BILL ANALYSIS Ó
SENATE JUDICIARY COMMITTEE
Senator Noreen Evans, Chair
2011-2012 Regular Session
AB 1670 (Lara)
As Amended June 25, 2012
Hearing Date: July 3, 2012
Fiscal: No
Urgency: No
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SUBJECT
Estates: Administration
DESCRIPTION
Existing law provides that, if a California resident dies
intestate (without a will), the court may appoint an
administrator over the decedent's estate, and the
court-appointed administrator must meet several qualifications,
including being a United States resident. This bill would
authorize court appointment of an administrator nominated by a
non-U.S. resident beneficiary to administer the decedent's
estate. This bill would sunset on January 1, 2016.
BACKGROUND
In California, if a person dies intestate, the court must
appoint a personal representative to administer the decedent's
estate. Under existing law, only certain individuals, such as
United States residents, may be appointed as an administrator.
(Prob. Code Sec. 8402(a).) A person (typically a potential heir
of the decedent), who would otherwise qualify to be the
administrator, may nominate another person to be appointed as
administrator. Such nomination may occur because the
beneficiary may believe another person is more qualified to act
as the estate administrator.
This bill would authorize a court to appoint an administrator
who is nominated by a non-U.S. person, who otherwise would not
qualify to be appointed as an administrator.
Initially, this bill was substantially similar to a provision
contained in AB 239 (Kaloogian, Ch. 175, Stats. 2009), which
(more)
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originally failed passage in this Committee but was approved
after this provision was deleted from the bill. Unlike AB 239,
this bill was amended to provide substantial protections for
beneficiaries who did not nominate the estate administrator in
order to protect against potential conflicts of interest between
the nominated administrator and other beneficiaries.
CHANGES TO EXISTING LAW
Existing law provides that, if a person dies intestate, the
court shall appoint an administrator as personal representative.
(Prob. Code Sec. 8460(a).)
Existing law provides that a person is not competent to act as a
personal representative in any of the following circumstances:
(1) the person is under the age of majority;
(2) the person is subject to a conservatorship of the estate
or is otherwise incapable of executing, or is otherwise unfit
to execute, the duties of the office;
(3) there are grounds for removal of the person from office;
(4) the person is not a resident of the United States; or
(5) the person is a surviving partner of the decedent and an
interested person objects to the appointment. (Prob. Code
Sec. 8402(a).)
Existing law provides that items (4) and (5) above do not apply
to a person named as executor or successor executor in the
decedent's will. (Prob. Code Sec. 8402(b).)
Existing law provides that a person is entitled to appointment
as administrator in the following order of priority based upon
the relation to the decedent: (a) surviving spouse or domestic
partner; (b) children; (c) grandchildren; (d) other issue; (e)
parents; (f) brothers and sisters; (g) issue of brothers and
sisters; (h) grandparents; (i) issue of grandparents; (j)
children of a predeceased spouse or domestic partner; (k) other
issue of a predeceased spouse or domestic partner; (l) other
next of kin; (m) parents of a predeceased spouse or domestic
partner; (n) issue of parents of a predeceased spouse or
domestic partner; (o) conservator or guardian of the estate
acting in that capacity at the time of death who has filed a
first account and is not acting as conservator or guardian for
any other person; (p) public administrator; (q) creditors; or
(r) any other person. (Prob. Code Sec. 8461.)
Existing law authorizes a court to appoint as administrator a
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person nominated by a person otherwise entitled to appointment
or by the guardian or conservator of the estate of a person
otherwise entitled to appointment. Existing law provides that
if a person making a nomination for appointment of an
administrator is the surviving spouse or domestic partner,
child, grandchild, other issue, parent, brother or sister, or
grandparent of the decedent, the nominee has priority next after
those in the class of the person making the nomination.
Otherwise, the court in its discretion may appoint either the
nominee or a person of a class lower in priority to that of the
person making the nomination, but other persons of the class of
the person making the nomination have priority over the nominee.
(Prob. Code Sec. 8465.)
This bill would authorize a court to appoint an administrator
nominated by a person who would otherwise be entitled for
appointment but who is ineligible for appointment because he or
she is not a United States resident.
This bill would require an administrator, who is nominated by a
non-U.S. resident, to reside in California to be eligible for
appointment as the estate administrator.
