Legislature(2009 - 2010)BELTZ 211

04/16/2009 03:45 PM Senate LABOR & COMMERCE

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
-- Time Change --
Moved CSSB 60(L&C) Out of Committee
Moved SCS CSHB 108(L&C) Out of Committee
Moved SCS CSHB 177(L&C) Out of Committee
Moved CSHB 175(L&C) Out of Committee
Moved HB 222(TITLE AM) Out of Committee
Bills Previously Heard/Scheduled
           SB  60-UNIFORM PROBATE CODE; TRUSTS, WILLS                                                                       
3:50:30 PM                                                                                                                    
CHAIR PASKVAN announced  SB 60 to be up  for consideration. [CSSB
60, labeled 26-LS0320\E, had been adopted on 3/31/09.]                                                                          
TREVOR FULTON, staff  to Senator McGuire, sponsor of  SB 60, said                                                               
he was available to answer questions.                                                                                           
DAVID  SHAFTEL, attorney  in private  practice,  said his  office                                                               
works with  estate planning and estate  and trust administration.                                                               
For  12 years  he  has been  a  member of  an  informal group  of                                                               
attorneys  and trust  officers who  have worked  with the  Alaska                                                               
Legislature on bills  in this area. He summarized that  SB 60 has                                                               
a  provision to  allow the  designation of  a representative  for                                                               
incapacitated  people,  it  updates and  correlates  a  provision                                                               
relating to the  augmented estate so it is  consistent with other                                                               
provisions  relating to  self-settled discretionary  spend-thrift                                                               
3:53:00 PM                                                                                                                    
SENATOR DAVIS joined the committee.                                                                                             
MR.  SHAFTEL  continued  explaining  that  SB  60  enacts  a  new                                                               
provision  dealing with  the pre-mortem  process of  establishing                                                               
capacity of a person who has  drafted a trust and where there are                                                               
issues  concerning whether  that person  had capacity  or whether                                                               
there was  duress or  undue influence,  fraud or  similar claims.                                                               
That person under this bill can  file an action in court and have                                                               
a  proceeding to  determine that  the  capacity and  the lack  of                                                               
those  improper influences  so that  the will  or trust  would be                                                               
upheld  as valid.  That  person can  participate  in the  process                                                               
while he  or she  is alive  and has  the best  evidence available                                                               
concerning  capacity  and  intent  rather than  waiting  for  the                                                               
person to die to go through the process.                                                                                        
3:55:24 PM                                                                                                                    
The bill also provides a venue  provision for probate of the will                                                               
of a non-resident  who may have property in the  state or not. It                                                               
also  allows  a personal  representative  or  trustee to  make  a                                                               
designation  about discretionary  distributions  that are  coming                                                               
from  capital  gains  rather than  principal,  which  allows  for                                                               
income  tax  planning, and  that  the  legislature knows  affects                                                               
every resident in the state.                                                                                                    
3:57:31 PM                                                                                                                    
SENATOR THOMAS said the court  can establish validity of the will                                                               
and make other findings. Can the court find it invalid, as well?                                                                
MR. SHAFTEL  replied yes; they could  find a lack of  capacity or                                                               
some  other event  took place  and the  instrument should  not be                                                               
given legal effect in that case.                                                                                                
CHAIR  PASKVAN said  his question  deals with  section 4  and the                                                               
exclusion from the augmented estate  of an irrevocable trust with                                                               
the settlor  designating himself as a  discretionary beneficiary.                                                               
He asked what policy reason there  is for excluding that from the                                                               
augmented estate.                                                                                                               
MR.  SHAFTEL  replied  that  this   trust  is  created  before  a                                                               
marriage.  For example  if someone  creates an  irrevocable trust                                                               
for children from a first marriage,  it would be treated the same                                                               
as  if  the  property  were   transferred  before  marriage.  The                                                               
augmented  estate  is  property  that  the  spouses  have  during                                                               
marriage; and  that is  what a spouse  can collect  against after                                                               
the death of  his spouse rather than what he/she  was left in the                                                               
will.  For instance,  he  could  choose to  take  a  third of  an                                                               
augmented estate rather than what was left in the will.                                                                         
So, this provision  says if you create this trust  30 days before                                                               
marriage,  it  will  be  excluded  from  the  estate.  It  is  an                                                               
irrevocable  trust  with an  independent  trustee  and while  the                                                               
trustee could  make distributions to  the person who  created it,                                                               
it  is  treated  as  property  that was  not  acquired  during  a                                                               
marriage.  Eleven  other  states  have  excluded  it  along  with                                                               
Alaska. This is not a manipulative  tool to hide assets from your                                                               
spouse after  you are married.  It would  have had to  be created                                                               
before marriage.                                                                                                                
CHAIR  PASKVAN asked  what prompted  the  change in  policy if  a                                                               
settlor  is  a  beneficiary  under   the  trust  they  themselves                                                               
established.  He  asked if  it  is  includable in  the  augmented                                                               
estate currently.                                                                                                               
4:02:54 PM                                                                                                                    
MR. SHAFTEL  replied that it is  included, and he said  section 2                                                               
(page  2)  clarifies  if  it's  done  prior  to  marriage  it  is                                                               
consistent with what law is today.                                                                                              
CHAIR PASKVAN asked  if this change would apply  to Alaskans only                                                               
or could it  be used by non-residents to create  trusts in Alaska                                                               
and have that potentially affect  an augmented estate analysis in                                                               
another state.                                                                                                                  
MR.  SHAFTEL  replied  it  applies to  probate  in  Alaska;  this                                                               
provision couldn't apply in any other state.                                                                                    
CHAIR PASKVAN  asked if the  exclusion from the  augmented estate                                                               
would apply only to Alaska residents.                                                                                           
MR. SHAFTEL replied that would be his understanding.                                                                            
4:04:58 PM                                                                                                                    
CHAIR PASKVAN  asked him to  clarify the intent of  excluding the                                                               
surviving spouse and child from the augmented estate.                                                                           
MR. SHAFTEL  replied that existing  statute requires that  in any                                                               
probate proceeding  the surviving  spouse and child  will receive                                                               
notice of everything.                                                                                                           
CHAIR PASKVAN asked if the  irrevocable trust with the settlor as                                                               
a  discretionary beneficiary  is includable  within the  probated                                                               
MR. SHAFTEL replied,  "No it would not be, if  it was done before                                                               
4:08:47 PM                                                                                                                    
SENATOR THOMAS  remarked that the  hearing and notice  section on                                                               
page 11, AS  13.12.565, indicates that the  spouse, the children,                                                               
the heirs of the testator and settlor shall be notified.                                                                        
4:09:58 PM                                                                                                                    
DOUG  BLATTMACHR,  President  and   CEO,  Alaska  Trust  Company,                                                               
supported SB 60.                                                                                                                
4:10:57 PM                                                                                                                    
RICH HOMPESCH, Fairbanks attorney, supported SB 60.                                                                             
4:11:44 PM                                                                                                                    
CHAIR PASKVAN closed the public hearing.                                                                                        
SENATOR THOMAS moved to report  CS SB 60(L&C) from committee with                                                               
individual recommendations  and attached zero fiscal  note. There                                                               
were no objections and it was so ordered.                                                                                       

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