BILL NUMBER: AB 2069 CHAPTERED
BILL TEXT
CHAPTER 682
FILED WITH SECRETARY OF STATE SEPTEMBER 22, 1998
APPROVED BY GOVERNOR SEPTEMBER 21, 1998
PASSED THE ASSEMBLY AUGUST 18, 1998
PASSED THE SENATE AUGUST 13, 1998
AMENDED IN SENATE AUGUST 10, 1998
AMENDED IN SENATE JULY 23, 1998
AMENDED IN ASSEMBLY APRIL 27, 1998
INTRODUCED BY Assembly Member Kaloogian
FEBRUARY 18, 1998
An act to add Section 6185 to the Business and Professions Code,
and to amend Sections 100, 101, 13651, 16060.5, 16061, 16061.5,
16061.7, 16062, 16246, and 17200 of, and to add Sections 2468, 9764,
and 18201 to, the Probate Code, relating to protective and probate
proceedings.
LEGISLATIVE COUNSEL'S DIGEST
AB 2069, Kaloogian. Estates and trusts: protective proceedings.
(1) Existing law establishes procedures for the establishment of a
conservatorship over a person and the administration of an estate of
a decedent.
This bill would authorize the appointment, by the superior court,
of a practice administrator with specified powers to take control of
the practice or deceased or disabled member of the State Bar of
California, as specified.
(2) Existing law prescribes the disposition of community and
quasi-community property upon the death of a married person.
This bill would provide that, notwithstanding these provisions, a
husband and wife may agree in writing to divide community or
quasi-community property on the basis of a non pro rata division of
the aggregate value of the property on the basis of a division of
each individual item or asset of the property, or partly on each
basis. This bill would make various conforming changes.
(3) Existing law defines the phrase "terms of the trust" for
purposes of laws regarding the duty of a trustee to keep the
beneficiaries of a trust reasonably informed of the trust and its
administration to include the written trust instrument of an
irrevocable trust or provisions of a written trust instrument that
describe or affect an irrevocable portion of a trust, as specified.
Existing law requires the trustee to provide, upon reasonable
request, the beneficiary with the terms of the trust that describe or
affect the beneficiary's interest.
This bill would exclude from the phrase "terms of the trust"
documents which were intended to affect administration or disposition
of the trust only while the trust was revocable. It would also
require the trustee to provide, upon reasonable request, the
beneficiary with the terms of the trust. This bill would also revise
various trustee notification requirements, as specified.
(4) Existing law provides that, if the settlor retains the power
to revoke the trust in whole or in part, the trust property is
subject to the claims of creditors of the settlor to the extent of
the power of revocation during the lifetime of the settlor.
This bill would provide that the trust property subject to the
claims of creditors pursuant to the above described provision of
existing law shall be entitled to specified exemptions.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 6185 is added to the Business and Professions
Code, to read:
6185. (a) Upon appointment by the superior court pursuant to
Section 2468, 9764, or paragraph (22) or (23) of subdivision (b) of
Section 17200 of the Probate Code, a practice administrator, who is
an active member of the State Bar, may be granted, by order of the
court appointing this person, one or more of the following powers to
take control of the practice of a deceased or disabled member of the
State Bar of California:
(1) Take control of all operating and client trust accounts,
business assets, equipment, client directories, and premises that
were used in the conduct of the deceased or disabled member's
practice.
(2) Take control and review all client files of the deceased or
disabled member.
(3) Contact each client of the deceased or disabled member who can
be reasonably ascertained and located to inform the client of the
condition of the member and of the appointment of a practice
administrator. The practice administrator may discuss various
options for the selection of successor counsel with the client.
(4) In each case that is pending before any court or
administrative body, notify the appropriate court or administrative
body and contact opposing counsel in the cases under the control of
the deceased or disabled member and obtain additional time for new
counsel to appear for the affected client.