This bill would provide that a court may, in its discretion,
deny the appointment of an administrator nominated by a non-U.S.
resident and appoint another person. In determining whether to
appoint the nominee, this bill would provide factors for the
court to consider, which are not limited to the following:
whether the nominee has a conflict of interest with the heirs
or any other interested party;
whether the nominee had a business or personal relationship
with the decedent or decedent's family before the decedent's
death;
whether the nominee is engaged in or acting on behalf of an
individual, a business, or other entity that solicits heirs to
obtain the person's nomination for appointment as
administrator; and
whether the nominee has been appointed as a personal
representative in any other estate.
This bill would provide that, if the court decides to appoint a
nominee of a non-U.S. resident, the court shall require the
nominee to obtain bond, unless the court orders otherwise for
good cause. This bill would provide that any order for good
cause must be supported by specific findings of fact, and shall
consider the need for the protection of creditors, heirs, and
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any other interested parties. Before waiving a bond, the court
shall consider all other alternatives, including, but not
limited to, the deposit of property in the estate on the
condition that the property, including any earnings thereon,
will not be withdrawn except on authorization of the court.
This bill would provide that a waiver of all of the heirs of the
requirement of a bond shall not constitute good cause.
This bill would provide that, if the appointed nominee ceases to
be a California resident following his or her appointment, he or
she shall be deemed to have resigned as administrator. Under
this bill, the court shall not lose jurisdiction of the
proceeding by any resignation under this subdivision.
This bill would require the nominee to submit personally to the
jurisdiction of the court.
This bill would sunset on January 1, 2016.
COMMENT
1. Stated need for the bill
The author writes:
The deficiency in current law precludes an heir of an estate
who is not a resident of the United States from having the
ability of nominating a qualified person to be the
administrator of the estate. As a result, a public
administrator who has no ties to the decedent takes over the
administration of the estate. Nonresident heirs have no
choice or say in who acts as the administrator of their
inherited estate.
By amending current law, we will ensure that non-resident
heirs have the ability to appropriately administer and care
for their inherited estate in the best manner they see fit.
AB 1670 will simply provide the ability for a nonresident heir
to nominate someone that is qualified to be the administrator
of the estate, not to allow a nonresident heir to be the
administrator.
The Executive Committee of the Trusts & Estates Section of the
State Bar of California (TEXCOM), sponsor of this bill, writes:
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A nonresident heir is currently prohibited from nominating an
administrator when a decedent dies intestate (without a valid
will) in California. That is the case even though the
decedent could have named a nonresident to act as executor or
provided a nonresident with a nomination power in his or her
will. For example, suppose that a decedent had immigrated to
the United States from another country, was financially
successful and accumulated a significant estate, then died as
a resident of California leaving heirs only in that other
country. Those heirs would be prohibited from nominating an
administrator (even a United States resident) to manage the
estate, even though they stand to receive all of the assets.
The public administrator would then be appointed, even over
the objection of the family members and would take its fees
out of the assets to be received by the decedent's family in
that other country.
Redirecting assets that would otherwise pass to families who
reside outside of the United States, merely because the
decedent did not have a will, creates a fundamental
unfairness. Moreover, this deficiency in the law deprives
families of the right to select the person best suited to
manage the assets they stand to receive.
2. Providing protection for beneficiaries
Existing law provides that, among other things, a person is not
competent to act as a personal representative if the person is
not a United States resident. (Prob. Code Sec. 8402.) Existing
law provides that a person who would qualify to be appointed as
the administrator of a decedent's estate may nominate another
person to be appointed as the estate administrator. (Prob. Code
Sec. 8465.) Because a foreign beneficiary would not qualify to
act as an estate administrator for lack of U.S. residency,
existing law does not allow a foreign beneficiary to nominate an
estate administrator.
TEXCOM argues that courts have noted the injustice of
prohibiting a non-U.S. beneficiary from nominating an
administrator. TEXCOM points to the Estate of Damskog (1991) 1
Cal.App.4th 78, in which the court upheld that a non-U.S.
resident could not nominate an administrator but noted that "no
such jurisdictional need justifies a residency requirement for
nominators. This very persuasive argument is better addressed
to the Legislature than to the courts." (Estate of Damskog
(1991) 1 Cal.App.4th 78, 82.
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In the Estate of Damskog (1991) 1 Cal.App.4th 78, the decedent
died intestate and his two sisters, residents of Norway,
nominated an estate administrator. The public administrator
objected to the nomination. The court held that California law
required United States residency of both nominators and
administrators, and the court appointed the public administrator
to oversee the estate administration. The court, having
discussed the legislative history of the nomination and
appointment of administrator provisions, determined that
"although there is no explicit residency requirement for the
nominator in section 8465, she must herself be 'entitled to
appointment' and that entitlement depends on United States
residence under section 8402. Had the Legislature wished to
retain differing residency requirements for administrators and
nominators, it could easily have said so in the same 'but for'
language it used in 1967 about California residency." (Id. at
pp. 81-82.)
