BILL ANALYSIS
SB 308
Page 1
Date of Hearing: June 23, 2009
ASSEMBLY COMMITTEE ON JUDICIARY
Mike Feuer, Chair
SB 308 (Harman) - As Amended: June 15, 2009
PROPOSED CONSENT
SENATE VOTE : 37-0
SUBJECT: Professional Fiduciaries: Qualifications
KEY ISSUE : SHOULD THE DEFINITION OF "PROFESSIONAL FIDUCIARY" BE
CLARIFIED TO DETERMINE WHO HAS TO BE LICENSED UNDER THE
PROFESSIONAL FIDUCIARIES ACT?
FISCAL EFFECT : As currently in print this bill is keyed fiscal.
SYNOPSIS
The Professional Fiduciaries Act, enacted as part of the Omnibus
Conservatorship and Guardianship Reform Act of 2006, defines and
regulates professional fiduciaries. A professional fiduciary
may be a conservator, guardian, or trustee, as specified. This
non-controversial bill, sponsored by the California Judges
Association, is a technical measure that refines the definition
of "professional fiduciary" to include varying types of
conservators and guardians and specifies how trusts and
beneficiaries are counted for purposes of that definition. It
also excludes from the definition employees of public officers
or agencies that are now specifically exempt from the
requirements imposed on professional fiduciaries, when those
employees are acting within the course and scope of their
official duties. This bill is supported by the Judicial Council
and has no known opposition.
SUMMARY : Clarifies who is considered a "professional fiduciary"
under the Professional Fiduciaries Act. Specifically, this
bill :
1)Clarifies that a "conservator" may be a "conservator of the
person, the estate, or person and estate" and that a
"guardian" means a "guardian of the estate, or person and
estate."
SB 308
Page 2
2)Clarifies that in making this determination: 1) all
individuals who are related to each other are counted as one
individual; 2) trustors related to each other shall count as
one individual; and 3) neither the number of beneficiaries nor
the number of trusts are to be counted for purposes of this
qualification of a professional fiduciary. Also specifies
that individuals who are related to the fiduciary shall not be
counted.
3)Includes employees of a public agency and a public officer of
a public agency, as specified, acting in the course and scope
of their official duties, in the professional fiduciary
exemption for public agencies and public officers.
4)Defines lineal kinship or consanguinity as the relationship
between two persons, one of whom is a direct descendant of the
other (parent and child, for example) and by counting the
generations separating one from the other.
5)Defines collateral kinship or consanguinity as the
relationship between two people who spring from a common
ancestor, but neither person is the direct descendant of the
other (thus siblings are related in the second degree, an aunt
or niece is related to the person in the third degree, and a
first cousin is related in the fourth degree).
6)Contains various provisions intended to conform the statutes
to the changes made by SB 1264 (Harman, Chap. 174, Stats.
2008).
EXISTING LAW :
1)Defines and regulates the activities of professional
fiduciaries. (Business & Professions Code Section 6500 et
seq. Unless stated otherwise, all further references are to
the Business & Professions Code.)
2)Defines "professional fiduciary" as a person who acts as a
conservator or guardian for two or more persons at the same
time who are not related to the professional fiduciary or to
each other by blood, adoption, marriage, or registered
domestic partnership. (Section 6501(f).)
3)Defines "professional fiduciary" to include a person who acts
as a trustee, agent under a durable power of attorney for
SB 308
Page 3
health care, or agent under a durable power of attorney for
finances, for more than three people or more than three
families, or a combination thereof that totals more than three
at the same time, that are not related to the professional
fiduciary by blood, marriage, or registered domestic
partnership. (Id.)
4)Provides that certain classes of entities and individuals are
exempt from the designation of "professional fiduciary." An
employee of a trust company or an FDIC-insured institution or
its affiliate (both of which are exempt under existing law) is
also exempt from designation as a professional fiduciary for
purposes of the Professional Fiduciaries Act, as long as the
employee is acting in the course and scope of that employment.
(Id.)
5)Exempts from the designation of "professional fiduciary" a
public officer or public agency, including the public
guardian, public conservator, or other agency of the state or
a county, including a regional center for persons with
developmental disabilities, when the officer or agency is
acting in the course and scope of their official duties.
(Id.)
COMMENTS : In 2006, the Legislature enacted a package of bills
to reform the conservatorship system in California. Major
features of the reforms, embodied in the Omnibus Conservatorship
and Guardianship Reform Act of 2006 (SB 1116 (Scott, Chap. 490),
SB 1550 (Figueroa, Chap. 491), SB 1716 (Bowen, Chap. 492) and AB
1363 (Jones, Chap. 493)) are: 1) increased frequency of court
review of conservatorships; 2) broadened scope of court
investigators' reports; 3) special procedures for the sale of a
conservatee's primary residence; and 4) the regulation and
licensing of private professional fiduciaries including private
professional conservators. These measures were compelled by a
series of articles in the media revealing widespread abuse of
vulnerable elders and dependent adults by conservators and
deficiencies in the courts' oversight of conservatorships.
SB 1550 established the Professional Fiduciaries Act (PFA) for
the purpose of licensing and regulating individuals who act as
conservators, guardians, trustees, personal representatives, or
agents under a durable power of attorney for health care or for
finances, for two or more persons unrelated to the professional
fiduciary or to each other, as specified. Public agency
SB 308
Page 4
fiduciaries (public guardians and public conservators) and those
employed by banks and trust companies are exempt from this
regulatory scheme.
