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Ceb.com: Guardianship, Conservatorship Practice: New Omnibus Conservatorship and Guardianship Reform Act of 2006

Effective January 1, 2007 (with some later operative dates for specific provisions), the California Legislature has enacted the Omnibus Conservatorship and Guardianship Reform Act of 2006, to substantially revise the provisions for guardians and conservators, to remedy what the Act terms a "conservatorship system in California [that] is fundamentally flawed and in need of reform." The highlights of these changes are discussed below. The discussion below appeared in the October 2006 issue of the CEB Estate Planning and California Probate Law Reporter (Vol. 28, No. 2). CEB will include discussions of these changes in its updates to all its titles that address this issue, including California Guardianship Practice and California Conservatorship Practice.

Omnibus Conservatorship and Guardianship Reform Act of 2006

Stats 2006, ch 493 (AB 1363-Jones)

Amends and adds numerous sections of the Probate Code.

Chapters 490-493 comprise the Omnibus Conservatorship and Guardianship Reform Act of 2006 (Omnibus Act). These enactments are responses to a series of four articles, entitled "Guardians for Profit," that appeared in the Los Angeles Times on November 13-16, 2005. The articles were highly critical of alleged actions of professional conservators and alleged ineffective oversight by courts. The articles can be found at: Guardians for Profit. Alternatively, readers can do a search engine search for the following (including the quotation marks): "Los Angeles Times" "Guardians for Profit".

The introduction to the Omnibus Act declares that "the conservatorship system in California is fundamentally flawed and in need of reform." Stats 2006, ch 493, §2(g).

Chapter 493 contains the majority of the provisions that directly affect court procedures. Some of these provisions have a delayed effective date of July 1, 2007, in order to provide courts time to plan implementation. Chapter 490, which also has immediate court procedure implications, addresses issues concerning conservatee's personal residences. Chapter 491 requires licensing of professional fiduciaries by July 1, 2008, and establishes the Professional Fiduciaries Bureau in the Department of Consumer Affairs. The only operative provision of Chapter 492 addresses ex parte communications issues. Chapters 490-492 are discussed in detail below.

Judicial Council Duties.

New Prob C §1456 mandates that the Judicial Council is to adopt rules of court by January 1, 2008, that specify the qualifications required for attorneys appointed for wards and conservatees, as well as qualifications required for court employees who serve as probate attorneys, examiners, and investigators. The rules will also impose education requirements concerning guardianships and conservatorships for such persons and also for judges who regularly hear probate matters. New Prob C §1457 requires the development of a 3-hour education program for nonprofessional fiduciaries. New Prob C §1458(a) mandates that "On or before January 1, 2008, the Judicial Council shall report to the Legislature the findings of a study measuring court effectiveness in conservatorship cases."

New Prob C §2410 provides that

On or before January 1, 2008, the Judicial Council, in consultation with the California Judges Association, the California Association of Superior Court Investigators, the California State Association of Public Administrators, Public Guardians, and Public Conservators, the State Bar of California, the National Guardianship Association, and the Association of Professional Geriatric Care Managers, shall adopt a rule of court that shall require uniform standards of conduct for actions that conservators and guardians may take under this chapter on behalf of conservatees and wards to ensure that the estates of conservatees or wards are maintained and conserved as appropriate and to prevent risk of loss or harm to the conservatees or wards. This rule shall include at a minimum standards for determining the fees that may be charged to conservatees or wards and standards for asset management.

Establishment of Conservatorships.

Amendments to Prob C §1826, effective July 1, 2007, greatly expand the scope of the initial conservatorship investigation, requiring the court investigator to interview the spouse or domestic partner and relatives within the first degree. Also, to the extent possible, the investigator is to interview relatives within the second degree, neighbors, and, if known, close friends. Prob C §1826(a)(1)-(3). Unless otherwise ordered by the court, the investigator's report will be mailed to the proposed conservatee, the spouse or domestic partner, and relatives within the first degree. Prob C §1826(l)(3)-(4). If a temporary conservatorship was established, a second investigation (in addition to the investigation made for establishment of the temporary conservatorship) is required and the report is to include the effect of the temporary conservatorship. Prob C §1826(q).

Subsequent Administration.

