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House Judiciary
Feb. 23, 2023
Rep Dalby: House Judiciary will come to order. Chair sees a quorum. Members, the first bill we’re going to take up today is House Bill 1018 for a concurrence in the Senate amendment. Representative Meeks, you’re recognized to come to the table and present the amendment.
Rep Meeks: All right. Thank you, Madam Chairman. Colleagues, a fulfillment of the promise I made to get this bill amended. I’m going to give you the short version just for brevity of time. We pulled out all the arrest authority and clarified the training language. At this time, all the invested parties are all in agreement with that, with the bill as it stands now. So with that, I’ll be happy to take any questions.
Rep Dalby: Members, are there any questions regarding the Senate amendment? Seeing no questions, We have no one who has signed up to speak for or against the amendment. Do I have a motion? We have a motion to concur in the Senate amendment. Is there any discussion on the motion to concur? Seeing no discussion. All in favor, please say aye. Any opposed say no. Congratulations, we have concur. Thank you for being here.
Rep Meeks: Thank you, colleagues.
Rep Dalby: All right, members, the next bill that we have up will be House Bill 1394. Representative Maddox. You’re welcome to come to the end of the table, introduce yourself, and then you may proceed.
Rep Maddox: Thank you, Madam Chair. Could I also bring a witness up to join me at the table?
Rep Dalby: Yes. Please have your witness identify himself for the record.
Rep Maddox: Yes, I will start. Representative Maddox, District 86. And my witness is–
Miller: My name is Alex Miller. I’m an attorney with RMP out of northwest Arkansas. And I’m a tax attorney and focus in estate planning.
Rep Dalby: Representative Maddox, you’re recognized to proceed.
Rep Maddox: Thank you, Madam Chair, members. So to be completely frank, I usually say this is a simple little bill. This is not necessarily a simple little bill. But it is a very good bill and it is excellent policy for the State of Arkansas. So this bill is the spendthrift trust and domestic asset protection trust bill. The purpose of this bill is to allow the creation of a domestic asset protection trust. This type of trust allows an individual to set up a trust in which the trust creator is a beneficiary of the trust. And the trust provides creditor protection against claims from the trust creditors.
In order for assets in domestic asset protection trust to be protected from creditors, the trust cannot be set up for the purpose of hindering creditors. So that’s very important. I know that will be a question. A person cannot set this up for the express intent of hindering an existing creditor. That would not be allowed. And a third-party trustee must control distribution of trust assets to the trust creator.
And that’s kind of just an overview of the bill. And obviously, we’ll go more in-depth in it. But I do want to talk about surrounding states. Tennessee, Mississippi, Missouri, and Oklahoma all allow for these types of trusts. I got very interested in this area of the law and I’m working with Representative Lundstrum on some other bills. Because I was informed, or I was contacted by an attorney who does a lot of estate planning in the interim. And he basically said that due to Arkansas’s restrictive laws, he is having to set up entities and trusts and LLCs and all sorts of other things in other states.
So we have Arkansans who we want to keep in Arkansas who are having to do other things, move their money to other states because of our restrictive laws. So I think that’s the overview of this bill and frankly, some of the others. So obviously, we want people and we want assets to remain in Arkansas. That’s good for accountants. That’s good for financial advisors. That’s good for everyone. Even attorneys, I know Representative Richmond doesn’t love that. But I would like to allow my witness to testify on this bill at this time.
Rep Dalby: Hang on just a minute. Do I have any questions right at this point of Representative Maddox? Representative Moore, you’re recognized for a question.
Rep Moore: Thank you, Madam Chair. I was just curious, Representative, does this particular language mirror that of other states currently codified?
Rep Maddox: I think it does. I think it almost mirrors the State of Nevada, which a lot of you who look into this area of the law, probably know that Nevada is very receptive to assets and to people and to business. And frankly, we all look at those statistics. Now they’re getting a lot of those things. So I think it almost mirrors the Nevada statute, Representative Moore.
