HB 110-VEHICLES/BOATS: TRANSFER ON DEATH TITLE  2:14:14 PM CHAIR CLAMAN announced that the next order of business would be HOUSE BILL NO. 110, "An Act relating to the transfer of a title to a boat on the death of the owner; relating to the transfer of a title to a vehicle, including certain manufactured homes and trailers, on the death of the owner; allowing a person to act for the surviving spouse of a decedent to enforce liability against real property transferred at death; and providing for an effective date." [Before the committee was CSHB 110(STA) labeled 31-LS0422\U.] 2:15:10 PM MEGAN HOLLAND, Staff, Representative Ivy Spohnholz, Alaska State Legislature, introduced HB 110 on behalf of Representative Spohnholz, the prime sponsor, and began the bill presentation. She identified various people available to the committee for questions. 2:16:14 PM REPRESENTATIVE IVY SPOHNHOLZ, Alaska State Legislature, said HB 110 would build upon the Uniform Real Property Transfer on Death Act (URPTODA) [House Bill 60, which passed in the Twenty-Eighth Alaska State Legislature], which created the Transfer on Death (TOD) deed. She said HB 110, which is similar to House Bill 273 introduced in the Twenty-Ninth Alaska State Legislature and carried by the late Representative Max Gruenberg, would extend the TOD concept to titles for vehicles and boats. She explained that HB 110 would allow an Alaskan to submit a form at the Division of Motor Vehicles (DMV) to designate up to two beneficiaries for his/her vehicle or boat. Upon death of the owner, the beneficiary or beneficiaries would provide proof of death to the DMV, submit a form, and pay associated fees to receive a new title in their name or names. She said HB 110 would assist estate planners and simplify the estate planning process so that families can avoid probate and other difficulties related to passing down assets to beneficiaries. 2:18:16 PM The committee took an at-ease from 2:18 p.m. to 2:35 p.m. 2:35:15 PM REPRESENTATIVE SPOHNHOLZ summarized her introduction from before the at-ease. She explained that she is carrying the legislation at the request of Representative Gruenberg's widow. She said the American Association of Retired Persons (AARP), the Alaska Automobile Dealers Association (AADA), and the Alaska Commission on Aging (ACoA) all support HB 110. She noted that her office has not received any formal opposition to the bill nor was there opposition to House Bill 273. 2:37:16 PM REPRESENTATIVE STUTES observed that HB 110 calls for a two-step process. She explained that, if she is the owner of the vehicle, she would submit a form declaring a beneficiary who would then return to the DMV after her death to submit another form and claim the new title. REPRESENTATIVE SPOHNHOLZ said that is correct. She explained that it would work like any other transfer of asset in which the person bequeathing the asset indicates his/her beneficiary, who then proves the death of the owner to claim the bequeathed asset. CHAIR CLAMAN asked if the process is different from the transfer of a bank account upon death. REPRESENTATIVE SPOHNHOLZ said it would require the presentation of a death certificate as well as proof of identification. She explained that the DMV wants there to be a form to document the process. 2:38:48 PM MS. HOLLAND began her PowerPoint presentation [hard copy included in the committee packet] and addressed slide 2. She spoke to the legislative history of HB 110 and similar bills in other state legislatures. She noted that 18 other states have TOD titles for vehicles and 7 authorize TOD titles for boats. She characterized TOD titles as a national trend. MS. HOLLAND addressed slide 3. She said HB 110 addresses the problem of probate, which can take anywhere from six months to several years and can cost thousands of dollars in legal fees. She noted that Alaska has a few existing remedies for non- probate transfers of property, including joint ownership, which requires a degree of forfeiture of certain ownership rights; an affidavit for collection of personal property, which only applies when the value of all vehicles is $100,000 or less and when the value of all other personal property owned by the decedent is $50,000 or less; and a living trust, which involves naming a trustee to manage one's property after death and is more complicated than a traditional will, meaning it is likely to be more expensive. She said HB 110 seeks to avoid the limitations and expenses associated with those options. 2:41:36 PM MS. HOLLAND addressed slide 4. She restated that HB 110 would create TOD titles to reduce the need for probate, to provide streamlined estate planning services to Alaskans at little cost to the State of Alaska (SOA), and to expedite the transfer of property to beneficiaries. MS. HOLLAND addressed slide 5. She noted that the information displayed about the application process corresponds to the earlier answer to Representative Stutes's question. 