HB 308 UNIFORM PROBATE CODE REVISIONS  REPRESENTATIVE SEAN PARNELL, sponsor of HB 308, reviewed the measure as follows. The National Conference of Commissioners on Uniform State Law has prepared a revision of the Uniform Probate Code which was enacted 24 years ago. HB 308 contains those revisions, which are designed to update and clarify the UPC. HB 308 has been reviewed and supported by the Estate Planning Section of the Alaska Bar Association. Number 207 BOB MANLEY explained HB 308 contains a number of technical fixes and responds to problems that have developed. It expands the Uniform Simultaneous Death Act to a 120 hour survival requirement to joint bank accounts and joint property to better carry out people's expectations if they have not properly planned their estate. It also expands the automatic revocation of disposition of property by divorce to life insurance policies. Problems have occurred in cases where a person divorced ten years ago started a new family but forgot to change the beneficiary designation on the life insurance policy. In such a case, the ex-spouse would obtain all of the life insurance to the detriment of the new family. HB 308 changes the intestacy law to better reflect social patterns over the past twenty years, to deal with blended families. HB 308 also expands the ability to disclaim property to nonprobate property. Frivolous disclaimers are used to fix faulty estate planning after a person has passed away. SENATOR GREEN asked if it would supersede the naming of the beneficiary if you have a succeeding family. MR. MANLEY responded HB 308 would provide for an automatic revocation of an ex-spouse as a beneficiary if a person is divorced. The divorced parties can reinstate, after the divorce, the ex-spouse as a beneficiary if so inclined, however if that is not done, the revocation would occur. SENATOR GREEN remarked the person who bought the policy and designated beneficiaries would not have to take responsibility for their own business. MR. MANLEY stated that in the divorce context, people occasionally forget to redesignate beneficiaries. He has seen cases where an ex-spouse may receive the proceeds from a policy, while the new spouse and children receive nothing at all. CHAIRMAN TAYLOR stated the no-fault divorce policy removes the legal profession from many divorce cases, and often results in oversights. JOHN GEORGE, representing the American Council of Life Insurance, testified in opposition to the inclusion of life insurance in the Probate Code. Insurance proceeds might be designated to take care of children from a prior marriage, or a prior spouse, as part of a divorce settlement. CHAIRMAN TAYLOR commented if a divorced person wanted to retain the ex-spouse as a beneficiary, he/she would only have to reinstate that person on the policy, which is no more difficult than changing the name of a beneficiary. He asked why the insurance industry would care who the beneficiary is. MR. GEORGE replied the insurance industry believes once a policy holder dies, if the named beneficiaries do not receive the proceeds, the insurance company will have to become involved. If the provision applies to policies sold after the date of passage, agents can inform clients when they purchase policies. Number 320 SENATOR GREEN stated she believes it is bad policy for the legislature to step in and allow a party to negate a contract. She repeated it is the policy holder's responsibility to indicate who the beneficiary of the policy will be. CHAIRMAN TAYLOR explained that one of the primary reasons that wills were included in the Uniform Probate Code was because people frequently forget to change their wills. If the previous spouse is designated as the beneficiary in a will, he/she receives 50 percent, while the current spouse receives 50 percent under the Intestate Code. REPRESENTATIVE PARNELL clarified Mr. George was referring to the spousal elective share of 33 percent. Under current law, if a person tries to disinherit a current spouse and leaves that spouse with no assets, but has left a life insurance policy to another person, the spousal elective share provides the spouse with 33 percent of anything in the augmented estate. Life insurance policies are not considered part of the augmented estate. HB 308 would include life insurance policies in the augmented estate but the spouse would have to make the claim against the beneficiary, not the insurance company, for 33 percent. This bill would enforce a policy against leaving a spouse with nothing. Number 373 SENATOR GREEN asked if an ex-spouse could claim against the current spouse for 33 percent. REPRESENTATIVE PARNELL answered no. CHAIRMAN TAYLOR noted this would impact people who do not get remarried because it is triggered on the divorce. REPRESENTATIVE PARNELL commented the spousal elective share would not be triggered if the policy holder was not married when he/she died. CHAIRMAN TAYLOR asked if the beneficiary provision of the insurance policy would revoke upon the action of the divorce, if the prime beneficiary is one of the spouses being divorced. MR. MANLEY replied that is correct; the revocation would be automatic and could be reinstated only by completing new beneficiary forms. The insurance industry's concern is bureaucratic; it simply wants to pay the designated beneficiary. Life insurance would be included in the augmented estate under HB 308 because the Uniform Probate Code set up the augmented estate to prevent disinheriting thousands but left a large loopholes. ART PETERSON, Uniform Law Commissioner for the State of Alaska, agreed with Mr. Manley and Representative Parnell. He explained the bill does not include life insurance in probate; it includes life insurance in the augmented estate which has a very limited role in probate matters. Its use occurs when a spouse is disinherited. All states, except Georgia, have some sort of spousal elective share provision. That policy kicks in when the disinherited spouse elects to exercise his or her right. HB 308 would no longer exempt life insurance from the augmented estate in such an occurrence. Number 455 SENATOR GREEN asked who would be responsible in a case where a mistake was made and the settlement was contrary to the originally named beneficiary, and that beneficiary made a claim for that settlement. CHAIRMAN TAYLOR questioned how the following scenario would be handled. There is an original contract of insurance which insures husband A with the beneficiary as wife B. HB 308 passes. At a later date, husband A and wife B divorce. The divorce action pursuant to HB 308 would nullify the beneficiary provision of that contract of insurance. The insurance company is not notified of the divorce. Husband A has remarried wife C, and then dies. The insurance company pays wife B because of an existing instruction, then wife C finds out the policy has been paid. She failed to give prompt notification to the insurance company that husband A died, but had she done so, she would have received the beneficiary portion as opposed to wife B. Now the company has mistakenly paid everything to wife B. Wife C chooses to exercise her right to an augmented share to the deceased's estate and asks that the life insurance policy be included in that estate. Would she be limited to bringing a cause of action against wife B? MR. PETERSON replied if the insurance company did not have notice and paid the original beneficiary, it would not be required to pay twice. The issue would be the value amount of the augmented estate. Wife C has the right to have that value included in the augmented estate. If an insurance company knows of a dispute, it can pay the money into the court. Wife C's recourse would be to take action against the estate. MR. MANLEY referred to lines 17-24 on page 64, and explained that section removes any risk from the insurance company unless they've ignored notices provided to them. MR. PETERSON noted the AARP strongly endorses HB 308, as does the Alaska Commission on Aging. SENATOR MILLER moved CSHB 308(JUD) out of committee with individual recommendations. There being no objection, the motion carried.