Rep Dalby: Representative Unger, you’re recognized for a question.
Rep Unger: Thank you, Madam Chair. Sir, could you tell me who would be against this and why?
Rep Maddox: You know, usually, I have answers to every question and I can’t imagine why anyone would be against this bill and why they would. I think the first thought would be hiding. If someone was trying to shield assets from legitimate creditors. And that’s not what any of us want. So I think that could be an issue that people would think about, but that is not allowed under this language.
Rep Dalby: Can you point to the page and line that you just referenced that it’s not allowed so the Committee can see that?
Rep Maddox: Could I have a moment, Madam Chair?
Miller: Okay, so I don’t have the bill in front of me. I do have it in my briefcase. I guess I failed on that one, but I can grab it if I need to and certainly can point out where the language is.
Rep Dalby: We’ll get you a copy. Hang on, we’ll get you a copy.
Miller: Yeah. I’m not sure where you guys are finding that. I’m being told page 3, line 30. I’m not seeing that here on the document I have in front of me. Okay, on Representative Maddox’s bill that he has in front of him, it is page 3, line 30 that specifically says that for a domestic asset protection trust, the settlor, when they set this up, that one of the– it has to be irrevocable, number one. So it can’t be a trust that the settlor can amend or change the terms of, and (2)(C), which is line 30 says, “it is not intended to hinder, delay or defraud known creditors.”
Rep Dalby: Members. Any other questions? Representative Collins, you’re recognized for a question.
Rep Collins: Thank you, Madam Chair. Have these asset protection trusts been tested in courts? And can you kind of give me a lay of the land of how the courts have received these?
Miller: Yeah. Most of the states that these have been challenged in– now Nevada has had asset protection trust. If you’ve ever done any research in this area, Nevada and South Dakota are really kind of known as– and Delaware, they’ve allowed these types of trusts for 20, 30 years. And so there’s a lot of case law in Nevada specifically and out west where these trusts have been upheld. There’s 20 states in the country that allow domestic asset protection trusts. And we’re surrounded by states. Mississippi, Tennessee – you may have already touched on this – Oklahoma, Missouri. Texas does not have one. So when we’re competing for trust business and wealth to come into the state, this would at least give us a leg up on Texas.
Rep Dalby: Members, any other questions? Representative Hudson, you’re recognized.
Rep Hudson: Thank you, Madam Chair. This isn’t my practice, I just want to make sure I understand. For purposes of the line 30 on page 3, as far as evasion of creditors. Does it matter in protecting against that type of concern whether the trust is revocable or irrevocable?
Miller: Yes. This whole statute only deals with irrevocable trust. So someone cannot set up a trust that they can amend or terminate and put their assets in that trust, and then say, hey, my creditors can’t touch these assets. That’s not the purpose of this bill. This bill, the person creating the trust is truly transferring their assets into an irrevocable trust that they now have no control over because they have to appoint a third-party trustee who they have to go to. And that third-party trustee actually makes the decision as to whether assets come back to the beneficiary or not. So as far as the creditor issue, there’s also a third factor here. I don’t know how many attorneys we have in the room, but the fraudulent transfer rules, I think we call it the Uniform Voidable Transfer Act. And any transfers into this trust is subject to fraudulent transfers as well. So you can’t go put these assets inside of this trust and then immediately tell your existing creditors you can’t come after these assets. They have to sit there and marinate in the trust for a certain period of time without having creditor issues come to light before they’re actually protected from creditors. So I hope that clarifies.
Rep Dalby: You’re recognized for a follow-up.
Rep Hudson: And thank you, that’s a helpful explanation. Could you just kind of explain for our information what the difference is between our existing trust structure in Arkansas and what this bill would do. Just to give us an idea of what we have now versus what this bill proposes?
