BILL ANALYSIS SB 685 Page 1 Date of Hearing: June 10, 2008 ASSEMBLY COMMITTEE ON JUDICIARY Dave Jones, Chair SB 685 (Yee) - As Amended: May 27, 2008 PROPOSED CONSENT (As Proposed to be Amended) SENATE VOTE : 40-0 SUBJECT : PET TRUSTS KEY ISSUE : SHOULD THE LAW BE CLARIFIED TO ENSURE THAT PET TRUSTS ARE VALID AND ENFORCEABLE IN CALIFORNIA? SYNOPSIS This non-controversial bill, sponsored by the San Francisco Society for the Prevention of Cruelty to Animals (SFSPCA), would repeal current law on trusts for domesticated or pet animals and enact new, more detailed provisions for the creation and enforcement of pet trusts. According to the SFSPCA, increasingly, pet owners are seeking to ensure that their pets are cared for after the owner's death or disability. Thus, informal arrangements with family or friends have been made for the care of such animals. Some have ventured to include pets in their wills, while others have created "pet trusts" that set aside money for the care of the pets in the event of the owner's death or disability. Examples include famed real estate and hotel mogul Leona Helmsley who left a trust of $12 million for the care of her pet dog. Another, lesser known pet owner from Maryland, willed some $400,000 plus a house to the three stray dogs that he adopted. Under such trusts, the trustee or executor is expected to pay a caretaker to ensure that the pets are housed, fed and maintained as provided in the trust or will. This bill seeks to ensure that pet trusts are valid and enforceable in California. The sponsor states that this bill ensures that the pet or pets designated within the trust are protected and cared for as the settlor intended and are not sent unnecessarily into the animal shelter system. This bill has no known opposition. SUMMARY : Seeks to ensure that pet trusts are valid and enforceable. Specifically, this bill : SB 685 Page 2 1)A trust for the care of an animal is a trust for a lawful noncharitable purpose. Unless expressly provided in the trust and subject to certain requirements, the trust terminates when no animal living on the date of the settlor's death is covered by the trust. 2)The governing instrument shall be liberally construed in order to bring the trust within the normal rules for trusts, to presume against the honorary nature of the disposition, and to carry out the general intent of the settlor. 3)The trust principal or income shall not be converted to the trustee's use or for any purpose other than for the benefit of the covered animal. 4)Upon termination of the trust, the trustee shall distribute the unexpended trust property as specified: a) As directed in the trust instrument; b) If the trust was created in a nonresiduary clause in the settlor's will or in a codicil to the settlor's will, under the residuary clause in the settlor's will; c) If the application of a) or b) does not result in distribution of unexpended trust property, to the settlor's heirs as specified. 5)The intended purpose of the trust principal or income may be enforced by a person designated by the trust or, if none is designated, by a person appointed by the court. Among others, any person interested in the welfare of the pet animal or any nonprofit charitable organization whose principle activity is the care of animals may petition the court regarding the trust as provided.