2:42:31 PM MS. HOLLAND began a sectional analysis of the bill. She addressed slide 6, which focused on sections 1 and 2 of HB 110. She said section 1 would allow for owners of boats for which the Department of Administration (DOA) issues titles to obtain a TOD title. She noted that certain boats are exempt from the titling requirements in AS 05.25.044, including boats less than 24 feet long, boats federally documented by the United States Coast Guard (USCG), homemade nonmotorized umiaks, and foreign vessels passing through Alaskan waters in less than 90 days. She added that, under AS 05.25.056(f), owners of boats less than 24 feet long are still able to apply for a title through the DMV, so a TOD title would be available to them should HB 110 become law. She explained that section 2 of the bill would add TOD title transfers of boats and vehicles to the existing list of properties that can be transferred outside of probate. MS. HOLLAND addressed slide 7, which focused on section 3. She explained that section 3 would create the mechanism of TOD titles for boats and vehicles titled through the DMV. She pointed to a photo of a motor home and said the DMV issues titles for some manufactured homes that are transportable without a permanent foundation and have plumbing, heating, and air-conditioning. She said much of the language in section 3 was pulled from or is similar to the Uniform Law Commission's language related to URPTODA, which created the TOD deed. She discussed the processes through which TOD titles would be obtained, changed, or revoked through the DMV and noted that the legislation does not allow for the titles to be altered in any other way. She clarified that the TOD title would automatically be revoked if the vehicle or boat is sold. She said section 3 would also subject TOD titles to the decedent's creditors, contracts, and liens, and lays out how liability would be enforced upon TOD titles. She stated that it would work similar to TOD deeds and that "the debt follows the asset," so the debts and contracts associated with a bequeathed boat would be transferred to the new owner. She said section 3 would also establish that the owner retains full ownership rights until death and that beneficiaries have the right to disclaim interest in the boat or vehicle should they wish not to receive it after the owner's death. 2:47:02 PM MS. HOLLAND addressed slide 8, which focused on sections 4 through 6. She said section 4 would clarify that a person acting on behalf of the surviving spouse of the decedent may demand to enforce liability against the decedent's property. She said section 5 would allow customers to authorize the DMV to automatically change their mailing address to match the address used by the United States Postal Service (USPS). She explained that many people who move to a new house change their address through USPS but fail to do so through the DMV, resulting in the DMV receiving a high volume of returned mail. She spoke to the cost of having to send multiple copies of a document to multiple addresses. She said section 5 is "an efficiency" supported by the [DMV]. She noted that section 5 was added to the bill by the House State Affairs Standing Committee. 2:48:21 PM REPRESENTATIVE KOPP identified a 1970s-era vehicle pictured on slide 8. He asked if the vehicle represents how long Representative Gruenberg had been pushing this legislation. After some laughter from the committee, he asked how long Representative Gruenberg had advocated for this legislation. REPRESENTATIVE SPOHNHOLZ provided some historical context including her understanding that Representative Gruenberg was very active with the Uniform Law Commission as relates to contracts. She provided additional information about URPTODA. 2:49:53 PM MS. HOLLAND continued to section 6, which she explained would clearly state that owners of vehicles for which the DMV issues titles may obtain a TOD title. MS. HOLLAND addressed slide 9, which covered sections 7, 8, and 9. She explained that section 7 would give DOA the authority to develop necessary regulations to implement TOD titles. She said section 8 would apply an immediate effective date to section 7, while section 9 would apply an effective date of July 1, 2020, for all sections other than 7 and 8. 2:51:00 PM REPRESENTATIVE EASTMAN asked, assuming HB 110 becomes law, what the differences would be between death transfers for boats versus real estate. REPRESENTATIVE SPOHNHOLZ answered that the passage of URPTODA [House Bill 60] in 2014 created the TOD deed which allows for the transfer of real property using a deed. She said this is a similar mechanism to the TOD titles proposed in HB 110. She said the idea behind HB 110 is to allow people with smaller estates to avoid the time-consuming probate process when transferring assets. She said a TOD deed would be "just about instant." She established a hypothetical scenario about a family fishing business wherein the elder dies and the younger person would like to assume immediate ownership of the boat. She said HB 110 would allow the younger person to efficiently take ownership and immediately begin fishing with full responsibility for the boat. 2:52:47 PM CHAIR CLAMAN opened public testimony on HB 110. He recognized that there was meant to be an invited testifier from AARP who had previously been present but is currently unavailable. He noted that he would allow her the opportunity to testify in the future. After ascertaining that no one else wished to testify, Chair Claman closed public testimony on HB 110. 2:54:11 PM CHAIR CLAMAN noted that a hearing for HB 115 was scheduled for today, but time constraints will prevent the bill from being heard. He announced his intention to hear HB 115 on Monday, May 6. 