BILL ANALYSIS ------------------------------------------------------------ |SENATE RULES COMMITTEE | SB 308| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ------------------------------------------------------------ UNFINISHED BUSINESS Bill No: SB 308 Author: Harman (R) Amended: 6/15/09 Vote: 21 SENATE JUDICIARY COMMITTEE : 5-0, 3/31/09 AYES: Corbett, Harman, Florez, Leno, Walters SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8 SENATE FLOOR : 37-0, 4/23/09 (Consent) AYES: Aanestad, Alquist, Ashburn, Benoit, Calderon, Cedillo, Cogdill, Corbett, Correa, Cox, Denham, DeSaulnier, Dutton, Florez, Hancock, Hollingsworth, Huff, Kehoe, Leno, Liu, Lowenthal, Maldonado, Negrete McLeod, Oropeza, Padilla, Pavley, Romero, Runner, Simitian, Steinberg, Strickland, Walters, Wiggins, Wolk, Wright, Wyland, Yee NO VOTE RECORDED: Ducheny, Harman, Vacancy ASSEMBLY FLOOR : 76-0, 8/17/09 (Consente) - See last page for vote SUBJECT : Professional fiduciaries: donative transfers SOURCE : California Judges Association DIGEST : This bill is a technical measure that refines the definition of "professional fiduciary" under the Professional Fiduciaries Act to include varying types of CONTINUED SB 308 Page 2 conservators and guardians and specifies how trusts and beneficiaries are counted for purposes of the 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 scope of their employment duties. Assembly Amendments make conforming changes and clarify specific definitions relative to probate issues. ANALYSIS : Existing law defines and regulates the activities of professional fiduciaries. (Business & Professions Code Section 6501 et seq. All references are to the Business & Professions Code unless otherwise indicated.) Existing law 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).) This bill 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." Existing law defines "professional fiduciary" to also include a person who acts as a trustee, agent under a durable power of attorney for 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. This bill clarifies that in making this determination: (1) all individuals who are related to each other shall count 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 will be counted for SB 308 Page 3 purposes of this qualification of a professional fiduciary. This bill also specifies that individuals who are related to the fiduciary shall not be counted. Existing law provides certain classes of entities and individuals exemptions from the designation of "professional fiduciary." An employee of a trust company or a Federal Deposit Insurance Corporation (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 (PFA), as long as the employee is acting in the course and scope of that employment. Existing law also 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. This bill 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 exemption for public agencies and public officers. Existing law, effective January 1, 2010, in relation to wills, trusts, and other instruments, defines and regulates no contest clauses. Existing law limits the application of a no contest clause to specific contests and provides that a no contest clause may be enforced against a direct contest only when it is brought without probable cause. Former law exempted certain contests from the enforcement of the no contest clause under specified circumstances, including if there was reasonable cause to believe that instrument had been revoked. Former law also permitted a beneficiary to apply to a court for a determination of whether a particular motion, petition, or other act by the beneficiary would be a contest within the terms of a no contest clause. This bill makes conforming changes to clarify under what circumstances the former law would apply. SB 308 Page 4 Existing law provides for a decedent's property to be distributed through intestate succession when the decedent dies without a will, trust, or other instrument based on the degree of kinship. Existing law prohibits certain property transactions between certain court officials or employees or their relatives and guardians or conservators based on the lineal or collateral consanguinity of the person to the court official or employee. Existing law requires a guardian or conservator, when engaging in certain property transactions, or when seeking approval for certain acts, with the guardians or conservator's family members, based on lineal or collateral consanguinity, to disclose that relationship to the court upon a petition for approval. This bill defines the degree of kinship or consanguinity for the purpose of these provisions. Background In 2006, the Legislature enacted a package of bills to reform the conservatorship system in the State of California. Major features of the reforms, embodied in the Omnibus Conservatorship and Guardianship Reform Act of 2006 (SB 1116 [Scott], Chapter 490 Statutes of 2006, SB 1550 [Figueroa], Chapter 491, Statutes of 2006, SB 1716 [Bowen], Chapter 492, Statutes of 2006, and AB 1363 [Jones], Chapter 493, Statutes of 2006) are: (1) increases frequency of review of conservatorships; (2) broadens scope of court investigators' reports; (3) special procedure for the sale of a conservatee's primary residence; and (4) the regulation and licensing of private professional fiduciaries including private professional conservators. The bills 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 (Figueroa) establishes the 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 SB 308 Page 5 persons unrelated to the professional fiduciary or to each other, as specified. Public agency fiduciaries (public guardians and public conservators) and those employed by banks and trust companies are exempt from this regulatory scheme. SB 1550 (Figueroa) also 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/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 makes some technical, clarifying amendments to the PFA with regards to conservators, guardians, and trustees who may qualify as a professional fiduciary under the PFA. Prior Legislation SB 1550 (Figueroa), Chapter 491, Statutes of 2006 , enacted the Professional Fiduciaries Act. AB 299 (Tran), Chapter 130, Statutes of 2007 , exempted from regulation as a professional fiduciary a person whose sole activity as a professional fiduciary is as an investment adviser. FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes Local: No SUPPORT : (Verified 8/18/09) California Judges Association (source) Judicial Council of California ARGUMENTS IN SUPPORT : The author's office states, this bill 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 SB 308 Page 6 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. 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. ASSEMBLY FLOOR : AYES: Adams, Ammiano, Anderson, Arambula, Beall, Bill Berryhill, Tom Berryhill, Blakeslee, Block, Blumenfield, Brownley, Buchanan, Caballero, Charles Calderon, Carter, Chesbro, Conway, Coto, Davis, De La Torre, De Leon, DeVore, Duvall, Emmerson, Eng, Evans, Feuer, Fletcher, Fong, Fuentes, Fuller, Furutani, Gaines, Galgiani, Garrick, Gilmore, Hagman, Hall, Harkey, Hayashi, Hernandez, Hill, Huber, Huffman, Jeffries, Jones, Knight, Krekorian, Lieu, Logue, Bonnie Lowenthal, Ma, Mendoza, Miller, Monning, Nava, Nestande, Niello, Nielsen, John A. Perez, V. Manuel Perez, Portantino, Ruskin, Salas, Silva, Skinner, Solorio, Audra Strickland, Swanson, Torlakson, Torres, Torrico, Tran, Villines, Yamada, Bass NO VOTE RECORDED: Cook, Saldana, Smyth, Vacancy RJG:do 8/18/09 Senate Floor Analyses SUPPORT/OPPOSITION: SEE ABOVE **** END ****