Amended in Senate April 6, 2015

Senate BillNo. 785


Introduced by Senator Morrell

February 27, 2015


An act to amendbegin delete Section 19000end deletebegin insert Sections 19000, 19001, 19003, 19006, 19008, 19024, 19025, 19320, 19323, and 19400end insert of the Probate Code, relating to trusts.

LEGISLATIVE COUNSEL’S DIGEST

SB 785, as amended, Morrell. Estates and trusts: creditor’s claim.

Existing law permits property to be titled in a trust, and provides that, upon the death of a settlor of a trust, the property of the deceased settlor that was subject to the power of revocation at the time of the settlor’s death is subject to the claims of creditors of the deceased settlor’s estate. Existing law defines specified terms for the purposes of these provisions.

This bill would definebegin delete additionalend deletebegin insert theend insert termsbegin insert “probate estate” and “trust estate”end insert for the purposes of thesebegin delete provisions, including the terms “decedent’s estate” and “trust estate.”end deletebegin insert provisions and clarify that certain uses of the term “estate” in existing law refer to a probate estate.end insert

Vote: majority. Appropriation: no. Fiscal committee: no. State-mandated local program: no.

The people of the State of California do enact as follows:

P1    1

SECTION 1.  

Section 19000 of the Probate Code is amended
2to read:

3

19000.  

As used in this part:

P2    1(a) “Claim” means a demand for payment for any of the
2following, whether due, not due, accrued or not accrued, or
3contingent, and whether liquidated or unliquidated:

4(1) Liability of the deceased settlor, whether arising in contract,
5tort, or otherwise.

6(2) Liability for taxes incurred before the deceased settlor’s
7death, whether assessed before or after the deceased settlor’s death,
8other than property taxes and assessments secured by real property
9liens.

10(3) Liability for the funeral expenses of the deceased settlor.

11(b) “Claim” does not include a dispute regarding title to specific
12property alleged to be included in the trust estate.

13(c) “Creditor” means a person who may have a claim against
14the trust property.

15(d) “Trust” means a trust described in Section 18200, or, if a
16portion of a trust, that portion that remained subject to the power
17of revocation at the deceased settlor’s death.

18(e) “Deceased settlor” means a deceased person who, at the time
19of his or her death, held the power to revoke the trust in whole or
20in part.

21(f) “Debts” means all claims, as defined in subdivision (a), all
22expenses of administration, and all other proper charges against
23the trust estate, including taxes.

24(g) begin delete“Decedent’s estate” and “decedent’s probate estate” mean end delete
25begin insert“Probate estate” means end inserta decedent’s estate subject to
26administration pursuant to Division 7 (commencing with Section
277000).

28(h) “Trust estate”begin delete and “trust estate of the deceased settlor” meanend delete
29begin insert meansend insert a decedent’s property, real and personal, that is titled in the
30name of the trustee of the deceased settlor’s trust or confirmed by
31order of the court to the trustee of the deceased settlor’s trust.

32begin insert

begin insertSEC. 2.end insert  

end insert

begin insertSection 19001 of the end insertbegin insertProbate Codeend insertbegin insert is amended to read:end insert

33

19001.  

(a) Upon the death of a settlor, the property of the
34deceased settlor that was subject to the power of revocation at the
35time of the settlor’s death is subject to the claims of creditors of
36the deceased settlor’sbegin insert probateend insert estate and to the expenses of
37administration of thebegin insert probateend insert estate to the extent that the deceased
38settlor’sbegin insert probateend insert estate is inadequate to satisfy those claims and
39expenses.

P3    1(b) The deceased settlor, by appropriate direction in the trust
2instrument, may direct the priority of sources of payment of debts
3among subtrusts or other gifts established by the trust at the
4deceased settlor’s death. Notwithstanding this subdivision, no
5direction by the settlor shall alter the priority of payment, from
6whatever source, of the matters set forth in Section 11420 which
7shall be applied to the trust as it applies to a probate estate.

8begin insert

begin insertSEC. 3.end insert  

end insert

begin insertSection 19003 of the end insertbegin insertProbate Codeend insertbegin insert is amended to read:end insert

9

19003.  

(a) At any time following the death of the settlor, and
10during the time that there has been no filing of a petition to
11administer thebegin insert probateend insert estate of the deceased settlor in this state
12of which the trustee has actual knowledge, the trustee may file
13with the court a proposed notice to creditors. Upon the court’s
14assignment of a proceeding number to the proposed notice, the
15trustee shall publish and serve notice to creditors of the deceased
16settlor in the form and within the time prescribed in Chapters 3
17(commencing with Section 19040) and 4 (commencing with
18Section 19050). That action shall constitute notice to creditors of
19the requirements of this part.

20(b) The filing shall be made with the superior court for the
21county in this state where the deceased settlor resided at the time
22of death, or if none, in any county in this state in which trust
23property was located at the time of the settlor’s death, or if none,
24in the county in this state that was the principal place of
25administration of the trust at the time of the settlor’s death.

26(c) Nothing in subdivision (a) affects a notice or request to a
27public entity required by Chapter 7 (commencing with Section
2819200).

29begin insert

begin insertSEC. 4.end insert  

end insert

begin insertSection 19006 of the end insertbegin insertProbate Codeend insertbegin insert is amended to read:end insert

30

19006.  

(a) If a trustee of a trust established by the deceased
31settlor files, publishes, and serves notice as provided in Section
3219003 the protection from creditors afforded that trustee and trust
33shall also be afforded to any other trusts established by the
34deceased settlor and the trustees and beneficiaries of those trusts.

