Number 978 SB 81-NONADEMPTION OF TRANSFERS IN TRUSTS  SENATOR THERRIAULT, sponsor of SB 81, said the bill is a clean up for a piece of legislation that was passed last year - HB 275. One section of HB 275 had incorrect language that rendered a portion of the new law ineffective. SB 81 proposes a fix for this problem. SENATOR ELLIS asked if SB 81 is the "clean-up of the clean-up last year that was the clean-up of the Joe Ryan trust bill." Number 1057 CHAIRMAN TAYLOR said seven or eight bills have been passed over the years tying to keep up with supreme court and tax court changes - trying to make Alaska an attractive state for people to place their money in trust. SENATOR ELLIS said a more comprehensive look at SB 81 might be in order. CHAIRMAN TAYLOR said he has received a report on this question and would be scheduling a meeting at a later time. SENATOR THERRIAULT said Section 1. AS 13.12.712(b), of HB 275, used language such as "authority of a durable power of attorney for an incapacitated principal." This was incorrect language with regard to trusts - when there is a trust there are trustees. This error has been corrected. The AG's office has sent a memo saying SB 81 appears to amend AS 13.12.712 "to properly reflect the purpose for the entire statute, namely the nonademption of specific transfers in trusts." Number 1220 SENATOR ELLIS thanked Senator Therriault for going to the revisor first. CHAIRMAN TAYLOR said Senator Ellis' point was a very good one. Often times the revisor is not consulted and bills are just created. SENATOR THERRIAULT said the State Affairs Committee saw the revisor's bill on 2/20/01. Number 1350 MR. STEPHEN GREER, Attorney, testifying via teleconference from Anchorage, said HB 275 was a complicated bill trying to give Alaska citizens the benefit of certain tax selections. Section 2, which was a non-tax provision, attempted to make the law applicable to wills equally applicable to revocable trusts. People use revocable trusts to avoid the expense of a probate proceeding. SB 81 cleans up HB 275 with respect to one particular section. CHAIRMAN TAYLOR asked for the definition of nonademption. MR. GREER said the definition means not extinguished. As an example: In a will or trust if you give a piece of property to a relative, and that piece of property has been sold by you prior to your death - under the general rule - this request would be adeemed or extinguished because the property does not exist at the time of death and the relative would not receive the property. MR. GREER said there are a few instances when a specific bequest is not adeemed or extinguished and SB 81 is meant to cover this situation with respect to revocable trusts. He gave the following examples for bequeaths not adeemed: The first instance is when a property is being condemned and there is an unpaid condemnation award for the taking of the property - the person who would have received the property is instead entitled to receive the condemnation award. The second instance is when a piece of property has been directed to a relative and that piece of property is destroyed and insurance proceeds remain unpaid at death, the relative would be entitled to the unpaid insurance proceeds. Another instance is when a person is the obligee of a promissory note and that person wants the note to go to a relative but before the person's death, there is foreclosure on the note and the property that was used to secure the note is taken back. In this case, the relative would be entitled to that piece of property. Section (b) is meant to address the situation when a settlor makes a specific bequest but becomes incompetent and the trustee sells the property. In this case, the intended recipient of the specifically bequeathed property is entitled to other properties of equal value. MR. GREER said all of these examples are in conformity with the Uniform Probate Code. Number 1526 SENATOR COWDERY asked - for a deed of trust - if the value is larger after a foreclosure than the balance of the money owed - is this an issue for SB 81? MR. GREER said the Uniform Probate Code has contemplated this - the excess value would go to the residuary estate. SENATOR COWDERY moved to pass SB 81 from committee with individual recommendations. There being no objection, the motion passed.