SENATE BILL NO. 63 "An Act relating to transfer restrictions on trust interests." 9:19:48 AM ESTHER CHA, STAFF, SENATOR MCGUIRE, commented on the state trust laws. She explained that the trust business is a multibillion dollar sector that often crosses state lines to take advantage of more attractive state trust laws. In 1997, Alaska became the first state to establish a law that allows a person to form an irrevocable trust via discretionary beneficiary of the trust. She quoted the document "What is a Trust" (copy on file). She continued that SB 63 is part of an ongoing effort to modernize trust laws. The modernization will create jobs and revenue to diversify our economy making Alaska attractive to trust business and investment. 9:24:03 AM Senator Huggins asked if a loophole would open for creditors if the creditor must establish by clear and convincing evidence no intent to defraud. Ms. Cha believed that the practice is standard among trustees. DAVE SHAFTEL, ATTORNEY, CONSULTANT (via teleconference) stated that there is an exception for a fraudulent transfer. If an asset is transferred with the intent to defraud creditors, then the court can set aside that transfer. The trust provision addressed contains the specific exception. The issue with our statute is that it does not include the need for a creditor to establish or satisfy in order to prove that the transfer was made with the intent to defraud. The clear and convincing standard is universally used for fraudulent transfer. This provision inserts into the statute what was previously an omission clarifying the standard that the creditor must show by clear and convincing evidence that the transfer was performed fraudulently. 9:27:27 AM Senator Thomas asked about the standards. He asked to know the next most rigid or difficult to attain burden of proof required of the person claiming they were intentionally defrauded. Mr. Shaftel responded that the standard used in litigation is a preponderance of the evidence or 51 percent. The standard is easier than clear and convincing evidence. The law requires a more stringent standard with clear and convincing evidence regarding fraudulence. Senator Olson asked if the bill interferes with the sale of assets within the trust. Mr. Shaftel responded no. He stated that the trustee is the owner of the assets with powers of sale and management and manages the assets for the beneficiaries of the trust. The laws in place do not inhibit the powers unless the person who set up the trust wants to ensure that a particular asset remain in the trust permanently. 9:30:28 AM Mr. Shaftel provided testimony. He commented that the bill allows the state to bring trust laws up to speed. He noted that the mentioned provisions have been enacted in other states with similar types of trusts. He opined that the proposed legislation improves the law in the area of trusts. He stated that most of his clients are Alaska residents who use this type of trust frequently. He urged the approval of the bill. Senator Thomas asked about the trust and the diversification of Alaska's economy. He wondered about a potential study illustrating the impact on the state's economy. Mr. Shaftel responded that recent testimony from trust and bank officers stated a substantial increase in business with large amounts of funds travelling through financial institutions. He expressed awareness of million dollar transactions in Alaska. He stated that the legislation has helped the economy with other states choosing Alaska because of our reputation for trust laws 9:33:56 AM DOUGLAS BLATTMACHR, PRESIDENT OF ALASKA TRUST COMPANY (via teleconference), testified in support of the legislation. He explained that the recently passed trust legislation has proven beneficial to the state while creating a number of jobs. The state received an additional $3 million in life insurance premium tax because of outside trusts. Co-Chair Hoffman commented that the legislation has one zero fiscal note from the Department of Law. SB 63 was HEARD and HELD in Committee for further consideration.