Miller: Sure. So, again, this is called a domestic asset protection trust. That’s just kind of the terminology that you see across the country when you’re referring to these types of trusts. What this allows is– well, under Arkansas law right now, you cannot set up a trust for yourself, put those assets in the trust, and those assets be protected from creditors. You can’t do that whether the trust is revocable or irrevocable. This statute allows you to do that. But again, it has to be the irrevocable trust with a third party in charge of the assets.
Rep Hudson: One last question?
Rep Dalby: You’re recognized.
Rep Hudson: And so just to kind of close the loop on those two questions. So under the current law, are there those same kind of restrictions and protections that you mentioned in your first response about the protecting against evasion of creditors?
Miller: To clarify, are you talking about fraudulent transfer rules or other?
Rep Hudson: Yeah. So under existing law, would those fraudulent transfer rules apply to the trusts that we can create now under–
Miller: Absolutely. Absolutely.
Rep Dalby: Representative Collins, you’re recognized for a question.
Rep Collins: Thank you, Madam Chair. So, I guess I just want to get at the question of whether or not there is any doubt that these domestic asset protection trusts will be honored in every case. Because I think my understanding is that the legal landscape is not quite settled on this. And what would happen if, is it possible for someone to get at the assets, a creditor to get at the assets based on an issue in law that’s not yet been resolved?
Miller: Yeah, you’ve done your homework a little bit. So to give you a little bit of history on these types of trusts. In the past, we’ve probably all heard of Switzerland and the Cayman Islands, and these places where wealthy people take their assets and they’re protected from creditors, and maybe even have tax benefits. And so the states really got in the business in the last 30 years of starting to allow, not all of the same things that these offshore places did, but these states got in the business of trying to attract that wealth back onshore. And so, yeah, there’s been cases and there’s been some conflict. And where the conflict comes. I think when I answered your question earlier, I said, in Nevada, if you have a Nevada person that creates the trust, the assets are in Nevada, and the creditor’s in Nevada, the Nevada court is going to uphold. That’s what I see in the law when I review these cases. But when you have these conflicts, like, let’s say, the creditor’s in a different state and the matter’s in front of a Utah judge looking at an Arkansas domestic asset protection trust, are they going to honor that or not? There is some conflict in those laws. I’m not well-versed enough, Mr. Collins, to tell you the ins and outs of all those cases, but there’s definitely a conflict.
Rep Dalby: Members, any other questions? We have no one who signed up for or against the bill. Representative Gazaway has just texted me and said he’s coming into the room. He may have a question.
Rep Maddox: I’m ready to close for my bill. (laughter)
Rep Dalby: Just not quite ready to recognize your closing for the bill. Representative Gazaway and Representative Cooper, we’re on House Bill 1394 on spendthrift trust. And I know there had been some questions on those. I wanted to give you plenty of time since this is changing the law in Arkansas. Have any questions, Representative Gazaway? You’re recognized, if you have any.
Rep Gazaway: Thank you, Madam Chair. So my understanding of the spendthrift trust historically has operated to protect from a beneficiary in the future from being able to essentially act negligent and waste the assets of the trust. And so it’s kind of doled out to them over time and in increments. And watched over very carefully in order to ensure that that doesn’t happen. So can you tell me specifically how this legislation improves what is a process that already works?
Rep Maddox: Well, I’ll start and then I’ll let him finish. So I would say certainly, it doesn’t– what we’re trying to do, it’s not working in Arkansas. People are fleeing with their money and their feet because of our restrictive asset protection laws. What I would say is these people are going to use these vehicles. They’re just going to do it in Arkansas and we’re going to be receptive to them or they’re going to go out of state and do it. So I would say it’s not working for what we’re trying to do today, but I’ll allow my witness to follow up.