(5) Determine the liabilities of the practice and pay them for the
assets of the practice. If the assets of the practice are
insufficient to pay these obligations or for the expenses incurred by
the practice administrator to carry out the powers ordered pursuant
to this section, the practice administrator shall apply to the
personal representative to obtain the additional funds that may be
required. If the personal representative and the practice
administrator are unable to agree on the amount that is necessary for
the practice administrator to undertake the duties ordered pursuant
to this paragraph, either party may apply to the court having
jurisdiction over the estate of the deceased or disabled member for
an order requesting funds from the estate.
(6) Employ any person, including but not limited to the employees
of the deceased or disabled member, who may be necessary to assist
the practice administrator in the management, winding up, and
disposal of the practice.
(7) Create a plan for disposition of the practice of the deceased
or disabled member to protect its value as an asset of the estate of
the member. Subject to the approval of the personal representative
of the estate, agree to the sale of the practice and its goodwill.
(8) Subject to the approval of the personal representative of the
estate, reach agreements with successor counsel for division of fees
for work in process on the cases of the deceased or disabled member.
(9) Subject to the prohibitions against soliciting cases, the
practice administrator may act as successor counsel for a client of
the deceased or disabled member.
(b) If the practice administrator is uncertain as to how to
proceed with the powers granted pursuant to this section, he or she
may apply to the Superior Court that has jurisdiction over the estate
of the deceased or disabled member for instructions.
SEC. 2. Section 100 of the Probate Code is amended to read:
100. (a) Upon the death of a married person, one-half of the
community property belongs to the surviving spouse and the other half
belongs to the decedent.
(b) Notwithstanding subdivision (a), a husband and wife may agree
in writing to divide their community property on the basis of a non
pro rata division of the aggregate value of the community property or
on the basis of a division of each individual item or asset of
community property, or partly on each basis. Nothing in this
subdivision shall be construed to require this written agreement in
order to permit or recognize a non pro rata division of community
property.
SEC. 3. Section 101 of the Probate Code is amended to read:
101. (a) Upon the death of a married person domiciled in this
state, one-half of the decedent's quasi-community property belongs to
the surviving spouse and the other half belongs to the decedent.
(b) Notwithstanding subdivision (a), a husband and wife may agree
in writing to divide their quasi-community property on the basis of a
non pro rata division of the aggregate value of the quasi-community
property, or on the basis of a division of each individual item or
asset of quasi-community property, or partly on each basis. Nothing
in this subdivision shall be construed to require this written
agreement in order to permit or recognize a non pro rata division of
quasi-community property.
SEC. 4. Section 2468 is added to the Probate Code, to read:
2468. (a) The conservator of the estate of a disabled attorney
who was engaged in the practice of law at the time of his or her
disability, or other person interested in the estate, may bring a
petition seeking the appointment of an active member of the State Bar
of California to take control of the files and assets of the
practice of the disabled member.
(b) The petition may be filed and heard on such notice that the
court determines is in the best interests of the persons interested
in the estate of the disabled member. If the petition alleges that
the immediate appointment of a practice administrator is required to
safeguard the interests of the estate, the court may dispense with
notice provided that the conservator is the petitioner or has joined
in the petition or has otherwise waived notice of hearing on the
petition.
(c) The petition shall indicate the powers sought for the practice
administrator from the list of powers set forth in Section 6185 of
the Business and Professions Code. These powers shall be
specifically listed in the order appointing the practice
administrator.
(d) The petition shall allege the value of the assets that are to
come under the control of the practice administrator, including but
not limited by the amount of funds in all accounts used by the
disabled member. The court shall require the filing of a surety bond
in the amount of the value of the personal property to be filed with
the court by the practice administrator. No action may be taken by
the practice administrator unless a bond has been duly filed with the
court.
(e) The practice administrator shall not be the attorney
representing the conservator.
(f) The court shall appoint the attorney nominated by the disabled
member in a writing, including but not limited to the disabled
member's will, unless the court concludes that the appointment of the
nominated person would be contrary to the best interests of the
estate or would create a conflict of interest with any of the clients
of the disabled member.
(g) The practice administrator shall be compensated only upon
order of the court making the appointment for his or her reasonable
and necessary services. The law practice shall be the source of the
compensation for the practice administrator unless the assets are
insufficient, in which case, the compensation of the practice
administrator shall be charged against the assets of the estate as a
cost of administration. The practice administrator shall also be
entitled to reimbursement of his or her costs.
