BILL ANALYSIS ------------------------------------------------------------ |SENATE RULES COMMITTEE | SB 1038| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ------------------------------------------------------------ CONSENT Bill No: SB 1038 Author: Harman (R) Amended: 4/26/10 Vote: 21 SENATE JUDICIARY COMMITTEE : 4-0, 5/4/10 AYES: Corbett, Harman, Hancock, Leno NO VOTE RECORDED: Walters SUBJECT : Powers of attorney: duties SOURCE : Conference of California Bar Associations DIGEST : This bill deletes existing laws exemption providing that an attorney-in-fact is not liable for losses to the principal's property when the attorney-in-fact is not compensated. This bill provides the circumstances under which an attorney-in-fact is chargeable with breaches of duty. ANALYSIS : Existing law provides that a principal can grant to an attorney-in-fact the authority to act on the principal's behalf regarding the principal's real or personal property. (Probation Code Section 4123.) Existing law provides that a designated attorney-in-fact has no duty to exercise the authority granted in the power of attorney and is not subject to the other duties of an attorney-in-fact, regardless of whether the principal has become incapacitated, is missing, or is otherwise unable to CONTINUED SB 1038 Page 2 act. (Probation Code Section 4230.) Existing law provides that if an attorney-in-fact is not compensated, the attorney-in-fact is not liable for a loss to the principal's property unless the loss results from the attorney-in-fact's bad faith, intentional wrongdoing, or gross negligence. (Probation Code Section 4231.) This bill provides that a non-compensated attorney-in-fact will be held liable for breaches of duty, regardless of whether the breach was made in bad-faith or error. This bill authorizes the court, in its discretion, to excuse the attorney-in-fact from liability if the attorney-in-fact acted reasonably and in good faith under the circumstances known to the attorney-in-fact. This bill provides that an attorney-in-fact shall be held liable for twice the value of the property recovered by an action to recover the property or for surcharge. FISCAL EFFECT : Appropriation: No Fiscal Com.: No Local: No SUPPORT : (Verified 5/6/10) Conference of California Bar Associations (source) The Executive Committee of the Trusts and Estates Section of the State Bar of California ARGUMENTS IN SUPPORT : The author's office writes, "There has been a sharp increase in recent years of predators acting under Powers of Attorney who are stealing money and property from disabled adults or the elderly. Attorneys-in-fact are entrusted with enormous power and should be held accountable when they breach [their] duties or fail to adhere to the standards set forth in the Probate Code. However, there is no specific provision in the Probate Code that sets forth the liability for attorneys-in-fact who breach their statutory, legal and/or fiduciary duties under the code, or which addresses the enhanced liability of an attorney-in-fact who knowingly or wrongfully misappropriates the monies of the principal. CONTINUED SB 1038 Page 3 "Current law provides a presumption against liability for uncompensated attorneys, but provides no definition or guidance as to what constitutes "compensation" under the meaning of the statute. A frequent example of how the problem occurs in real life is where the attorney in fact does not receive regular payment for his or her services, but there are numerous cash withdrawals that cannot be accounted for, or unsupported "reimbursements" to the agent. A contrary example is the good friend who accepts de minimus or in-kind compensation (e.g., meals) in return for the assistance he and she provides or to offset a sacrifice he or she has made; it seems inapposite to hold such a person to the same standard as a professional fiduciary. SB 1038 would remove this confusing and exploitable distinction, and instead leave it to the court to determine the proper standard of liability." The Executive Committee of the Trusts and Estates Section of the State Bar of California support the bill since it "provides a means to protect agents under powers of attorney from liability in appropriate cases by giving courts discretion to excuse the attorney-in-fact in whole or in part from liability." RJG:do 5/6/10 Senate Floor Analyses SUPPORT/OPPOSITION: SEE ABOVE **** END **** CONTINUED