BILL ANALYSIS                                                                                                                                                                                                    



                                                                  SB 308
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          Date of Hearing:  June 23, 2009

                           ASSEMBLY COMMITTEE ON JUDICIARY
                                  Mike Feuer, Chair
                     SB 308 (Harman) - As Amended:  June 15, 2009

                                  PROPOSED CONSENT

           SENATE VOTE  :  37-0
           
           SUBJECT:  Professional Fiduciaries: Qualifications

           KEY ISSUE  :  SHOULD THE DEFINITION OF "PROFESSIONAL FIDUCIARY" BE  
          CLARIFIED TO DETERMINE WHO HAS TO BE LICENSED UNDER THE  
          PROFESSIONAL FIDUCIARIES ACT? 

           FISCAL EFFECT  :  As currently in print this bill is keyed fiscal.

                                      SYNOPSIS
          
          The Professional Fiduciaries Act, enacted as part of the Omnibus  
          Conservatorship and Guardianship Reform Act of 2006, defines and  
          regulates professional fiduciaries.  A professional fiduciary  
          may be a conservator, guardian, or trustee, as specified.  This  
          non-controversial bill, sponsored by the California Judges  
          Association, is a technical measure that refines the definition  
          of "professional fiduciary" to include varying types of  
          conservators and guardians and specifies how trusts and  
          beneficiaries are counted for purposes of that definition.  It  
          also excludes from the definition employees of public officers  
          or agencies that are now specifically exempt from the  
          requirements imposed on professional fiduciaries, when those  
          employees are acting within the course and scope of their  
          official duties.  This bill is supported by the Judicial Council  
          and has no known opposition.

           SUMMARY  :  Clarifies who is considered a "professional fiduciary"  
          under the Professional Fiduciaries Act.  Specifically,  this  
          bill  :    

          1)Clarifies that a "conservator" may be a "conservator of the  
            person, the estate, or person and estate" and that a  
            "guardian" means a "guardian of the estate, or person and  
            estate." 









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          2)Clarifies that in making this determination: 1) all  
            individuals who are related to each other are counted as one  
            individual; 2) trustors related to each other shall count as  
            one individual; and 3) neither the number of beneficiaries nor  
            the number of trusts are to be counted for purposes of this  
            qualification of a professional fiduciary.  Also specifies  
            that individuals who are related to the fiduciary shall not be  
            counted.

          3)Includes employees of a public agency and a public officer of  
            a public agency, as specified, acting in the course and scope  
            of their official duties, in the professional fiduciary  
            exemption for public agencies and public officers.

          4)Defines lineal kinship or consanguinity as the relationship  
            between two persons, one of whom is a direct descendant of the  
            other (parent and child, for example) and by counting the  
            generations separating one from the other. 

          5)Defines collateral kinship or consanguinity as the  
            relationship between two people who spring from a common  
            ancestor, but neither person is the direct descendant of the  
            other (thus siblings are related in the second degree, an aunt  
            or niece is related to the person in the third degree, and a  
            first cousin is related in the fourth degree).

          6)Contains various provisions intended to conform the statutes  
            to the changes made by SB 1264 (Harman, Chap. 174, Stats.  
            2008).

           EXISTING LAW  :

          1)Defines and regulates the activities of professional  
            fiduciaries.  (Business & Professions Code Section 6500 et  
            seq.  Unless stated otherwise, all further references are to  
            the Business & Professions Code.)

          2)Defines "professional fiduciary" as a person who acts as a  
            conservator or guardian for two or more persons at the same  
            time who are not related to the professional fiduciary or to  
            each other by blood, adoption, marriage, or registered  
            domestic partnership.  (Section 6501(f).)

          3)Defines "professional fiduciary" to include a person who acts  
            as a trustee, agent under a durable power of attorney for  








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            health care, or agent under a durable power of attorney for  
            finances, for more than three people or more than three  
            families, or a combination thereof that totals more than three  
            at the same time, that are not related to the professional  
            fiduciary by blood, marriage, or registered domestic  
            partnership.  (Id.)