(h) Upon conclusion of the services of the practice administrator,
the practice administrator shall render an accounting and petition
for its approval by the superior court making the appointment. Upon
settlement of the accounting, the practice administrator shall be
discharged and the surety on his or her bond exonerated.
(i) If the court appointing the practice administrator determines
upon petition that the disabled attorney has recovered his or her
capacity to resume his or her law practice, the appointment of a
practice administrator shall forthwith terminate and the disabled
attorney shall be restored to his or her practice.
(j) For purposes of this section, the person appointed to take
control of the practice of the disabled member shall be referred to
as the "practice administrator" and the conservatee shall be referred
to as the "disabled member."
SEC. 5. Section 9764 is added to the Probate Code, to read:
9764. (a) The personal representative of the estate of a deceased
attorney who was engaged in a practice of law at the time of his or
her death or other person interested in the estate may bring a
petition for appointment of an active member of the State Bar of
California to take control of the files and assets of the practice of
the deceased member.
(b) The petition may be filed and heard on such notice that the
court determines is in the best interests of the estate of the
deceased member. If the petition alleges that the immediate
appointment of a practice administrator is required to safeguard the
interests of the estate, the court may dispense with notice only if
the personal representative is the petitioner or has joined in the
petition or has otherwise waived notice of hearing on the petition.
(c) The petition shall indicate the powers sought for the practice
administrator from the list of powers set forth in Section 6185 of
the Business and Professions Code. These powers shall be
specifically listed in the order appointing the practice
administrator.
(d) The petition shall allege the value of the assets that are to
come under the control of the practice administrator, including, but
not limited by the amount of funds in all accounts used by the
deceased member. The court shall require the filing of a surety bond
in the amount of the value of the personal property to be filed with
the court by the practice administrator. No action may be taken by
the practice administrator unless a bond has been fully filed with
the court.
(e) The practice administrator shall not be the attorney
representing the personal representative.
(f) The court shall appoint the attorney nominated by the deceased
member in a writing, including, but not limited to, the deceased
member's will, unless the court concludes that the appointment of the
nominated person would be contrary to the best interests of the
estate or would create a conflict of interest with any of the clients
of the deceased member.
(g) The practice administrator shall be compensated only upon
order of the court making the appointment for his or her reasonable
and necessary services. The law practice shall be the source of the
compensation for the practice administrator unless the assets are
insufficient in which case, the compensation of the practice
administrator shall be charged against the assets of the estate as a
cost of administration. The practice administrator shall also be
entitled to reimbursement of his or her costs.
(h) Upon conclusion of the services of the practice administrator,
the practice administrator shall render an accounting and petition
for its approval by the superior court making the appointment. Upon
settlement of the accounting, the practice administrator shall be
discharged and the surety on his or her bond exonerated.
(i) For the purposes of this section, the person appointed to take
control of the practice of the deceased member shall be referred to
as the "practice administrator" and the decedent shall be referred to
as the "deceased member."
SEC. 6. Section 13651 of the Probate Code is amended to read:
13651. (a) A petition filed pursuant to Section 13650 shall
allege that administration of all or a part of the estate of the
deceased spouse is not necessary for the reason that all or a part of
the estate is property passing to the surviving spouse, and shall
set forth all of the following information:
(1) If proceedings for the administration of the estate are not
pending, the facts necessary to determine the county in which the
estate of the deceased spouse may be administered.
(2) A description of the property of the deceased spouse which the
petitioner alleges is property passing to the surviving spouse,
including the trade or business name of any property passing to the
surviving spouse that consists of an unincorporated business or an
interest in an unincorporated business which the deceased spouse was
operating or managing at the time of death, subject to any written
agreement between the deceased spouse and the surviving spouse
providing for a non pro rata division of the aggregate value of the
community property assets or quasi-community assets, or both.
(3) The facts upon which the petitioner bases the allegation that
all or a part of the estate of the deceased spouse is property
passing to the surviving spouse.