SB 1550 prohibits a court from appointing a person as a private
professional conservator, guardian, or trustee, or permitting a
person to continue to serve as such, unless he or she is
licensed as a professional fiduciary and has filed evidence of
the license with the clerk of the court in each county where a
petition for appointment has been filed.
This bill, sponsored by the California Judges Association, makes
technical, clarifying amendments to the PFA with regards to
conservators, guardians, and trustees who may qualify as
professional fiduciaries under the PFA.
In support of the bill, the author writes:
SB 308 is a very technical measure designed to codify
the principle that, for purposes of determining when a
trustee must be licensed, only trustors should be
counted, and not beneficiaries or trusts. In many
cases trusts may have large numbers of beneficiaries,
and large numbers of trusts and sub-trusts might have
been established for tax reasons by a small number of
trustors. The language codifying this point is
already included in regulations adopted by the
Professional Fiduciaries Bureau, Title 16 CCR Section
4406(e)(2), but for clarity the rule should be
contained in the statute.
Second, the sponsor believes that Section 6501 is
unclear that persons employed by entities exempt from
licensure, but who are "moonlighting" as professional
fiduciaries, must be licensed. The bill thus contains
language clarifying this point.
Conservators, guardians, and trustees . Under existing law, a
"professional fiduciary" means a person who acts as a
conservator or guardian for two or more persons at the same time
who are not related to the professional fiduciary by blood,
adoption, marriage, or registered domestic partnership.
This bill clarifies that "conservator" means conservator of the
person or of the estate, or conservator of both the person and
SB 308
Page 5
estate, of the conservatee and that "guardian" means guardian of
the estate, or guardian of the person and estate, of the ward.
These changes are consistent with former Probate Code provisions
and simply and appropriately exclude from regulation under the
PFA a guardian of the person, that is an adult who is taking
care of a child who has no assets.
Under existing law, a "professional fiduciary" also means a
person who acts as a trustee or an agent under a durable power
of attorney for health care or for finances for more than three
people or three families, or a combination of people and
families that totals more than three, at the same time, who are
not related to the professional fiduciary by blood, adoption,
marriage, or registered domestic partnership. This language was
adopted from the former statute (Probate Code Section 2854)
which exempted from the requirement of registration in the
Statewide Registry a trustee who serves as trustee for the
benefit of not more than three people or three families or any
combination of both that totals not more than three.
This bill clarifies that the counting of three people or three
families shall be based on the number of unrelated trustors, not
the number of beneficiaries of the trusts or the number of
trusts involved. The reason for this is that trusts may have
classes of beneficiaries or a number of beneficiaries greater
than three. There may also be subtrusts created by a general
trust, even by the same trustor or trustors. The sponsor of the
bill, the California Judges Association, wants clarity in the
statute, to ease the transition to the new professional
fiduciary statutes, and to be able to implement the provisions
of the Professional Fiduciaries Act more easily. Thus, a
husband and wife who have executed separate trusts with mutual
provisions will count as one family, even though there are in
reality two trusts that a trustee would serve under.
These clarifying provisions are already embodied in the
regulations adopted by the Professional Fiduciaries Bureau at
the Department of Consumer Affairs, the agency with jurisdiction
over professional fiduciaries.
Restrictions on "moonlighting" employee would apply to employees
of public agencies and public officers . Under current law, an
employee of a trust company or FDIC-insured financial
institution or its holding companies, subsidiaries, or
affiliates is exempt from the licensing requirements of the
SB 308
Page 6
Professional Fiduciaries Act, provided the employee is acting in
the course and scope of that employment. This bill extends
these restrictions on "moonlighting" employees to employees of
public agencies and public officers who are exempt from the
professional fiduciary provisions as well.
This bill also defines how to count degrees of kinship or
consanguinity: how to count the ways . As recommended by the
California Law Revisions Commission (CLRC), this bill also
provides guidance, for the entire Probate Code, on how to
determine kinship or consanguinity and how to calculate degrees
of kinship. In 1982, the CLRC had recommended repealing former
Probate Code Sections 251-253, which then contained the general
rules of construction with respect to kinship and consanguinity.
At that time, the CLRC states, they felt that the provisions
were not necessary for purposes of the law governing wills and
intestate succession. Since then, many other pieces of
legislation have returned the concept of degree of kinship and
consanguinity to the Probate Code, and it is now relevant once
more to provide guidance. The definitions contained in this
bill are consistent with the repealed statutes.
Technical Corrections : This bill also contains corrections to
obsolete cross-references to the no-contest clause provisions of
the Probate Code that were repealed by SB 1264 (Harman), Chap.
174, Stats. 2008. SB 1264 repealed the former no-contest clause
statute.
ARGUMENTS IN SUPPORT : In support of the bill, the Judicial
Council writes: "The bill's statutory clarification of the
definition of professional fiduciary should help avoid confusion
and ease the courts' overall administration of these cases."
Prior Legislation : The Omnibus Conservatorship and Guardianship
Reform Act of 2006 consisted of SB 1116 (Scott, Chap. 490), SB
1550 (Figueroa, Chap. 491), SB 1716 (Bowen, Chap. 492) and AB
1363 (Jones, Chap. 493).
REGISTERED SUPPORT / OPPOSITION :
Support
California Judges Association (sponsor)
Judicial Council
SB 308
Page 7
Opposition
None on file
Analysis Prepared by : Leora Gershenzon / JUD. / (916)
319-2334