Miller: Yeah. So that’s a great question. Third-party spendthrift trusts do work in the State of Arkansas, and I think that’s what you’re referring to. You know, if I’m a mom or dad and I’m putting assets in trust for a kid and I’ve drafted that trust so that it’s truly a spendthrift trust. What that means is that the trustee has the discretion if the kid has a creditor out there that’s trying to get to the trust assets. The trustee, as opposed to giving money directly to the kid where the money can be intercepted by the creditor. A spendthrift trust allows the trustee to instead pay bills on behalf of the kid, pay for their education, pay for their phone bill, their rent. And when they do it that way, under a spendthrift trust, the assets cannot be intercepted. This does not change that law. What this law does is, it adds a self-settled trust. Where someone is setting up a trust and putting the assets inside that trust for their own benefit versus a third-party trust, which is what we already have in existence in Arkansas today.
Rep Dalby: Members, anything further? You’re recognized for a follow up.
Rep Gazaway: Can you give any clear examples of the people who are fleeing our state to set up these trusts in other states?
Rep Maddox: I’ll start. So why I got interested in this legislation is estate planning counsel from Arkansas was sending me emails and phone calls about how he is not choosing Arkansas for his higher net worth folks. To be frank, we all probably know people who are forced to live out of state, out of the State of Arkansas for 185 days per year. There’s numerous reasons for that, our income tax. And this is another one of the things that we need to get better. We need to get more competitive and be more receptive to people who want to do. They’re going to do this type of estate planning. So it’s estate planning attorneys in Arkansas who brought this to my attention that we need to do this.
Miller: Okay. If I may address. For confidentiality purposes, I can’t give you specific names, but I can certainly give you examples. And my law firm, I know you weren’t here when I introduced myself, but I do estate planning. We have 11 tax attorneys at my law firm. And our law firm was founded on high net worth estate planning. That’s kind of our bread and butter. And so when Representative Maddox came to us, one of the questions was, why are your clients not keeping their assets in the State of Arkansas? And I can tell you for sure we have one of our billionaire clients whose assets are in Delaware. Multiple clients with assets in Nevada trust. And these are our biggest clients. I have a client that left for Tennessee at the end of last year and set up a trust there. So again, without giving specific names, I have tons of examples. So that’s my response.
Rep Dalby: Members, any other questions? Seeing no further questions. Representative Maddox, you’re recognized to close for your bill.
Rep Maddox: Thank you. Members, I think I’ve already basically said all that I want to. Just to reiterate, all the surrounding states except Texas has these types of trust. We could actually potentially beat them on something for once, which would be nice. Again, as he stated, these folks are already using these vehicles. It’s just do we want to be receptive to them in Arkansas or do we want to just kind of let them know that we would rather not keep their money, their assets, and frankly, them in our state? So I would appreciate a good vote. And I’m closed for my bill.
Rep Dalby: Members, Representative Maddox has closed for his bill. Do I have a motion? I have a motion do pass. I have a motion do pass. Is there any discussion on the motion? All in favor say aye. All opposed say no. The ayes have it, you have passed your bill.
Rep Maddox: Thank you, Madam Chair. Thank you, Committee.
Rep Dalby: Representative Gazaway, you’re recognized to present House Bill 1474. Members, this one has an impact statement that’s being– and a sentencing from the Sentencing Commission that’s being passed out very quickly to you. All right, members, I believe everyone has the Arkansas Sentencing Commission impact statement in front of you. And with that, Representative Gazaway, you’re recognized to present your bill.
Rep Gazaway: Thank you, Madam Chair. With your permission, because there is a sentencing impact report, could I have Tawnie Rowell from the Sentencing Commission join me at the end of the table?
Rep Dalby: Yes, Ms. Rowell. There she is. All right, if both of you will go ahead and identify yourself for the record, then we may begin.
Rowell: Tawnie Rowell, Sentencing Commission Director.
Rep Gazaway: Representative Jimmy Gazaway, represent District 31. Members, what you’ll see before you, House Bill 1474 is a amendment, you might say, to the critical infrastructure law that we passed in 2021. Some of you may remember in the last session we passed a critical infrastructure bill which placed criminal penalties on anyone who would damage or destroy pieces of critical infrastructure. Critical infrastructure includes things like telecommunications networks, drainage facilities, wastewater facilities, water management facilities, things that are important to our everyday functioning in life.