If the conservatorship is established, the conservator must mail the order to the conservatee and specified relatives of the conservatee together with "an information notice of the rights of conservatees." Prob C §1830(c). It appears this new requirement is effective immediately, but the Judicial Council is given until January 1, 2008, to "develop the notice." Amended Prob C §1850 now provides for an additional court investigator investigation 6 months after appointment of the conservator. Prob C §1850(a)(1). The court can order a "review" of the conservatorship in response to the investigator's report. Otherwise, the conservatorship is generally reviewed 1 year after appointment and annually thereafter unless the court orders that subsequent reviews will occur every 2 years, in which case there will nevertheless be an annual investigation. Prob C §1850(a)(2). Except as ordered by the court, the investigation is to include a visit with the conservatee that occurs without notice. Prob C §1851(a). (Note: The periods for filing accounts are not changed. Accounts are due 1 year after appointment and biennially thereafter. Prob C §2620.)

New Prob C §2113 states in its entirety, "A conservator shall accommodate the desires of the conservatee, except to the extent that doing so would violate the conservator's fiduciary duties to the conservatee or impose an unreasonable expense on the conservatorship estate."

Amended Prob C §2215 addresses court venue in cases where a conservatee's residence is changed to another county. The amendment creates a presumption that the county of the new residence is the best venue if any of specified relatives also reside in that county. Prob C §2215(b)(2).

Temporary Conservatorships.

Current law generally requires (except for "good cause shown") that a proposed ward or conservatee be given 5 days' notice of the appointment of a temporary guardian or conservator. Effective July 1, 2007, Prob C §2250(c) has been amended to require 5 days' notice of a "hearing" on a petition for appointment of a temporary guardian or conservator and to require service on the ward or conservatee of both a notice of hearing and a copy of the petition. Under new Prob C §2250(f), if a petition for temporary conservatorship is granted ex parte, the court must set any petition for termination of the temporary conservatorship within 15 days unless the hearing date for the petition for a regular conservator will be heard within that period. Unless the court otherwise orders, notice of hearing on a petition for termination of the temporary conservatorship must be given 10 days before hearing. Under new Prob C §2250(j), the Judicial Council shall adopt a rule of court that establishes uniform standards for good cause exceptions to these notice requirements on or before January 1, 2008. Subject to specified exceptions, new Prob C §2250.4, effective July 1, 2007, requires that the proposed conservatee attend the hearing on the petition for appointment of a temporary conservatorship. New Prob C §2250.6, also effective July 1, 2007, generally requires a court investigator investigation and report before the appointment of a temporary conservator. Existing Prob C §2253 concerning petitions by a temporary conservator to change a conservatee's residence has been amended to require a court investigator investigation unless the court for good cause orders otherwise. Previously, an investigation only occurred if the court ordered one. The amendment is effective July 1, 2007.

Bonds.

An amendment to Prob C §2320 effectively increases the amount of conservatorship bonds by requiring that the amount of the bond include a reasonable amount for the attorney fees and costs needed to collect on the bond. Probate Code §2321 currently limits the ability of the court to waive a bond without a determination of good cause. The statute has been amended to similarly limit the ability of the court to reduce the bond without such a determination.

Conflicts of Interest.

Under current Prob C §2401(c), a guardian or conservator may not hire or refer any business to an entity in which he or she has a financial interest except upon authorization of the court. The statute has only applied to fiduciaries required to register with the Statewide Registry. Probate Code §2401 has been significantly revised. It now applies to all conservators and guardians other than trust companies, with new separate provisions applying to trust companies. Prob C §2401(d).

Inventories and Appraisals; Accounts.

Probate Code §2610 has been amended to require that a copy of the inventory and appraisal be served on the conservatee, various relatives, and attorneys of record. The inventory and appraisal is to be accompanied by a "notice of how to file an objection." The statute is effective immediately, but the Judicial Council has until January 1, 2008, to "develop a form" to effectuate the notice.

An amendment to Prob C §2620 requires the Judicial Council, by January 1, 2008, to develop a "standard accounting form, a simplified accounting form, and rules for when the simplified accounting form may be used." After January 1, 2008, all accounts must use the forms. Currently, conservatorship accounts must include original end-of-accounting-period statements for financial institution accounts. Prob C §2620(a). Original statements are also required for the period when the conservatorship is commenced. Under an amendment to Prob C §2620, professional conservators will be required to provide all original account statements. Prob C §2620(c). Courts can adopt local rules that permit these statements to be lodged rather than filed. All guardians and conservators will be required to file original escrow statements for real estate sales and original bills of residential care facilities and long-term care facilities. Except for the January 1, 2008, effective date for using the forms developed by the Judicial Council, the amendments to Prob C §2620 are effective July 1, 2007.

