiary, which would generally cost a lot more money than had the designation been done in the trust instrument. MR. HOMPESCH concurred with everything Ms. Cha said regarding the lifetime probate provision that is in Section 8. He said the disadvantage that the proponent of the challenged will has is that the essential main witness, unfortunately, is always dead. Section 8 would allow the court to ask questions of that main witness - the person who wrote the will or trust - before he or she dies. He offered his understanding that this would be the first time this has ever been done, and he predicted it would minimize litigation. 1:35:08 PM REPRESENTATIVE GATTO related that he and his wife have set up a will through which each child will receive equal assets, but none will receive any assets before the youngest child has graduated from college, if he/she desires to attend. He asked Mr. Hompesch if that is legal. 1:35:47 PM MR. HOMPESCH replied that it is legal to hold assets in a trust until a child reaches a certain age. 1:36:21 PM CHAIR RAMRAS said he's heard concern expressed regarding how such laws are benefiting the state, where employment rates have risen, which banks are becoming the depositories for these funds, when this all began, and what the future potential is. MR. HOMPESCH proffered that the Revised Limited Liability Company and Limited Partnership Act of 1997 made limited liability and partnership laws the most attractive in the U.S. Prior to that Act, no one ever came to Alaska to form a limited liability company or limited partnership, or if they did the business was so inconsequential no one kept track of it. After the bill was passed, in conjunction with other trust legislation, Mr. Hompesch said he heard there were so many attorneys from out of state that wanted to form Alaska limited liability companies that an online filing process was started. The state received a $250 filing fee for each limited liability company. There was substantial work for the Division of Corporations, Business, and Professional Licensing, and there were substantial fees to the state. He said there is a biennial tax of $100 that is paid every two years by each limited liability company. He said that is one example, and he suggested the committee could get more accurate information from the Department of Commerce, Community, & Economic Development (DCCED). MR. HOMPESCH offered another example, which was a bill of several years ago, which changed the excise tax that is charged on life insurance premiums. He explained that the State of Alaska charges an excise tax on every life insurance premium that is paid. However, before the aforementioned bill, the state was charging approximately 2 percent on premiums in excess of $100,000, and there were so few of those the state was never getting any money from those large premiums. The bill reduced the excise tax down to one quarter of a percent of any premium over $100,000. As a result, many individuals in the Lower 48 who would have bought their life insurance elsewhere, started buying premiums from Alaska, and the state started receiving hundreds of thousands of dollars of extra premium tax as a result of that change. Mr. Hompesch said a third example is that he is contacted each week by lawyers in the Lower 48 who have clients interested in creating trusts under Alaska law to be administered by trust companies in Alaska, and that is something that did not happen prior to 1997. 1:41:52 PM JONATHAN G. BLATTMACHR, Attorney at Law, Milbank, Tweed, Hadley & McCloy LLP, concurred with the comments of Mr. Hompesch. He said there has been an addition of 15-20 management level jobs in Alaska as a result of the legislation that began in 1997. He said those are relatively high-paying jobs that have "made Alaska look better." He said this is just another example of where Alaska is at the forefront of one part of the financial services industry. He said Delaware has got the corner on forming corporations, but now Alaska is doing well in relation to limited liability companies. Mr. Blattmachr said with the right backing of the legislature, he thinks this could be an enormous industry for the State of Alaska. He listed states that vie with Alaska, including Delaware, South Dakota, and Utah, and said "our group" gets together each year to try to come up with the most creative ideas to obtain additional business for the state. MR. BLATTMACHR related that his brother is president of the Alaska Trust Company, and he knows that that company has tens of millions of dollars on deposit in various banks, which are available to loan to Alaska businesses to help them grow. He said there are about a dozen other states that are constantly imitating Alaska's law, which is a compliment. He encouraged the committee to support the proposed legislation. 1:45:39 PM CHAIR RAMRAS asked what the trust community's goal is in coming back to the legislature year after year to update Alaska's statutes. MR. BLATTMACHR replied that the other states are trying to make their laws better than Alaska's laws, and every once in awhile another state comes up with an idea that will be more attractive to individuals who may want to create a trust or buy insurance policies in a tax efficient manner. He said, "So, we keep on those, and we come back and ask that we be able to be as good as any other state in some areas. And we also come back to ask that we be better than any other state in other areas." He said the group puts in hundreds of hours each year to figure out how to make Alaska the best state in the country to do trust business. He noted that the aforementioned legislation Alaska passed in 1997 was just adopted about a year ago by Nevada - over a decade later. MR. BLATTMACHR indicated that the trust community, which considers these matters, spends time each year debating, drafting, speaking with legal scholars, and considering the impact of ideas on the state. He said the group thinks SB 60 will significantly reduce the burden on the court, because it will "stamp out any likely will contest that would arise." He indicated that people have a pretty good idea when there will be a contested will, and the proposed legislation would head that off and allow an arrangement to be made and the will admitted to probate. He said he anticipates that the trust business will continue to grow throughout the U.S., and he wants Alaska to be a major part of that business. 1:48:47 PM CHAIR RAMRAS, after ascertaining that no one else wished to testify, closed public testimony on CSSB 60(L&C). 1:48:58 PM REPRESENTATIVE HERRON moved to report CSSB 60(L&C) out of committee with individual recommendations and the accompanying fiscal notes. There being no objection, CSSB 60(L&C) was reported from the House Judiciary Standing Committee.