BILL ANALYSIS �
AB 1670
Page 1
Date of Hearing: March 20, 2012
ASSEMBLY COMMITTEE ON JUDICIARY
Mike Feuer, Chair
AB 1670 (Lara) - As Introduced: February 14, 2012
SUBJECT : ESTATE ADMINISTRATION: NOMINATION OF PERSONAL
REPRESENTATIVE
KEY ISSUE : SHOULD AN OTHERWISE QUALIFIED NON-U.S. RESIDENT BE
PERMITTED TO NOMINATE A PERSONAL REPRESENTATIVE TO ADMINISTER
THE ESTATE TO WHICH HE OR SHE IS HEIR?
FISCAL EFFECT : As currently in print this bill is keyed
non-fiscal.
SYNOPSIS
When someone creates a will, he or she can name an executor in
the will, whether or not a U.S. resident, who has the right to
be appointed as the personal representative and administer the
estate in court. When someone dies without a will, the court
appoints a personal representative to administer the estate.
Under current law, the personal representative must meet
specified qualifications, including being a resident of the
United States. There is a list of persons who are entitled to
appointment as administrator, and that list is in order of
priority, with heirs (who stand to inherit the estate) given the
highest priority. If no heirs are available, the court may next
consider a guardian or conservator of the decedent's estate,
then the public guardian and finally creditors of the decedent.
A U.S. resident heir can nominate an administrator, but an
otherwise qualified non-U.S. resident heir cannot. This bill,
sponsored by the Trusts & Estates Section of the State Bar,
allows a non-United States resident heir to nominate an
administrator for the decedent's estate. The nominee will still
have to meet the other qualifications required of personal
representatives.
This provision allows foreign heirs to nominate a trusted family
friend or lawyer as administrator of the estate, rather than the
public administrator who would in almost all cases be a stranger
to the heirs. The California State Association of Public
Administrators, Public Guardians, and Public Conservators
opposes the bill, arguing, primarily, that the fees they receive
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for managing large estates of those who die intestate with only
non-U.S. resident heirs help funds their other work. The
sponsor counters that there is no policy reason to require that
the nominee be a U.S. resident and that it is fundamentally
unfair to require non-U.S. heirs to fund the other work of the
Public Administrator and to prevent them from appointing a
representative of their choosing. The Public Administrators are
also concerned that relying on the nominee of a non-U.S. heir
could result in misappropriation of estate assets. However, the
sponsor points out that, regardless of who nominated him or her,
the administrator is still subject to the court's oversight and
is required to comply with California's laws, including
providing a bond to ensure that the estate and its creditors are
protected.
SUMMARY : Authorizes the court to appoint, as administrator of a
decedent's estate the nominee of a person who would be entitled
to appointment, or the nominee of the guardian or conservator of
that person, even if that person is not a resident of the United
States.
EXISTING LAW :
1)Provides that a person has no power to administer an estate
until that person is appointed as personal representative.
(Probate Code Section 8400. Unless stated otherwise, all
further statutory references are to that code.)
2)Provides that a person is not qualified to act as a personal
representative under specified circumstances, including if the
person is not a resident of the United States. However,
provides that a person named as executor in the decedent's
will has the right to appointment as personal representative
even if that person is not a United States resident.
(Sections 8402, 8420.)
3)Provides that if a decedent dies intestate (without a will),
the court must appoint an administrator as a personal
representative. (Section 8460.)
4)Authorizes the court to appoint as administrator of a
decedent's estate the nominee of a person entitled to the
appointment or the nominee of the guardian or conservator of
that person. (Section 8465(a).)
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5)Sets forth individuals entitled to appointment in a priority
list, which begins with the surviving spouse and children, and
includes in priority order grandchildren, parents, other
relatives, conservator or guardian of the estate of the
deceased, public guardian and creditors. (Section 8461.)
6)Allows a court to appoint a qualified non-resident of
California as administrator of a decedent's estate, provided
certain requirements are met. (Section 8570 et seq.)
7)Allows the public administrator of the county in which an
estate is administered to petition for appointment as personal
representative of the estate if no person of higher priority
has petitioned and if the value of the estate exceeds
$150,000. (Section 7620.)