(4) A description of any interest in the community property or
quasi-community property, or both, which the petitioner requests the
court to confirm to the surviving spouse as belonging to the
surviving spouse pursuant to Section 100 or 101, subject to any
written agreement between the deceased spouse and the surviving
spouse providing for a non pro rata division of the aggregate value
of the community property assets or quasi-community assets, or both.
(5) The name, age, address, and relation to the deceased spouse of
each heir and devisee of the deceased spouse, the names and
addresses of all persons named as executors of the will of the
deceased spouse, and the names and addresses of all persons appointed
as personal representatives of the deceased spouse, which are known
to the petitioner.
Disclosure of any written agreement between the deceased spouse
and the surviving spouse providing for a non pro rata division of the
aggregate value of the community property assets or quasi-community
property assets, or both, or the affirmative statement that this
agreement does not exist. If a dispute arises as to the division of
the community property assets or quasi-community property assets, or
both, pursuant to this agreement, the court shall determine the
division subject to terms and conditions or other remedies that
appear equitable under the circumstances of the case, taking into
account the rights of all interested persons.
(b) If the petitioner bases the allegation that all or part of the
estate of the deceased spouse is property passing to the surviving
spouse upon the will of the deceased spouse, a copy of the will shall
be attached to the petition.
(c) If the petitioner bases the description of the property of the
deceased spouse passing to the surviving spouse or the property to
be confirmed to the surviving spouse, or both, upon a written
agreement between the deceased spouse and the surviving spouse
providing for a non pro rata division of the aggregate value of the
community property assets or quasi-community assets, or both, a copy
of the agreement shall be attached to the petition.
SEC. 7. Section 16060.5 of the Probate Code is amended to read:
16060.5. As used in this article, the "terms of the trust" shall
include the written trust instrument of an irrevocable trust or those
provisions of a written trust instrument that describe or affect an
irrevocable portion of a trust, including, but not limited to,
signatures, amendments, disclaimers, and any directions or
instructions to the trustee that affect the administration or
disposition of the trust. "Terms of the trust" does not include
documents which were intended to affect administration or disposition
only while the trust was revocable.
SEC. 8. Section 16061 of the Probate Code is amended to read:
16061. Except as provided in Section 16064, on reasonable request
by a beneficiary, the trustee shall provide the beneficiary with a
report of information about the assets, liabilities, receipts, and
disbursements of the trust, the acts of the trustee, and the
particulars relating to the administration of the trust relevant to
the beneficiary's interest, including the terms of the trust.
SEC. 9. Section 16061.5 of the Probate Code is amended to read:
16061.5. (a) When a revocable trust or any portion thereof
becomes irrevocable because of the death of one or more of the
settlors of the trust or for any other reason, the trustee shall
provide a true and complete copy of the terms of the irrevocable
trust, or irrevocable portion of the trust, to any beneficiary of the
trust who requests it and to any heir of a deceased settlor who
requests it.
(b) The trustee shall, for purposes of this section, rely upon any
final judicial determination of heirship. However, the trustee
shall have discretion to make a good faith determination by any
reasonable means of the heirs of a deceased settlor in the absence of
a final judicial determination of heirship.
SEC. 10. Section 16061.7 of the Probate Code is amended to read:
16061.7. (a) A trustee shall serve a notification by the trustee
described in this section in either of the following cases:
(1) When a revocable trust or any portion thereof becomes
irrevocable because of the death of one or more of the settlors of
the trust or for any other reason.
(2) When there is a change of trustee of an irrevocable trust.
(b) The notification by trustee required by subdivision (a) shall
be served on each of the following:
(1) Each beneficiary of the irrevocable trust or irrevocable
portion of the trust, subject to the limitations of Section 15804.
(2) If the event that requires trustee notification is the death
of a settlor, to each heir of the deceased settlor.
(3) If the trust is a charitable trust subject to the supervision
of the Attorney General, to the Attorney General.
(c) The trustee need not provide a copy of the notification by
trustee to any beneficiary or heir the existence of whom is (A) known
to the trustee but who cannot be located by the trustee after
reasonable diligence, or (B) unknown to the trustee.