          4)Provides that certain classes of entities and individuals are  
            exempt from the designation of "professional fiduciary."  An  
            employee of a trust company or an FDIC-insured institution or  
            its affiliate (both of which are exempt under existing law) is  
            also exempt from designation as a professional fiduciary for  
            purposes of the Professional Fiduciaries Act, as long as the  
            employee is acting in the course and scope of that employment.  
             (Id.)

          5)Exempts from the designation of "professional fiduciary" a  
            public officer or public agency, including the public  
            guardian, public conservator, or other agency of the state or  
            a county, including a regional center for persons with  
            developmental disabilities, when the officer or agency is  
            acting in the course and scope of their official duties.   
            (Id.)

           COMMENTS  :  In 2006, the Legislature enacted a package of bills  
          to reform the conservatorship system in California.  Major  
          features of the reforms, embodied in the Omnibus Conservatorship  
          and Guardianship Reform Act of 2006 (SB 1116 (Scott, Chap. 490),  
          SB 1550 (Figueroa, Chap. 491), SB 1716 (Bowen, Chap. 492) and AB  
          1363 (Jones, Chap. 493)) are:  1) increased frequency of court  
          review of conservatorships; 2) broadened scope of court  
          investigators' reports; 3) special procedures for the sale of a  
          conservatee's primary residence; and 4) the regulation and  
          licensing of private professional fiduciaries including private  
          professional conservators.  These measures were compelled by a  
          series of articles in the media revealing widespread abuse of  
          vulnerable elders and dependent adults by conservators and  
          deficiencies in the courts' oversight of conservatorships.

          SB 1550 established the Professional Fiduciaries Act (PFA) for  
          the purpose of licensing and regulating individuals who act as  
          conservators, guardians, trustees, personal representatives, or  
          agents under a durable power of attorney for health care or for  
          finances, for two or more persons unrelated to the professional  
          fiduciary or to each other, as specified.  Public agency  








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          fiduciaries (public guardians and public conservators) and those  
          employed by banks and trust companies are exempt from this  
          regulatory scheme.

          SB 1550 prohibits a court from appointing a person as a private  
          professional conservator, guardian, or trustee, or permitting a  
          person to continue to serve as such, unless he or she is  
          licensed as a professional fiduciary and has filed evidence of  
          the license with the clerk of the court in each county where a  
          petition for appointment has been filed.

          This bill, sponsored by the California Judges Association, makes  
          technical, clarifying amendments to the PFA with regards to  
          conservators, guardians, and trustees who may qualify as  
          professional fiduciaries under the PFA.

          In support of the bill, the author writes:
                      
               SB 308 is a very technical measure designed to codify  
               the principle that, for purposes of determining when a  
               trustee must be licensed, only trustors should be  
               counted, and not beneficiaries or trusts.  In many  
               cases trusts may have large numbers of beneficiaries,  
               and large numbers of trusts and sub-trusts might have  
               been established for tax reasons by a small number of  
               trustors.  The language codifying this point is  
               already included in regulations adopted by the  
               Professional Fiduciaries Bureau, Title 16 CCR Section  
               4406(e)(2), but for clarity the rule should be  
               contained in the statute.

               Second, the sponsor believes that Section 6501 is  
               unclear that persons employed by entities exempt from  
               licensure, but who are "moonlighting" as professional  
               fiduciaries, must be licensed.  The bill thus contains  
               language clarifying this point.

           Conservators, guardians, and trustees  .  Under existing law, a  
          "professional fiduciary" means a person who acts as a  
          conservator or guardian for two or more persons at the same time  
          who are not related to the professional fiduciary by blood,  
          adoption, marriage, or registered domestic partnership. 

          This bill clarifies that "conservator" means conservator of the  
          person or of the estate, or conservator of both the person and  








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          estate, of the conservatee and that "guardian" means guardian of  
          the estate, or guardian of the person and estate, of the ward.   
          These changes are consistent with former Probate Code provisions  
          and simply and appropriately exclude from regulation under the  
          PFA a guardian of the person, that is an adult who is taking  
          care of a child who has no assets.