6)If the value of the assets in the trust does not exceed $40,000, no accounting, filing, separate maintenance of funds, fees, or other report is required by reason of the fiduciary relationship to the trustee, unless ordered by the court or required by the trust instrument. 7)Any beneficiary, any person designated by the trust instrument or the court to enforce the trust or any nonprofit charitable corporation that has as its principal activity the care of SB 685 Page 3 animals may, upon reasonable request, inspect the animal, the premises where the animal is maintained or the books and records of the trust. 8)A trust governed by this measure is not subject to termination solely because the trust principal does not exceed $20,000. 9)A trust governed by this measure shall not automatically be limited to 21 years. 10)If the trust instrument does not name a trustee or no trustee or successor trustee is willing or able to serve, the court would be required to appoint a trustee to carry out the intended use of the trust property. A court may make all other orders necessary to carry out the settlor's intent. 11)"Animal" means one or more domestic or pet animals for whose benefit the trust was established. EXISTING LAW provides that a trust for the care of an animal may be performed by the trustee for the life of the animal, whether or not there is a beneficiary who can seek enforcement or termination of the trust and whether or not the terms of the trust contemplate a longer duration. (Probate Code Section 15212.) FISCAL EFFECT : As currently in print this bill is keyed non-fiscal. COMMENTS : This non-controversial bill, sponsored by the San Francisco SPCA, seeks to repeal current law on trusts for domesticated or pet animals and enact new, more detailed provisions for the creation and enforcement of pet trusts. The author states that this bill creates the basis for oversight and enforcement of pet trusts, ensuring that the trust provisions are legally protected. The sponsor, states that current law treats pet trusts as honorary and therefore these trusts are unenforceable. The sponsor asserts that California is one of only two states that have unenforceable pet trust statutes. By adopting the pet trust provisions of Uniform Probate Code Section 2-907, the author explains, California will finally join 37 other states that provide for the creation of pet trusts and the means for their enforcement. The author states that this bill would also have positive effects on shelters and animal care facilities, which are often the destination and destiny of SB 685 Page 4 pets whose owner or guardian has passed away. No Bones About It, This Bill Creates Enforceable Pet Trusts . This bill specifies several conditions that the trust must meet in order to be valid. First, except as the governing instrument itself may provide, a pet trust cannot be converted to the use of the trustee or for any use other than the trust's purpose or for the benefit of a covered animal. Second, upon termination of the trust, the trustee must transfer the unexpended trust property either as directed by the trust or, if the trust was created in a nonresiduary clause of a will, the trustee must transfer the unexpended trust property under the residuary clause of the will. If the trustee could not transfer unexpended assets as described, the trust property would be distributed to the settlor's heirs as provided in Probate Code Section 21114. Additional Trust Provisions Make This Bill The Cat's Meow . This bill would provide for the court's appointment of a trustee if the pet trust does not designate a trustee or no designated trustee is willing or able to serve. The court may require the transfer of property to a trustee, if necessary to carry out the settlor's intended use of the property, as well as make other orders. This bill establishes a threshold for accounting purposes. If the value of the assets in the trust does not exceed $40,000, no accounting, filing, separate maintenance of funds, fees, or other report is required by reason of the fiduciary relationship to the trustee, unless ordered by the court or required by the trust instrument. However, if the value exceeds $40,000, the accountings required by Probate Code section 16062 shall be provided to the beneficiaries who would be entitled to distribution if the animal were then deceased and to any nonprofit charitable corporation that has as its principal activity the care of animals and that has requested these accountings in writing. Section 16062 requires, among other things, the trustee to account at least annually, at the termination of the trust, and upon a change of trustee, to each beneficiary to whom income or principal is required or authorized in the trustee's discretion to be currently distributed. Under this bill, the intended use of the trust principal or income may be enforced by a person designated by the trust SB 685 Page 5 instrument or, if none is designated, by a person appointed by the court. The bill states that any person interested in the welfare of the pet animal or any nonprofit charitable organization whose principal activity is the care of animals may petition the court regarding the trust as provided in Probate Code Part 5, Chapter 3. This Chapter includes among the issues for which a petition may be made, the internal affairs of the trust or to determine the existence of the trust as provided in Probate Code Part 5, Chapter 3. The pet trust created under this bill would be subject to all of the Probate Code provisions that generally govern trusts. As a result, the trust may sue and be sued, buy and sell stocks, and conduct any activity that a trust where the beneficiary is a person may conduct. Author's Technical Amendment . In order to clarify that this bill covers both "domestic animals" and "pet animals," the author has agreed to replace these terms with "animal" and defines "animal" to mean one or more domestic or pet animals for whose benefit the trust was established. REGISTERED SUPPORT / OPPOSITION : Support San Francisco SPCA (sponsor) Action for Animals American SPCA Animal Legal Defense Fund Animal Switchboard California Federation for Animal Legislation Humane Society of the United States Marin Humane Society Pets Are Wonderful Support San Francisco Dog Owners Group State Humane Association of California United Animal Nations 2nd Chance 4 Pets One individual Opposition None on file SB 685 Page 6 Analysis Prepared by : Manuel Valencia / JUD. / (916) 319-2334