This bill would respond to the Damskog ruling by authorizing
court-appointment of an estate administrator nominated by a
foreign person. Supporters of this bill argue that, given the
development of the global economy with U.S. born beneficiaries
now living and working in foreign countries, this bill is
necessary to keep in step with the changing demographic of
California families. In addition to the example provided by
TEXCOM above, children of California residents who accept jobs
in other countries would be prohibited from nominating an estate
administrator, who may be an individual known to the family and
who knows the wishes of the decedent better than the public
administrator. In support of this bill, the United Farm Workers
assert that existing law "deprives families of the right to
select the person best suited to manage the assets they stand to
receive. This bill will help ensure that a nonresident heir has
the authority to appoint an administrator of their choice to
administer the assets of his or her estate."
Staff notes that the Damskog court's discussion of the
development of the estate administrator and nomination statutes
is instructive on the issue of whether it is appropriate to
consider foreign nominators to appoint an estate administrator.
The Damskog court pointed out that in 1931, an estate
administrator was required to be a California resident, and in
1966, case history showed that nominators had no better
standing. (Estate of Damskog (1991) 1 Cal.App.4th at p. 80.)
But by 1967, a nominee who was not a California resident but a
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resident of the U.S. could nominate an estate administrator.
(Id. at p. 81.) In 1976, the U.S. residency requirement was
deleted for nominators. (Id.) In 1980, the law changed again
to require a nominee to be a U.S. resident, but an administrator
no longer had to be a California resident, just a U.S. resident.
(Id.)
The changes in the residency requirements appear to coincide
with increased mobility of family members across the country.
By the late 1960's, people were more fluid and moving to various
parts of the country. By the 1980's, familial demographics had
changed such that nuclear families may be spread out over the
country. At the same time, California presumably recognized
that, as long as the court could maintain jurisdiction over U.S.
residents, the California residency requirement for
administrators was less important. Similarly, this bill would
recognize the continued mobility of family members and authorize
a beneficiary in another country to nominate an estate
administrator in California. However, to ensure the protection
of other beneficiaries, this bill contains a California
residency requirement for a nominated estate administrator as
discussed further in Comment 4.
3. Opposition concerns
Opponents contend that allowing a foreign beneficiary to
nominate an administrator of their choosing could have dire
consequences for other beneficiaries, who may not be aware of
the decedent's passing. As such, these beneficiaries may not
receive proper notice from the nominated administrator, who will
arguably have a conflict of interest with additional
beneficiaries. Further, the opponents argue that, when the
nomination of an administrator is not challenged, a court has
little reason not to appoint the administrator. On advice and
documents submitted by this administrator, the court can approve
distribution of the decedent's estate to foreign beneficiaries.
In the event additional beneficiaries, who may not have received
proper notice of administration of the estate from the nominated
administrator, come forward after probate of the estate, the
additional beneficiaries may be unable to recover
misappropriated estate assets from other beneficiaries in
foreign countries because the foreign nominee is not required to
submit to California jurisdiction.
Further, California State Association of Public Administrators,
Public Guardians, and Public Conservators (Public
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Administrators) argue that:
Public Administrators are county employees who are assigned by
the courts to administer the estates of decedents who die
without a will or trust and when there are no other relatives
or heirs willing to administer the estate. The Public
Administrator's primary purpose is to protect the estate from
fraud or misuse and convey its asserts to those rightfully
entitled. Besides identifying the rightful heirs, as
prescribed by law, the Public Administrator will pay
creditors, including the federal, state, and local
governments, before turning over any remaining assets to the
proper heirs of the Ýestate].
AB 1670 would impact Public Administrators both from a policy
standpoint as well as a fiscal. A person who lives outside of
the United States who is allowed to nominate an administrator
for an estate, as proposed in AB 1670, is not subject to
enforcement actions in our judicial system. . . .
Furthermore, in these cases the courts often appoint a Public
Administrator to finalize the proper resolution of an estate,
even though a person appointed by the initially identified
heir administered the estate throughout the original probate
process. In simple terms, the Public Administrator is left to
clean up the mess, with little or no hope of a proper
resolution or payment for their services because the assets
are in a foreign country.