2:54:32 PM REPRESENTATIVE KOPP said he appreciates that HB 110 addresses what can be a major hassle for people. He recognized that this legislation would benefit Alaska's military service members and their families. He spoke to his experience with the probate process and observed that HB 110 introduces concepts that are much needed in Alaska law. 2:55:27 PM REPRESENTATIVE EASTMAN asked how the bill distinguishes between those acting in good faith and those who are not. REPRESENTATIVE SPOHNHOLZ answered that HB 110 would not affect debt resolution issues. She noted that any responsibility related to money owned on a vehicle would be transferred to the beneficiary, so financial responsibilities could not be circumvented through a TOD title. She added that proof of death is required for an asset to transfer, so "fraud would still be fraud." REPRESENTATIVE EASTMAN asked a question based on a hypothetical scenario in which a relative with heavy debts dies and bequeaths his truck to a survivor via a TOD title. REPRESENTATIVE SPOHNHOLZ answered that the purpose of HB 110 is to create an opening for people who do not need to go through the probate process. She said there would still be responsibilities for liabilities if the decedent's estate has liabilities. She suggested that the specifics of Representative Eastman's scenario would be better addressed by a representative from the Department of Law or the Alaska Bar Association's (ABA) Estate Planning & Probate Law section. 2:58:26 PM REPRESENTATIVE LEDOUX remarked that she would like to hear testimony from ABA. She said it is her understanding that if an item of property transfers automatically and does not have a lien on it, then it is not part of the estate. She said it would not matter if the estate owes $500,000 and a $500,000 boat without liens is automatically bequeathed to a beneficiary, as the beneficiary would not be liable for the debts of the estate. REPRESENTATIVE SPOHNHOLZ said that is also her understanding. She noted that if there is a debt associated with the boat, then the beneficiary would be responsible for that. 2:59:47 PM REPRESENTATIVE LEDOUX asked if there is any cap on the value of what can be automatically transferred. She remarked that the issue is a major policy question of whether an estate and its beneficiaries should be able to avoid [liability]. She established a scenario in which a person operates a fishing enterprise and owns the fishing boat "free and clear," but has many other debts. Upon death, the spouse inherits the boat and does not have to pay those debts. CHAIR CLAMAN said he believes this bill only applies to boats registered with SOA and specifically exempts vessels registered with USCG. He noted that the typical fishing boat would be registered with USCG and that there are not likely any vessels registered with SOA that are as valuable as the one in Representative LeDoux's scenario. REPRESENTATIVE LEDOUX said the boat in her hypothetical was just one example. She said there could be items of considerable value that get automatically transferred, leaving the creditors of the estate with nothing to pay the debts owed to them. MS. HOLLAND said there is no cap in HB 110 for value of vehicles or boats that can be transferred upon death. She stated that creditors can use a boat or vehicle as collateral to ensure debts are payable. She established a scenario in which an expensive car is automatically transferred to a beneficiary and is thus removed from the probate process. In the scenario, she continued, the individual who has died had considerable debts and the value of the decedent's estate is not sufficient to satisfy those allowed claims. She said the creditors would be able to reclaim the value of the debt through the vehicle. REPRESENTATIVE LEDOUX said she does not believe that is correct. CHAIR CLAMAN concurred with Representative LeDoux. 3:03:35 PM REPRESENTATIVE EASTMAN said there could be scenarios in which vehicles of very high value are transferred. He asked whether HB 110 would clash with federal law as pertains to money/asset transfers. He said he does not want to create a scenario in which an Alaskan who acts in compliance with Alaska law is surprised to find the Internal Revenue Service (IRS) seeking payment. REPRESENTATIVE SPOHNHOLZ suggested that the question would be better answered by a representative from the National Association of Estate Planners & Councils (NAEPC) or the Alaska Bar Association's (ABA) Estate Planning & Probate Law section. She said there are valid "policy call" discussions to be had. She repeated that the purpose of the bill is not to allow people to avoid responsibility for debts owed, but to find a streamlined way for people with modest assets to avoid the probate process. She addressed the earlier discussion about how fishing vessels tend to be licensed through USCG and said HB 110 deals more with personal use boats. She expressed that she is not clear whether a high-end yacht would or would not be registered with USCG. She suggested bringing in an expert to answer that question. She opined that it would be perfectly reasonable for the committee to decide to place a cap on the value of an asset that is eligible for a TOD title. She said she wants to see a practical way of addressing high-value assets that still allows people who own trailers, small boats, and vehicles to transfer their assets to beneficiaries without the use of an attorney. 3:06:47 PM CHAIR CLAMAN observed that part of the goal of estate planning is to "plan ahead" and noted that estate planning attorneys often advise people to transfer moderate and large assets during their lifetime. He spoke about the process of securing loans. He announced that the committee would hold HB 110 for further review.