SB 1158, as introduced, Anderson. Trusts: modification or termination.
Existing law authorizes the beneficiaries of an irrevocable trust, upon the consent of all beneficiaries, to compel the modification or termination of the trust upon petition to the court. Existing law prohibits the modification or termination of an irrevocable trust if the continuance of the trust is necessary to carry out a material purpose of the trust, unless the court determines that modification or termination under the circumstances outweighs the interest in accomplishing a material purpose of the trust. Notwithstanding that provision, existing law prohibits the court from terminating a trust that is subject to a valid restraint on the transfer of a beneficiary’s interest.
This bill would revise and recast these provisions to instead authorize, upon the consent of all beneficiaries, the modification or termination of an irrevocable trust as agreed to by the beneficiaries upon petition to the court. The bill would instead authorize the court, in determining whether modification or termination would defeat a material purpose of the trust, to take into consideration any factors deemed relevant to the court, including whether the trust is subject to a valid restraint on the transfer of a beneficiary’s interest. The bill would delete the provision that the court is prohibited from terminating an irrevocable trust that is subject to a valid restraint on the transfer of a beneficiary’s interest.
Existing law authorizes the settlor and the beneficiaries of a trust, upon the consent of the settlor and all beneficiaries, to compel the modification or termination of the trust.
This bill would revise and recast those provisions and instead authorize the trust to be modified or terminated by the written consent of the settlor and all beneficiaries without court approval of the modification or termination.
Existing law provides that the presumption of fertility is rebuttable in determining the class of beneficiaries whose consent is necessary to modify or terminate a trust pursuant to the above-described provisions.
This bill would additionally authorize the court to limit the beneficiaries whose consent is required under those provisions to beneficiaries whose interests would be substantially impaired by the modification or termination, as specified.
Vote: majority. Appropriation: no. Fiscal committee: no. State-mandated local program: no.
The people of the State of California do enact as follows:
Section 15403 of the Probate Code is amended
2to read:
(a) Except as provided in subdivision (b), if all
4beneficiaries of an irrevocable trustbegin delete consent, they may compelend delete
5begin insert consent to aend insert modification or termination of thebegin delete trustend deletebegin insert trust, the trust
6shall be modified or terminated by the court as agreed to by the
7beneficiariesend insert upon petition to the court.
8(b) begin deleteIf the continuance of the trust is necessary to carry out a begin insertThe
court shall grant a petition for modification
9material purpose of the trust, the trust cannot be modified or
10terminated unless the court, in its discretion, determines that the
11reason for doing so under the circumstances outweighs the interest
12in accomplishing end delete
13or termination made pursuant to subdivision (a) unless the court
14determines the modification or termination would defeat end inserta material
15purpose of thebegin delete trust. Under this section the court does not have begin insert trust, after
16discretion to permit termination of a trust thatend delete
17considering, in addition to any other factors deemed relevant to
18the court, whether the trustend insert is subject to a valid restraint onbegin insert theend insert
19 transfer ofbegin delete theend deletebegin insert aend insert beneficiary’s interest as provided in Chapter 2
20
(commencing with Section 15300).begin insert The court is not precluded
P3 1from modifying or terminating the trust solely because of such a
2restraint on the transfer.end insert
Section 15404 of the Probate Code is amended to read:
(a) begin deleteIf end deletebegin insertA trust may be modified or terminated by the
5written consent of end insertthe settlor and all beneficiariesbegin delete of a trust consent, begin insert without court approval of theend insert modification
6they may compel theend delete
7orbegin delete termination of the trust.end deletebegin insert termination.end insert
8(b) If any beneficiary does not consent to the modification or
9termination of the trust, upon petition to the court, the other
10beneficiaries, with the consent of the settlor, may compel a
11modification or a partial termination of the trust if the interests of
12the beneficiaries who do not consent are not substantially impaired.
13(c) If the trust provides for the disposition of principal to a class
14of persons described only as “heirs” or “next of kin” of the settlor,
15or using other words that describe the class of all persons who
16would take under the rules of intestacy, the court may limit the
17class of beneficiaries whose consent is needed to compel the
18modification or termination of the trust to the beneficiaries who
19are reasonably likely to take under the circumstances.
Section 15406 of the Probate Code is amended to read:
In determining the class of beneficiaries whose consent
22is necessary to modify or terminate a trust pursuant to Section
2315403 or 15404,begin delete the presumption of fertility is rebuttable.end deletebegin insert both of
24the following shall apply:end insert
25(a) The presumption of fertility is rebuttable.
end insertbegin insert
26(b) The court in its discretion may limit the beneficiaries whose
27consent is required to beneficiaries whose interests would be
28substantially impaired by the modification or termination. For
29purposes of this subdivision, the court may consider the likelihood
30of a beneficiary taking under the trust.
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