          Under existing law, a "professional fiduciary" also means a  
          person who acts as a trustee or an agent under a durable power  
          of attorney for health care or for finances for more than three  
          people or three families, or a combination of people and  
          families that totals more than three, at the same time, who are  
          not related to the professional fiduciary by blood, adoption,  
          marriage, or registered domestic partnership.  This language was  
          adopted from the former statute (Probate Code Section 2854)  
          which exempted from the requirement of registration in the  
          Statewide Registry a trustee who serves as trustee for the  
          benefit of not more than three people or three families or any  
          combination of both that totals not more than three.  

          This bill clarifies that the counting of three people or three  
          families shall be based on the number of unrelated trustors, not  
          the number of beneficiaries of the trusts or the number of  
          trusts involved.  The reason for this is that trusts may have  
          classes of beneficiaries or a number of beneficiaries greater  
          than three.  There may also be subtrusts created by a general  
          trust, even by the same trustor or trustors.  The sponsor of the  
          bill, the California Judges Association, wants clarity in the  
          statute, to ease the transition to the new professional  
          fiduciary statutes, and to be able to implement the provisions  
          of the Professional Fiduciaries Act more easily.  Thus, a  
          husband and wife who have executed separate trusts with mutual  
          provisions will count as one family, even though there are in  
          reality two trusts that a trustee would serve under.

          These clarifying provisions are already embodied in the  
          regulations adopted by the Professional Fiduciaries Bureau at  
          the Department of Consumer Affairs, the agency with jurisdiction  
          over professional fiduciaries.

           Restrictions on "moonlighting" employee would apply to employees  
          of public agencies and public officers  .  Under current law, an  
          employee of a trust company or FDIC-insured financial  
          institution or its holding companies, subsidiaries, or  
          affiliates is exempt from the licensing requirements of the  








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          Professional Fiduciaries Act, provided the employee is acting in  
          the course and scope of that employment.  This bill extends  
          these restrictions on "moonlighting" employees to employees of  
          public agencies and public officers who are exempt from the  
          professional fiduciary provisions as well.  

          This bill also defines how to count degrees of kinship or  
          consanguinity: how to count the ways  .  As recommended by the  
          California Law Revisions Commission (CLRC), this bill also  
          provides guidance, for the entire Probate Code, on how to  
          determine kinship or consanguinity and how to calculate degrees  
          of kinship.  In 1982, the CLRC had recommended repealing former  
          Probate Code Sections 251-253, which then contained the general  
          rules of construction with respect to kinship and consanguinity.  
           At that time, the CLRC states, they felt that the provisions  
          were not necessary for purposes of the law governing wills and  
          intestate succession.  Since then, many other pieces of  
          legislation have returned the concept of degree of kinship and  
          consanguinity to the Probate Code, and it is now relevant once  
          more to provide guidance.  The definitions contained in this  
          bill are consistent with the repealed statutes.
           
          Technical Corrections  :  This bill also contains corrections to  
          obsolete cross-references to the no-contest clause provisions of  
          the Probate Code that were repealed by SB 1264 (Harman), Chap.  
          174, Stats. 2008.  SB 1264 repealed the former no-contest clause  
          statute.
           
           ARGUMENTS IN SUPPORT  :  In support of the bill, the Judicial  
          Council writes:  "The bill's statutory clarification of the  
          definition of professional fiduciary should help avoid confusion  
          and ease the courts' overall administration of these cases."

           Prior Legislation  :  The Omnibus Conservatorship and Guardianship  
          Reform Act of 2006 consisted of SB 1116 (Scott, Chap. 490), SB  
          1550 (Figueroa, Chap. 491), SB 1716 (Bowen, Chap. 492) and AB  
          1363 (Jones, Chap. 493).

           REGISTERED SUPPORT / OPPOSITION  :

          Support 
           
          California Judges Association (sponsor)
          Judicial Council 









                                                                  SB 308
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           Opposition 
           
          None on file
           

          Analysis Prepared by  :    Leora Gershenzon / JUD. / (916)  
          319-2334