So one of the things that we add in this bill is underground gas storage facilities. There was a companion bill to this that came out of the Senate that I ran in the House. You may remember just last week on underground gas storage facilities that changed the definition because of ongoing commercial activity in that space. Particularly in south Arkansas, you have oil and gas companies that are storing different types of gas underground. As part of the oil mining process, gas that’s produced that’s collected to kind of the carbon capture issue is being stored underground. We just want to ensure that if anyone were to cause damage to or try to destroy underground gas storage facilities, that they would face some fairly severe criminal penalties. Similar to all the other critical infrastructure that we already– protections that we have for critical infrastructure that we already have in place. So that’s all the bill does. And I’m happy to answer any questions.
Rep Dalby: Representative Collins, you’re recognized for a question.
Rep Collins: Thank you, Madam Chair. So I understand that which you describe, the big South Arkansas facility. But does this include just the underground storage tanks that are at numerous commercial properties in cities and towns everywhere? Wherever there used to be a gas station, there’s a underground tank, may or may not have gas in it. When I read underground gas storage facility, I mean, I don’t know, you tell me, is that meant to be included in this, where we have all these more severe criminal penalties?
Rep Gazaway: So underground gas storage facility is given a very specific definition in other sections of the code. It includes things like underground aquifers and similar to what’s being used in the oil and gas industry. It’s not meant to capture the propane tank that you keep in your backyard to run your gas lights or gas lamps on your back porch. So I understand your concern, but I don’t think that that’s what the definition covers.
Rep Dalby: Members, any other questions? Seeing no further questions. We have no one who has signed up to speak for or against the bill. Representative Gazaway, you’re recognized to close for your bill.
Rep Gazaway: Thank you, Madam Chair. I’m closed for the bill. Make a motion do pass.
Rep Dalby: Members, we have a motion to do pass on the floor. Is there any discussion of the motion? Seeing no discussion. All in favor say aye. Any oppose say no. The ayes have it. Congratulations, you have passed your bill.
Rep Gazaway: Thank you, Madam Chair. Thank you, Committee.
Rep Dalby: Members, next we’re going to turn to House Bill 1431. Representative Lundstrum, you’re recognized. House Bill 1431, members. Representative Lundstrum, when you get to the end, you may identify yourself, and you’re recognized to proceed.
Rep Lundstrum: Thank you, Chairman Dalby. Robin Lundstrum. And may I also bring a witness to the stand with me?
Rep Dalby: Yes.
Rep Lundstrum: Today I bring before you HB 1431. And this is a trust decanting statute that allows the trustee of an irrevocable trust to amend the trust terms without going to court. It will save time, expense, and an unnecessary clogging up of the courts. And with that, I will open it up to any questions.
Rep Dalby: Members, are there any questions? Representative Gazaway, you’re recognized for a question.
Rep Gazaway: Thank you, Madam Chair. So, I read the bill prior to today. And my understanding was that I mean, that was a very brief explanation of the bill, but it seemed that there were a lot of very technical provisions as a part of this bill. And I know you have a witness here with you who’s an attorney that practices in this area. I’d like a more thorough explanation of the technicalities and how this bill will operate if you wouldn’t mind.
Rep Lundstrum: That’s why he’s here. I would not presume to be an attorney. And I didn’t stay in a hotel last night named Holiday Inn. So I definitely wanted to have somebody here that could answer those questions. I will say this is already the practice in 36 states, and I’m hoping we’re number 37. But I’ll let Alex answer any technical questions you might have. So fire at will.
Rep Dalby: If you’ll identify yourself for the record.
Miller: Alex Miller.
Rep Dalby: Mr. Miller, did you understand Representative Gazaway’s question and could you please address that?
