BILL ANALYSIS
SB 308
Page 1
Date of Hearing: June 30, 2009
ASSEMBLY COMMITTEE ON BUSINESS AND PROFESSIONS
Mary Hayashi, Chair
SB 308 (Harman) - As Amended: June 15, 2009
SENATE VOTE : 37-0
SUBJECT : Professional fiduciaries: donative transfers.
SUMMARY : Revises the definition of a "professional fiduciary"
(PF) and clarifies that public employees are exempt from
licensure if they are acting within the scope of employment.
Specifically, this bill :
1)Redefines "PF" to mean a person acting as a conservator or
guardian of the person, the estate, or person and estate for
two or more individuals unrelated to the PF.
2)Redefines "PF" to mean a person who acts as a trustee, agent
under a durable power of attorney for health care, or agent
under a durable power of attorney for finances, for more than
three individuals at the same time. Establishes the following
method to count individuals:
a) Individuals who are related to the PF shall not be
counted;
b) All individuals who are related to each other shall be
counted as one individual; and,
c) All trustors who are related to each other shall be
counted as one individual, and neither the number of trusts
nor the number of beneficiaries of those trusts shall be
counted.
3)Defines "related" to mean related by blood, adoption,
marriage, or registered domestic partnership.
4)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 PF exemption for public
agencies and public officers.
5)Defines lineal kinship or consanguinity as the relationship
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between two persons, one of whom is a direct descendant of the
other (e.g., parent and child) and by counting the generations
separating one from the other. Each generation is referred to
as a degree.
6)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 (e.g., 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).
7)Contains various conforming changes made by SB 1264 (Harman),
Chapter 174, Statutes of 2008.
EXISTING LAW :
1)Authorizes the Professional Fiduciaries Bureau (Bureau) to
regulate and license professional fiduciaries.
2)Defines "PF" 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 PF or to each other by blood, adoption, marriage, or
registered domestic partnership.
3)Defines "PF" to include a person who acts as a trustee, agent
under a durable power of attorney for 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 PF by blood, marriage, or registered
domestic partnership.
4)Provides that certain classes of entities and individuals are
exempt from the designation of "PF." 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 PF for purposes of the Professional
Fiduciaries Act (PFA), as long as the employee is acting in
the course and scope of that employment.
5)Exempts from the designation of "PF" a public officer or
public agency, including the public guardian, public
conservator, or other agency of the state or a county,
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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.
FISCAL EFFECT : Unknown
COMMENTS :
Purpose of the bill . According to the author's office, "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 Title 16 of the California Code of Regulations, Section 4406
(e)(2), but the sponsor believes that for clarity the rule
should be contained in the statute.
"Second, the sponsor believes that the Business and Professions
Code 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."
Background . In 2006, the Legislature enacted a package of bills
to reform the conservatorship system in California. The Omnibus
Conservatorship and Guardianship Reform Act of 2006 was a bill
package that included the following pieces of legislation: SB
1116 (Scott), Chapter 490, Statutes of 2006; SB 1550 (Figueroa),
Chapter 491, Statutes of 2006; SB 1716 (Bowen), Chapter 492,
Statutes of 2006; and, AB 1363 (Jones), Chapter 493, Statutes of
2006. The major features of the bill package included:
increased frequency of court review of conservatorships;
broadened scope of court investigators' reports; special
procedures for the sale of a conservatee's primary residence;
and, 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 PFA for the purpose of licensing and
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regulating individuals who act as conservators, guardians,
trustees, personal representatives, or agents under a durable
power of attorney for health care or finances, for two or more
persons unrelated to the PF or to each other, as specified.
Public agency 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 PF 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 (CJA),
makes technical, clarifying amendments to the PFA with regards
to conservators, guardians, and trustees who may qualify as
professional fiduciaries under the PFA.
Conservators, guardians, and trustees . Under existing law, a
"PF" 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
PF 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
estate, for the conservatee, and that "guardian" means guardian
of the estate, or guardian of both the person and estate, for
the ward. These changes are consistent with former Probate Code
(PC) provisions and simply and appropriately exclude from
regulation under the PFA a guardian who is taking care of a
child who has no assets.
Under existing law, a "PF" also means a person who acts as a
trustee or an agent under a durable power of attorney for health
care or finances for more than three people or three families,
or a combination of people and families that total more than
three, at the same time, who are not related to the PF by blood,
adoption, marriage, or registered domestic partnership. This
language was adopted from the former statute (PC 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
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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, CJA, wants clarity in the statute, to ease the transition
to the new PF statutes, and to be able to implement the
provisions of the PFA 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 Bureau.
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 PFA, 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 PF
provisions as well.
As recommended by the California Law Revisions Commission
(CLRC), this bill also provides guidance, for the entire PC, on
how to determine kinship or consanguinity and how to calculate
degrees of kinship. In 1982, the CLRC had recommended repealing
former PC 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 PC, and it is now relevant once more to
provide guidance. The definitions contained in this bill are
consistent with the repealed statutes.
Arguments in support . According to CJA, "The bill clarifies
that for purposes of counting unrelated parties in determining
when it is necessary to obtain a license as a PF, only trustors
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are counted, not beneficiaries or trusts. This avoids
unnecessarily requiring a license for a person who establishes
multiple trusts for one family."
Prior Legislation .
SB 1264 (Harman), Chapter 174, Statutes of 2008, establishes a
statutory scheme governing no contest clauses in wills and
trusts, and other donative instruments that become irrevocable
on or after January 1, 2001.
SB 1215 (Harman) of 2008 was a measure identical to SB 308 that
was not heard in Assembly Judiciary Committee.
SB 1047 (Committee on Business, Professions and Economic
Development), Chapter 354, Statutes of 2007, extended the
licensing deadline from July 1, 2008 to January 1, 2009.
AB 1363 (Jones), Chapter 493, Statutes of 2006, established
additional court oversight requirements of conservatorships.
SB 1116 (Scott), Chapter 490, Statutes of 2006, established a
presumption regarding residence of conservatee and increased
sale requirements of a conservatee's residence.
SB 1550 (Figueroa), Chapter 491, Statutes of 2006, established
the Board within the DCA for the purpose of licensing and
regulating professional fiduciaries.
SB 1716 (Bowen), Chapter 492, Statutes of 2006, allowed ex parte
communication in cases involving fiduciaries and expands court
review of conservators.
REGISTERED SUPPORT / OPPOSITION :
Support
California Judges Association (CJA) (sponsor)
Judicial Council
Opposition
SB 308
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None on file.
Analysis Prepared by : Joanna Gin / B. & P. / (916) 319-3301