COMMENTS : When someone creates a will, he or she can name an
executor in the will, whether or not a U.S. resident, who has
the right to be appointed as the personal representative and
administer the estate in court. When someone dies without a
will, the court appoints a personal representative to administer
the estate. A personal representative must meet specified
qualifications, including being a resident of the United States.
The Probate Code lists persons who are entitled to appointment
as estate administrator, and that list is in order of priority.
Relatives, who are the legal heirs of the estate, receive high
priority, with the closest relatives, including spouses and
children, receiving the highest priority. If no relatives are
available, the court may next consider a guardian or conservator
of the decedent's estate, then the public guardian and finally
creditors of the decedent.
Current law provides that an heir otherwise entitled to appoint
a personal representative cannot do so if he or she is not a
U.S. resident, even though a decedent could appoint a non-U.S.
resident to serve in that capacity. This bill, sponsored by the
Trusts & Estates Section of the State Bar, allows the
appointment of a person who is nominated by a non-U.S. resident
heir as administrator of a decedent's estate. The nominee would
still have to meet the qualification requirements of Section
8402, including, that the person is a resident of the United
States, of the age of majority, not under a conservatorship or
guardianship, not a surviving partner of the decedent if an
interested person has objected, and not otherwise incapable of
discharging the duties of an administrator. For example, if
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there is no surviving spouse and all the adult children live in
another country, this bill allows the children to nominate a
personal representative of their choosing to administer their
parent's estate.
This provision allows foreign heirs of who are not residents of
the United States and therefore cannot themselves qualify as
administrator of a decedent's estate to nominate a trusted
family friend, lawyer, or even an institution known to the
heirs, as administrator of the estate, rather than the public
administrator who would surely be a stranger to the heirs. If
so allowed, the nominee would take priority over the public
administrator for the appointment.
In support of the bill, the author writes that this bill
provides non-residents with the ability to appropriately manage
their inherited estates by giving them the ability to nominate a
qualified person to act as administrator and care for their
inherited estate in the best manner they see fit.
Case Law Demonstrates Difficulties with Existing Law : Cases
interpreting the statutory scheme for appointment of an
administrator when the heirs are non-U.S. residents have been in
conflict. In Estate of Kaussen (1987) 190 Cal.App.3d 1644 (but
later unpublished), a decedent left his $26 million estate to
his partner and their four children, all residents of Germany.
The heirs then petitioned the court to appoint an administrator
of their choosing. The trial court appointed the public
guardian instead because the heirs were not United States
residents. The court of appeals, while acknowledging that the
heirs could not themselves be the estate administrator since
none of them resided in the United States, nonetheless reversed,
finding that the heir's lack of residency did not prevent them
from nominating a personal representative of their own choosing.
Four years later, the same court of appeals reversed course. In
Estate of Damskog (1991) 1 Cal.App.4th 78, the appeals court
vacated the appointment of the attorney and holder of a durable
power of attorney of a decedent and ordered the appointment of
the public guardian, despite the fact that the only heirs of the
decedent, his two sisters and the children of a deceased sister,
residents of Norway, nominated the attorney. The court
acknowledged that if the sisters from Norway had the right to
nominate, which as non-residents they did not under existing
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law, their nominee would have had priority over the public
guardian. In a footnote, the court referred to its decision in
Kaussen, and stated that "the policy considerations which
informed our earlier decision are best left to the Legislature."
(Id. at 82, footnote 5.)
The Damskog court however explicitly stated that "�w]hile it
makes sense to require administrators to reside in the United
States where the probate court can exercise personal
jurisdiction over them, if need be, as they perform their
duties, no such jurisdictional need justifies a residency
requirement for nominators. This very persuasive argument is
better addressed to the Legislature than to the courts ." (Id.
(emphasis added).) It should be noted that an administrator
appointed by the court, whether public or private, is
responsible to the court.
ARGUMENTS IN SUPPORT : In support of the bill, the Trusts &
Estates Section of the State Bar writes:
A nonresident heir is currently prohibited from nominating
an administrator when a decedent dies intestate (without a
valid will) in California. That is the case even though the
decedent could have named a nonresident to act as executor
or provided a nonresident with a nomination power in his or
her will. For example, suppose that a decedent had
immigrated to the United States from another country, was
financially successful and accumulated a significant
estate, then died as a resident of California leaving heirs
only in that other country. Those heirs would be
prohibited from nominating an administrator (even a United
States resident) to manage the estate, even though they
stand to receive all of the assets. The public
administrator would then be appointed, even over the
objection of the family members, and would take its fees
out of the assets to be received by the decedent's family
in that other country.