Miller: Sure. I’ll give my own synopsis of what the bill is. And so you see that the title of the bill is to amend, well, it’s regarding decanting of trust. And that term decanting, it may be familiar to some people here. Usually, it’s thought of with wine and alcohol, where you’re pouring alcohol from one glass to another. And what this is, if you really read the technical details of this trust or this bill, it’s not just amending a trust. It’s actually allowing a trustee to create a second trust. And let me back up, I’m getting ahead of myself. We’re dealing with irrevocable trusts here. These are irrevocable trusts that cannot be amended or modified or not supposed to by their terms. Under Arkansas law right now, we can amend and modify irrevocable trusts. But generally, the way to do it is you need to go to court and you need to put it in front of a judge and have all the beneficiaries consent. Like Robin said, that takes time and effort, and the judge’s time to do. What this allows, as opposed to the trustee of the trust just amending the terms of the trust itself, it allows the trustee to set up a second trust with more favorable terms. And I’m happy to answer questions on why a trustee may want to do this. But basically, you set up the second trust and you pour the assets of the first trust into the second trust where they will be held and administered under more favorable terms to the beneficiaries. Did I answer your question Representative Gazaway?
Rep Gazaway: That was helpful. Yes.
Rep Dalby: Representative Collins, you’re recognized for a question. Members, any other questions? Seeing no further questions. Oh, I’m sorry, Representative Richardson, you’re recognized for a question.
Rep Richardson: Thank you. Because I’m not an attorney could you go ahead and give me more information? You said if we asked you the question about why they would do this, why would somebody move their trust from one to another one or pour it in as you just described?
Miller: Sure. So this comes up very frequently. In fact, most irrevocable trusts that I review that have been in effect for some time have provisions that I would consider faulty. If you were to come to me and I would draft an irrevocable trust for you, a lot of times these are 40 page documents. And the older the document, the shorter they usually are, and usually have sometimes three and four pages. And they don’t really cover what happens in certain situations. So let me give you a couple examples, though. One thing that I see in trusts a lot is when mom and dad die or when the kids die, the trust terminates and the assets leave the trust and go into the hands of the beneficiaries, and they can do whatever they want to with those assets. Now, that sounds great, but as soon as those assets leave the trust, they’re no longer protected from the creditors of the beneficiaries.
If the family is wealthy enough, there’s something called the estate tax. The inheritance tax in this country, that if your net worth is over a certain amount. Every generation, 40% of that net worth gets cut and a check sent to the federal government. And so it allows you to leave those assets inside of the trust for a longer period of time to at least defer that tax. Whereas if the assets were to leave the trust at a certain age, let’s say when the beneficiaries are 30. Now those assets are right back in the estate tax system and subject to tax again. So those are a couple examples. There’s many more. There may just be, you may just want to change who the trustee is and some of the really basic administrative provisions. But it’s usually something revolving around creditor protection or taxation is why we usually do this. And as I’m sure you all know, tax law changes all the time. Creditor protection laws change frequently as well. And so there’s just times where we as estate planners look at trusts and say we need the ability to amend this trust to make it compliant with what the creator’s intent ultimately was when they created the trust.
Rep Dalby: Representative Hudson, you’re recognized for a question.
Rep Hudson: Thank you, Madam Chair. So you mentioned that the procedure now in Arkansas is to go to court for some of these items. And you said that in part that procedure includes getting approval from the beneficiaries of the trust. Which I assume is intended to be some sort of protection against the trustee going rogue or doing things that benefit some beneficiaries over others. So what protections are there if we pull the judge out of this and pull the court appearance out of this to protect against a trustee favoring beneficiaries or doing things without consent?
Miller: Yeah. There’s a laundry list of fiduciary duties that trustees have within trusts under our current uniform trust code. And those are the duty of loyalty to the beneficiaries in the trust. The duty – I may not have this duty exactly, the correct legalese, but to not show favoritism to one beneficiary over the other. But the point is, the trustee has a fiduciary duty to not harm those beneficiaries. And so they have recourse if the trustee were to exercise this in a manner that they thought was harmful to them. They could end up in court and that would be how they would resolve that issue.
Rep Dalby: Representative Collins, you’re recognized for a question.