It has been argued that the rights of a potential heir to
appoint the person they choose to administer their relative's
estate should be the same for any person no matter what
country they live in. The problem with this argument is that
the probate process is supposed to protect the interests of
the decedent first . . ., as well as those of any creditors
Ýand an] heir's interest . . . is secondary to the interests
of the estate. . . .
AB 1670 will allow profitable estates to be "cherry picked" by
others leaving the insolvent and difficult estates to Public
Administrators. Such a scenario will exacerbate a significant
fiscal hardship for Public Administrator offices and counties
in two ways. First, the only source of offsetting revenue is
removed and second, the difficult and insolvent cases, where
foreign heirs could nominate, will still be left to Public
Administrators and County Counsels to administer, literally a
fiscal "double whammy".
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Staff notes that the concerns raised by opponents of this bill
are the same as those raised when this Committee considered, and
rejected, this proposal in AB 239 (Kaloogian, Ch. 175, Stats.
1999). However, as discussed further below, this bill has been
substantially amended to address jurisdictional and beneficiary
and creditor protection concerns raised by the opponents.
4. Recent amendments
Recent amendments providing bonding and jurisdictional
requirements attempt to address the concerns raised by the
opposition. Specifically, this bill was amended to.
a. Factors to be considered for appointment of nominee
In determining whether to appoint the nominee, this bill would
provide factors for the court to consider, which are not
limited to the following:
whether the nominee has a conflict of interest with the
heirs or any other interested party;
whether the nominee had a business or personal
relationship with the decedent or decedent's family before
the decedent's death;
whether the nominee is engaged in or acting on behalf of
an individual, a business, or other entity that solicits
heirs to obtain the person's nomination for appointment as
administrator; and
whether the nominee has been appointed as a personal
representative in any other estate.
These factors are relevant to determine whether the nominee is
an "heir-hunter," who may solicit his or her services to
foreign beneficiaries in order to take a large percentage of
the estate. Concern has arisen that those individuals may not
take complete action to identify all potential beneficiaries
of the estate so as to maintain a large portion going to the
nominating beneficiary.
a. Jurisdiction
This bill would require an administrator who is nominated by a
non-U.S. resident to reside in California in order to be
eligible for appointment as the estate administrator. This
bill would also require the administrator to personally submit
to the court's jurisdiction, and, in the event the
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administrator moves away from California, the administrator
position would be deemed vacant so that the court could then
appoint another administrator subject to the court's
jurisdiction to assume estate administration. These
jurisdictional requirements would provide additional
protections for beneficiaries who learn about the death of the
decedent after estate administration has begun, thus allowing
them to make certain the administrator performs his or her
tasks fairly and appropriately to avoid judicial
repercussions.
b. Bonding requirements
This bill would provide that, if the court decides to appoint
a nominee of a non-U.S. resident, the court shall require the
nominee to obtain a bond, unless the court orders otherwise
for good cause. This bill would also provide that any order
for good cause must be supported by specific findings of fact,
and shall consider the need for the protection of creditors,
heirs, and any other interested parties. Before waiving a
bond, the court shall consider all other alternatives,
including, but not limited to, the deposit of property in the
estate on the condition that the property, including any
earnings thereon, will not be withdrawn except on
authorization of the court.
This provision attempts to address the Public Administrator's
concern that the nominated administrator may be acting with a
conflict of interest in favor of the nominating beneficiary
and against potential heirs of the estate. Requiring a bond
that may not be waived unless certain criteria are considered
would help protect the estate and claims made by creditors or
beneficiaries who are made aware of the estate administration
after administration has begun.
Although these amendments may not fully address all of the
fiscal concerns of the opponents, the bill would provide
substantial protections for beneficiaries and creditors through
bonding and jurisdictional requirements, which are intended to
reduce the incidence of "heir-hunters" soliciting for business
and reduce nominated administrator misconduct with respect to
the estate assets.
Support : California Rural Legal Assistance Foundation; Mexican
American Legal Defense and Educational Fund; United Farm
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Workers; one individual
Opposition : California State Association of Counties;
California State Association of Public Administrators, Public
Guardians, and Public Conservators; County of Los Angeles; Urban
Counties Caucus
HISTORY
Source : Executive Committee of the Trusts and Estates Section
of the State Bar of California
Related Pending Legislation : None Known
Prior Legislation : AB 239 (Kaloogian, Ch. 175, Stats. 1999) See
Background and Comment 3.
Prior Vote :
Assembly Floor (Ayes 52, Noes 15)
Assembly Committee on Judiciary (Ayes 6, Noes 2)
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