35(b) If the personal representative of the deceased settlor’s
36begin insert probateend insert estate has published notice under Section 8120 and given
37notice of administration of thebegin insert probateend insert estate of the deceased settlor
38under Chapter 2 (commencing with Section 9050) of Part 4 of
39Division 7, the protection from creditors afforded the personal
P4    1representative of the deceased settlor’sbegin insert probateend insert estate shall be
2afforded to the trustee and to the beneficiaries of the trust.

3(c) In the event that, following the filing and publication of the
4notice set forth in Section 19003, there shall be commenced any
5proceeding under which a notice pursuant to Section 8120 is
6required to be published, then the trustee shall have a right of
7collection against thatbegin insert probateend insert estate to recover the amount of any
8debts paid from trust assets that would otherwise have been
9satisfied (whether by law or by direction in the deceased settlor’s
10will or trust) by the property subject to probate proceedings.

11begin insert

begin insertSEC. 5.end insert  

end insert

begin insertSection 19008 of the end insertbegin insertProbate Codeend insertbegin insert is amended to read:end insert

12

19008.  

If there is no proceeding to administer thebegin insert probateend insert estate
13of the deceased settlor, and if the trustee does not file a proposed
14notice to creditors pursuant to Section 19003 and does not publish
15notice to creditors pursuant to Chapter 3 (commencing with Section
1619040), then the liability of the trust to any creditor of the deceased
17settlor shall be as otherwise provided by law.

18begin insert

begin insertSEC. 6.end insert  

end insert

begin insertSection 19024 of the end insertbegin insertProbate Codeend insertbegin insert is amended to read:end insert

19

19024.  

At least 30 days before the time set for the hearing on
20the petition, the petitioner shall cause notice of the time and place
21of the hearing, together with a copy of the petition, to be mailed
22to each of the following persons who is not a petitioner:

23(a) All trustees of the trust and of any other trusts to which an
24allocation of liability may be approved by the court pursuant to
25the petition.

26(b) All beneficiaries affected.

27(c) The personal representative of the deceased settlor’sbegin insert probateend insert
28 estate, if any is known to the trustee.

29(d) The Attorney General, if the petition relates to a charitable
30trust subject to the jurisdiction of the Attorney General, unless the
31Attorney General waives notice.

32begin insert

begin insertSEC. 7.end insert  

end insert

begin insertSection 19025 of the end insertbegin insertProbate Codeend insertbegin insert is amended to read:end insert

33

19025.  

(a) If any creditor, beneficiary, or trustee fails timely
34to file a written pleading upon notice, then the case is at issue,
35notwithstanding the failure. The case may proceed on the petition
36and written statements filed by the time of the hearing, and no
37further pleadings by other persons are necessary. The creditor,
38beneficiary, or trustee who failed timely to file a written pleading
39upon notice may not participate further in the proceeding for the
P5    1determination requested, and that creditor, beneficiary, or trustee
2shall be bound by the decision in the proceeding.

3(b) The court’s order, when final, shall be conclusive as to the
4liability of the trust property with respect to the claims at issue in
5the petition. In the event of a subsequent administration of the
6begin insert probateend insert estate of the deceased settlor, that order shall be binding
7on the personal representative of thebegin insert probateend insert estate of the deceased
8settlor as well as all creditors and beneficiaries who had notice of
9the petition.

10begin insert

begin insertSEC. 8.end insert  

end insert

begin insertSection 19320 of the end insertbegin insertProbate Codeend insertbegin insert is amended to read:end insert

11

19320.  

If it appears that a debt of the deceased settlor has been
12paid or is payable in whole or in part from property in the deceased
13settlor’s trust, then the trustee, the surviving spouse, the personal
14representative, if any,begin delete orend deletebegin insert ofend insert a deceased settlor’s probate estate, or
15a beneficiary may petition for an order to allocate the debt.

16begin insert

begin insertSEC. 9.end insert  

end insert

begin insertSection 19323 of the end insertbegin insertProbate Codeend insertbegin insert is amended to read:end insert

17

19323.  

(a) At least 30 days before the time set for the hearing
18on the petition, the petitioner shall cause notice of the time and
19place of the hearing and a copy of the petition to be served on the
20surviving spouse in the manner provided in Chapter 4 (commencing
21with Section 413.10) of Title 5 of Part 2 of the Code of Civil
22Procedure.

23(b) At least 30 days before the time set for the hearing on the
24petition, the petitioner shall cause notice of the time and place of
25hearing, together with a copy of the petition, to be mailed to each
26of the following persons who are not petitioners:

27(1) All trustees of the trust and of any trusts to which an
28allocation of liability may be approved by the court pursuant to
29the petition.

30(2) All beneficiaries affected.

31(3) The personal representative of the deceased settlor’sbegin insert probateend insert
32 estate, if any is known to the trustee.

33(4) The Attorney General, if the petition relates to a charitable
34trust subject to the jurisdiction of the Attorney General, unless the
35Attorney General waives notice.

36begin insert

begin insertSEC. 10.end insert  

end insert

begin insertSection 19400 of the end insertbegin insertProbate Codeend insertbegin insert is amended to
37read:end insert

38

19400.  

Subject to Section 366.2 of the Code of Civil Procedure,
39if there is no proceeding to administer thebegin insert probateend insert estate of the
40deceased settlor, and if the trustee does not file a proposed notice
P6    1to creditors pursuant to Section 19003 and does not publish notice
2to creditors pursuant to Chapter 3 (commencing with Section
319040), then a beneficiary of the trust to whom payment, delivery,
4or transfer of the deceased settlor’s property is made pursuant to
5the terms of the trust is personally liable, to the extent provided in
6Section 19402, for the unsecured claims of the creditors of the
7deceased settlor’sbegin insert probateend insert estate.



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