Rep Collins: Thank you, Madam Chair. So, I guess I just want to see if I can understand this clearly. So the real benefits of this bill are to kind of avoid paying estate taxes. Tax avoidance, and creditor protection, protection from creditors. I mean, that’s essentially what we’re doing here. Is there anyone I mean, other than people who want estate taxes to be paid more or creditors to have more access, what are the other downsides to this or other benefits if I’m missing anything?
Miller: Yeah, sure. I mean, that’s a legitimate. I think the State of Arkansas has to decide whether they want these individuals here. It’s kind of what we talked about with Representative Maddox. And I think Robin may have touched on this earlier. But you have, if you were to go out and Google, what are the– we’ve probably all heard of Delaware as a place where people go to set up businesses for creditor protection and things like that, and there’s other jurisdictions. But in the law world, everybody thinks that Delaware is the place to set up a business. With trusts, there’s multiple jurisdictions. And when I have these wealthy families come to me, sure, we set up a trust and we decide where these assets are going to pass when my clients die. And hey, what if I die and I have minor children, who are they going to live with? All of us have those type of issues. But wealthy individuals do have the other questions of where can I park my assets where they’re not subject to as much tax, whether that’s estate tax or income tax. They look at where can I park these assets where they get the most creditor protection. And where can I put these assets, where I have the most control over how they’re administered? And you’re correct, that a part of this, that may be one reason why we would want to amend these trusts is to help further protect estate tax. But if we don’t want these clients here, then I agree. You don’t pass these laws if we don’t want these wealthy citizens here.
But in my mind, I’m a big sports fan. And I think of Houston Nutt used to say this with the Razorbacks. It’s like, hey, we need to build a fence around the State of Arkansas and keep our in-state talent here if we want to have a successful football program. And I think that’s the same for all athletics. But for the State of Arkansas, with our economic prosperity, I think it’s necessary to keep our wealthy Arkansans and their money and assets inside the State of Arkansas. And so that’s why I think these bills are favorable and why they should pass. But I certainly understand if someone has a different opinion.
Rep Dalby: Representative Richardson, you’re recognized for a question.
Rep J Richardson: Thank you. So based on what you just said, if these trusts are created and these individuals are placing these into trust to consumer protection and tax avoidance. What’s the benefit to the state for having that trust in the state? If we can’t tax it and we can’t get to it for whatever reason. I understand that’s personal stuff, but what would be the benefit of the state to say, yes, we want you to come load your stuff here?
Miller: It’s a huge benefit. Their assets come here. If they’ve got cash, if they have stocks, if they have bonds, liquid investments, they go to financial advisors inside this state. If it’s a bank, if they have to, with the domestic asset protection trust we just talked about, there has to be an independent trustee. So we hire a bank to be the trustee. Those financial advisors and those banks get to charge a fee. A percentage of the assets under management they get to charge as a fee, usually around 1%. South Dakota started going this direction within the last 15 years, and they now have over $500 billion of trust assets under management. That alone at 1% is $5 billion of revenue and income generated in this state. Obviously, the attorneys and myself, we get to draft these trusts, which helps. And any time there’s questions on the administration of the trust, we get to reap those benefits. But accountants that prepare the tax returns for these trusts. If you’re allowed to have these trusts in the State of Arkansas, those assets will also include real estate. So now you’re selling real estate and the real estate industry is helped. Well, you can also own a business inside of these trusts. And so you can operate, if you own grocery stores they can be owned by this trust. And so it encourages these wealthy citizens to start those businesses here versus in other states.
Rep Dalby: Members, any other questions? Representative Underwood, you’re recognized for a question.
Rep Underwood: This might be more of a question for Representative Lundstrum, and maybe you said it and I just missed it. You said there was 36 states that do this currently. Can you kind of give me a list of maybe some of the surrounding states that do it?
