BILL NUMBER: AB 434	CHAPTERED  07/21/05

	CHAPTER  94
	FILED WITH SECRETARY OF STATE  JULY 21, 2005
	APPROVED BY GOVERNOR  JULY 21, 2005
	PASSED THE SENATE  JULY 11, 2005
	PASSED THE ASSEMBLY  APRIL 11, 2005

INTRODUCED BY   Assembly Member Parra

                        FEBRUARY 15, 2005

   An act to amend Section 14860 of the Financial Code, relating to
credit unions.


	LEGISLATIVE COUNSEL'S DIGEST


   AB 434, Parra  Credit unions: trusts and custodial agreements.
   Existing law, the California Credit Union Law, provides for the
regulation of credit unions by the Commissioner of Financial
Institutions. The law authorizes a credit union to act as a trustee
or custodian under a written trust instrument or custodial agreement
created or organized in the United States that is part of a pension
plan for its members, or groups or organizations of its members, and
that qualifies or has qualified for specific tax treatment.
   This bill would also authorize a credit union to act as a trustee
or custodian under a written trust instrument or custodial agreement
created or organized in the United States that is part of an
education or medical plan for its members, or groups or organizations
of its members, and that qualifies or has qualified for specific tax
treatment.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:


  SECTION 1.  Section 14860 of the Financial Code is amended to read:

   14860.  Except as provided in this section and Part 2 (commencing
with Section 5100) of Division 5 of the Probate Code, no credit union
shall exercise trust powers except upon qualifying as a trust
company pursuant to Division 1 (commencing with Section 99).
   (a) Notwithstanding any other provisions of law relating to trusts
and trust authority, subject to the regulations of the commissioner,
a credit union may act as a trustee or custodian, and may receive
reasonable compensation for so acting, under any written trust
instrument or custodial agreement created or organized in the United
States which is a part of a pension, education, or medical plan for
its members or groups or organizations of its members, which
qualifies or has qualified for specific tax treatment under Section
220, 223, 401, 408, 408A, 457, or 530 of the Internal Revenue Code,
Title 26 of the United States Code, or any deferred compensation plan
for the benefit of the credit union's employees, provided the funds
received pursuant to these plans are invested as provided in Section
16040 of the Probate Code. All funds held by a credit union as
trustee or in a custodial capacity shall be maintained in accordance
with applicable laws and rules and regulations as may be promulgated
by the Secretary of Labor, the Secretary of the Treasury, or any
other authority exercising jurisdiction over the trust or custodial
accounts. The credit union shall maintain individual records for each
participant or beneficiary that show in detail all transactions
relating to the funds of each participant or beneficiary.
   The trust instrument or agreement shall provide for the
appointment of a successor trustee or custodian by a person,
committee, corporation, or organization other than the credit union
or any person acting in his or her capacity as a director, employee,
or agent of the credit union, upon notice from the credit union or
the commissioner that the credit union is unwilling or unable to
continue to act as trustee or custodian.
   (b) Shares may be issued in a revocable or irrevocable trust
subject to the following:
   (1) When shares are issued in a revocable trust, the settlor shall
be a member of the credit union issuing the shares in his or her own
right. If the trust has joint settlers, who are husband and wife,
then only one settlor need be a member of the credit union.
   (2) When shares are issued in an irrevocable trust, the settlor or
the beneficiary shall be a member of this credit union in his or her
own right. For purposes of this section, shares issued pursuant to a
pension plan authorized by this section shall be treated as an
irrevocable trust unless otherwise indicated in rules and regulations
issued by the commissioner.
   (3) This subdivision does not apply to trust accounts established
prior to the effective date of this subdivision.