Redirecting assets that would otherwise pass to families
who reside outside of the United States, merely because the
decedent did not have a will, creates a fundamental
unfairness. Moreover, this deficiency in the law deprives
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families of the right to select the person best suited to
manage the assets they stand to receive. While the
injustice of this result has been recognized by the
judiciary, only the legislature can correct this problem.
ARGUMENTS IN OPPOSITION : The California State Association of
Public Administrators, Public Guardians, and Public Conservators
(Public Administrators) opposes the bill. The organization's
chief argument is financial: They make money administering
larger estates, which helps fund their overall operations, and
this bill could potentially eliminate some of their most
lucrative appointments:
AB 1670 will have significant fiscal impacts on Public
Administrators and their County Counsels. Under current
law, Public Administrators have priority to administer an
estate where the rightful heirs live outside the United
States. A majority of these foreign heir cases are small
estates with few assets and/or significant creditors, so
the public burden is already significant. In these cases,
the foreign heir is unlikely to nominate and would find
retaining counsel financially unfeasible. Public
Administrators and their attorneys rarely make enough money
to even recoup their costs, burdening taxpayers for funding
these cases. The rare large estates that have enough
assets to pay for the services of administering them help
to offset the costs of administering the many smaller
estates that do not.
However, the sponsor argues persuasively that it is
fundamentally unfair to require non-U.S. heirs to fund the other
work of the Public Administrators and to prevent them from
appointing a representative of their choosing.
Additionally, the Pubic Administrator is concerned that because
the foreign nominee may be outside the jurisdiction of the court
that the estate's assets may be misappropriated:
A person who lives outside of the United States who is
allowed to nominate an administrator for an estate, as
proposed in AB 1670, is not subject to enforcement actions
in our judicial system. In cases where the estate's assets
are misappropriated and removed to another country,
recourse can only be had on the nominee of the foreign
heir. If the nominee is judgment proof, (has no
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professional license or assets) there is no recourse.
However, the sponsor counters persuasively that the court
oversees the administration of the estate and helps ensure
justice is done. An administrator is generally required to
provide a bond to protect both beneficiaries and creditors and,
while the court can under appropriate circumstances waive the
bond requirements, it would almost certainly not do so if the
administrator is judgment proof and the heirs all live outside
the country. Moreover if the decedent had left a will, the
administrator himself or herself could be a non-U.S. resident.
The Public Administrators' perceived misappropriation risks seem
far more likely to arise in that situation than the one
addressed by this bill.
The Public Administrators go on to argue that they:
are trained and experienced in estate administration,
understand their fiduciary obligations and can resist
inappropriate demands of foreign heirs. Misconception of
U.S. and California property rights are common among
foreign heirs, who often believe the rights of the family
to a decedent's assets take priority over creditors and
others. Also, nominees are not required to hire counsel.
Where counsel is retained, the retaining party (and that
attorney's client) is often a nonresident, not the
estate's. The Public Administrator retains County Counsel,
both of whom place the estate's interest first.
However, regardless of what non-U.S. resident heirs may believe,
the sponsor accurately notes that the court will ensure that
California laws on estate administration are followed and it
will do so even if the administrator is a non-attorney.
California law ensures that creditors and beneficiaries are
protected during the estate administration and these laws - as
well as court oversight to ensure these laws are complied with -
will continue to apply whether or not heir hunters are involved
and whether or not the heirs live in the U.S. or not.
Previous Legislation : AB 239 (Kaloogian), Chap. 175, Stats.
1999 would have permitted the nominee of a non-resident heir to
be appointed administer of the estate. That provision was
dropped from the bill in the Senate.
REGISTERED SUPPORT / OPPOSITION :
AB 1670
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Support
Trusts & Estates Section of the State Bar (sponsor)
Opposition
California State Association of Public Administrators, Public
Guardians, and Public Conservators
Analysis Prepared by : Leora Gershenzon / JUD. / (916) 319-2334