Rep Lundstrum: Off the top of my head, I believe Tennessee, Florida, Wyoming, South Dakota, Utah, Delaware, and I believe Texas. I’m not sure on Texas. I can tell you we are in the bottom third of states that welcome wealth. We shun the wealth. We put a closed door and a we are closed to business on our door to Arkansas. And we’ve got to quit thinking as a poor state. We need to start thinking as a wealthy state and be proud of our state. And we need to put the welcome mat out.
Rep Dalby: Representative Collins, you’re recognized for a question.
Rep Collins: Thank you, Madam Chair. It’s actually somewhat related to the 36 states. So we may keep more people in our state if we pass this. But we’re not really going to be a magnet because so many other states have this, right? I mean, it’s not like you mentioned Nevada in the previous bill, that probably was a magnet for a lot of business. But I mean, do you agree it’s unrealistic that with 36 other states having adopted something similar to this, we’re going to be a magnet? Or is this different enough that we will be a magnet? Is it somehow more permissive than other states’ laws?
Miller: From a technical standpoint, does passing this law make wealthy clients tell me, hey, I want to put my assets in the State of Arkansas? No. But is it important? This is part of a package of four bills that we’re running, two today here. Hopefully another one in the future, and then one in Tax and Revenue. If you were to go out in my industry, and I started down this path earlier and I guess I lost my train of thought. But if you were to go out and Google, hey, what are the best jurisdictions for putting your assets inside of a trust. You’ll see these ranking systems that have about 10 different factors that they look at. And these decanting statutes are always part of that equation when they’re ranking what is the best jurisdiction to park your assets. Now, a lot of times these are trust companies that are putting out these ranking systems. And so trust companies definitely like these decanting statutes. So maybe that’s why they’re saying that these are so favorable. But I do not think, I think that’s a great point you’re making. And this out of the four bills is probably the least likely on it alone to attract that wealth. But I do think that if we pass this along with those other bills, whenever these ranking systems come out, we’re absolutely going to be in the top. In my opinion, we’re going to be in the top five after this.
Rep Dalby: Representative McCullough, you’re recognized for a question.
Rep McCullough: Thank you, Madam Chair. I appreciate that the trustee has a fiduciary duty, but don’t we run the risk that they breach that duty and the breach goes unnoticed if they don’t have to go to court and notify the trustees before they make that change?
Miller: Sure. You run that risk. I would, that would be a nightmare for the trustee to go amend this trust and then, the beneficiaries do something harmful to these beneficiaries and they find out 20 years down the road. But yeah, I mean, that’s a legitimate concern.
Rep Dalby: Members, any other questions? Seeing no further questions. Representative Lundstrum, you’re recognized to close for your bill.
Rep Lundstrum: Thank you. Colleagues, I think it’s important that we bring Arkansas forward. Any time we have an opportunity to do that, I think we should. To answer your comment, Representative Collins, why? Why not Arkansas? Why not bring our laws forward? And why not roll out that welcome mat and make this a business friendly state? And with that, I would ask for a good vote.
Rep Dalby: Members, Representative Lundstrum has closed for her bill. What are the wishes of the Committee? We have a motion to do pass. Is there any discussion on the motion? All in favor of the motion please say aye. All opposed say no. The ayes have it. I did hear a no. The ayes have it, you have passed your bill. Members, we have nothing else to hear this morning. We’re on a tight timeframe. Thank you, Representative Lundstrum.
Rep Lundstrum: Thank you, colleagues.
Rep Dalby: Members, we do have– Here’s what I’m anticipating that we’re going to have for Tuesday. And this will probably grow. As you can tell, our agenda is growing by leaps and bounds. So we’re not going to have too many days of just a quick meeting. So here’s what we have so far. Senate Bill 204, Senate Bill 211, House Bill 1426, House Bill 1472. And I have had a number of other members inquire about getting on the agenda for Tuesday, kind of depending on what’s happening in their Committee. I will see what I can do to get that updated for you for Tuesday. But please anticipate from here on out we’ll be spending a lot more time in our Committee meeting so we can start working through this agenda. With that, have a great weekend. We are adjourned.