(d) The notification by trustee shall be served by mail to the
last known address, pursuant to Section 1215, or by personal
delivery.
(e) The notification by trustee shall be served not later than 60
days following the occurrence of the event requiring service of the
notification by trustee, or 60 days following the trustee's becoming
aware of the existence of a person entitled to receive notification
by trustee, if that person was not known to the trustee on the
occurrence of the event requiring service of the notification by
trustee. If there is a vacancy in the office of the trustee on the
date of the occurrence of the event requiring service of the
notification by trustee, or if that event causes a vacancy, then the
60-day period for service of the notification by trustee commences on
the date the new trustee commences to serve as trustee.
(f) The notification by trustee shall contain the following
information:
(1) The identity of the settlor or settlors of the trust and the
date of execution of the trust instrument.
(2) The name, mailing address and telephone number of each trustee
of the trust.
(3) The address of the physical location where the principal place
of administration of the trust is located, pursuant to Section
17002.
(4) Any additional information that may be required by the terms
of the trust instrument.
(5) A notification that the recipient is entitled, upon reasonable
request to the trustee, to receive from the trustee a true and
complete copy of the terms of the trust.
(g) Unless the notification by trustee is served only because of a
change of the trustee, the notification by trustee shall also
include a warning, set out in a separate paragraph in not less than
10-point boldfaced type, or a reasonable equivalent thereof, that
states as follows:
"You may not bring an action to contest the trust more than 120
days from the date this notification by the trustee is served upon
you or 60 days from the day on which a copy of the terms of the trust
is mailed or personally delivered to you in response to your request
during that 120-day period, whichever is later."
(h) A trustee who fails to serve the notification by trustee as
required by this section shall be responsible for all damages,
including attorney's fees and costs, caused by the failure unless the
trustee makes a good faith effort to comply with this section. A
trustee shall, for purposes of this section, rely upon any final
judicial determination of heirship; but the trustee shall have
discretion to make a good faith determination by any reasonable means
of the heirs of a deceased settlor in the absence of a final
judicial determination of heirship known to the trustee.
(i) Any waiver by a settlor of the requirement of serving the
notification by trustee required by this section is against public
policy and shall be void.
(j) A trustee may serve a notification by trustee in the form
required by this section on any person in addition to those on whom
the notification by trustee is required to be served. A trustee is
not liable to any person for serving or for not serving the notice on
any person in addition to those on whom the notice is required to be
served. A trustee is not required to serve a notification by
trustee if the event that otherwise requires service of the
notification by trustee occurs before January 1, 1998.
SEC. 11. Section 16062 of the Probate Code is amended to read:
16062. (a) Except as otherwise provided in this section and in
Section 16064, the trustee shall account at least annually, at the
termination of the trust, and upon a change of trustee, to each
beneficiary to whom income or principal is required or authorized in
the trustee's discretion to be currently distributed.
(b) A trustee of a living trust created by an instrument executed
before July 1, 1987, is not subject to the duty to account provided
by subdivision (a).
(c) A trustee of a trust created by a will executed before July 1,
1987, is not subject to the duty to account provided by subdivision
(a), except that if the trust is removed from continuing court
jurisdiction pursuant to Article 2 (commencing with Section 17350) of
Chapter 4 of Part 5, the duty to account provided by subdivision (a)
applies to the trustee.
(d) Except as provided in Section 16064, the duty of a trustee to
account pursuant to former Section 1120.1a of the Probate Code (as
repealed by Chapter 820 of the Statutes of 1986), under a trust
created by a will executed before July 1, 1977, which has been
removed from continuing court jurisdiction pursuant to former Section
1120.1a, continues to apply after July 1, 1987. The duty to account
under former Section 1120.1a may be satisfied by furnishing an
account that satisfies the requirements of Section 16063.
(e) Any limitation or waiver in a trust instrument of the
obligation to account is against public policy and shall be void as
to any sole trustee who is a disqualified person as defined in
paragraph (1) of subdivision (b) of Section 21350.
SEC. 12. Section 16246 of the Probate Code is amended to read:
16246. The trustee has the power to effect distribution of
property and money in divided or undivided interests and to adjust
resulting differences in valuation. A distribution in kind may be
made pro rata or non pro rata, and may be made pursuant to any
written agreement providing for a non pro rata division of the
aggregate value of the community property assets or quasi-community
property assets, or both.
SEC. 13. Section 17200 of the Probate Code is amended to read:
17200. (a) Except as provided in Section 15800, a trustee or
beneficiary of a trust may petition the court under this chapter
concerning the internal affairs of the trust or to determine the
existence of the trust.
(b) Proceedings concerning the internal affairs of a trust
include, but are not limited to, proceedings for any of the following
purposes:
(1) Determining questions of construction of a trust instrument.
(2) Determining the existence or nonexistence of any immunity,
power, privilege, duty, or right.
(3) Determining the validity of a trust provision.
(4) Ascertaining beneficiaries and determining to whom property
shall pass or be delivered upon final or partial termination of the
trust, to the extent the determination is not made by the trust
instrument.
(5) Settling the accounts and passing upon the acts of the
trustee, including the exercise of discretionary powers.
(6) Instructing the trustee.
(7) Compelling the trustee to report information about the trust
or account to the beneficiary, if (A) the trustee has failed to
submit a requested report or account within 60 days after written
request of the beneficiary and (B) no report or account has been made
within six months preceding the request.
(8) Granting powers to the trustee.
(9) Fixing or allowing payment of the trustee's compensation or
reviewing the reasonableness of the trustee's compensation.
(10) Appointing or removing a trustee.
(11) Accepting the resignation of a trustee.
(12) Compelling redress of a breach of the trust by any available
remedy.
(13) Approving or directing the modification or termination of the
trust.
(14) Approving or directing the combination or division of trusts.
(15) Amending or conforming the trust instrument in the manner
required to qualify a decedent's estate for the charitable estate tax
deduction under federal law, including the addition of mandatory
governing instrument requirements for a charitable remainder trust as
required by final regulations and rulings of the United States
Internal Revenue Service, in any case in which all parties interested
in the trust have submitted written agreement to the proposed
changes or written disclaimer of interest.
(16) Authorizing or directing transfer of a trust or trust
property to or from another jurisdiction.
(17) Directing transfer of a testamentary trust subject to
continuing court jurisdiction from one county to another.
(18) Approving removal of a testamentary trust from continuing
court jurisdiction.
(19) Reforming or excusing compliance with the governing
instrument of an organization pursuant to Section 16105.
(20) Determining the liability of the trust for any debts of a
deceased settlor. However, nothing in this paragraph shall provide
standing to bring an action concerning the internal affairs of the
trust to a person whose only claim to the assets of the decedent is
as a creditor.
(21) Determining petitions filed pursuant to Section 15687 and
reviewing the reasonableness of compensation for legal services
authorized under that section. In determining the reasonableness of
compensation under this
paragraph, the court may consider, together with all other relevant
circumstances, whether prior approval was obtained pursuant to
Section 15687.
(22) If a member of the State Bar of California has transferred
the economic interest of his or her practice to a trustee and if the
member is a deceased member under Section 9764, a petition may be
brought to appoint a practice administrator. The procedures,
including, but not limited to, notice requirements, that apply to the
appointment of a practice administrator for a deceased member shall
apply to the petition brought under this section.
(23) If a member of the State Bar of California has transferred
the economic interest of his or her practice to a trustee and if the
member is a disabled member under Section 2468, a petition may be
brought to appoint a practice administrator. The procedures,
including, but not limited to, notice requirements, that apply to the
appointment of a practice administrator for a disabled member shall
apply to the petition brought under this section.
SEC. 14. Section 18201 is added to the Probate Code, to read:
18201. Any settlor whose trust property is subject to the claims
of creditors pursuant to Section 18200 shall be entitled to all
exemptions as provided in Chapter 4 (commencing with Section 703.010)
of Division 2 of Title 9 of Part 2 of the Code of Civil Procedure.