Probate Code §2620.2, concerning failures to file accounts, has been amended. The current statute requires the court to give notice to the conservator or guardian and set a hearing within 60 days of the notice (120 days for a public agency). Those time periods are shortened to 30 and 45 days, respectively, but the court may grant an additional 30 days to file the account. Prob C §2620.2(a). If the fiduciary is not a licensed professional, the court may later be able to grant an additional 30 days. Prob C §2620.2(c)(5). Probate Code §2620.2(c)(3), concerning the appointment of temporary fiduciaries to investigate a failure of the guardian or conservator to account, has been amended to delete the court's option of permitting payment of the fees of the temporary fiduciary from the estate-the fees are to be paid by the regular fiduciary or the bonding company.

Compensation.

Probate Code §2623 has been amended to provide that a guardian or conservator shall not be compensated from the estate for costs or fees the guardian or conservator incurred in unsuccessfully opposing a petition, or other request or action, made by or on behalf of the ward or conservatee, unless the court determines that the opposition was made in good faith, based on the best interests of the ward or conservatee. Prob C §2623(b). Parallel changes are made in Prob C §§2640 and 2641.

Under current law, if a person has petitioned for the appointment of a particular conservator and another conservator was appointed, the unsuccessful petitioner and that person's attorney can petition for orders allowing them compensation and costs. An amendment to Prob C §2640.1(a) allows such an order only if the court determines that filing the petition was in the best interests of the conservatee.

Probate Code §2653, concerning removal proceedings, has been amended to provide that a fiduciary removed for cause cannot charge his or her litigation costs to the estate. Prob C §2653(c)(2). A related amendment provides that the successful petitioner shall be awarded attorney fees and costs unless the court determines that the fiduciary acted in good faith. Prob C §2653(c)(1).

Special Notice.

Probate Code §2701 has been amended to delete the provision that a request for special notice is deemed withdrawn after 3 years.

Public Guardians.

Probate Code §2920 has been amended to require the public guardian to apply for appointment as guardian or conservator if there is an "imminent threat" to a person's health, safety, or estate. Under existing law, the public guardian must apply for appointment if ordered by the court. The amended statute requires the court to so order if it appears a guardian or conservator is required and no one else is qualified and willing to act. New Prob C §2923 provides that the public guardian shall comply by January 1, 2008, with continuing education requirements established by the California State Association of Public Administrators, Public Guardians, and Public Conservators.

Change or sale of a conservatee's residence.

Stats 2006, ch 490 (SB 1116-Scott)

Amends Prob C §§2352, 2540, 2543, 2590, 2591. Adds Prob C §§2352.5, 2591.5.

Current law requires that conservators select the "least restrictive appropriate residence" for the conservatee. Prob C §2352(a). New Prob C §2352.5(a) establishes a presumption that the "personal residence" of the conservatee at the commencement of the conservatorship is the least restrictive appropriate residence. New Prob C §2352.5(b) now requires that the conservator determine the appropriate level of care for the conservatee and evaluate the measures necessary to keep the conservatee at the conservatee's residence or to return the conservatee to his or her residence. The determination must be sent to the court within 60 days of appointment.

There are significant changes to the current Prob C §2352(e) requirement that the conservator "promptly" notify the court of a change of the conservatee's residence. As amended, the statute also makes it necessary to send the notice to the same persons entitled to a notice of a petition to establish the conservatorship under Prob C §1822(b)-a provision that effectively incorporates the listing of persons in Prob C §1821(b). (Generally, the persons entitled to notice under these statutes include the conservatee's spouse or registered domestic partner and all relatives within the second degree of kinship. If no such persons are known to the petitioner, more remote persons are notified.) The court can waive giving notice in order to prevent harm to the conservatee. Prob C §2652(e)(2). The notice to the court must be filed within 30 days and must include a declaration stating that the change of residence meets the "least restrictive appropriate residence" standard. The conservator must also file proof of service of the notice on the individuals entitled to notice. The statute is effective January 1, 2007, but the Judicial Council is given until January 1, 2008, to develop the form for the required declaration.

These after-the-fact notices do not suffice if the change of residence involves removal of the conservatee from the conservatee's "personal residence." In such cases, the notices usually must be given at least 15 days in advance. Prob C §2352(e)(3). (Note: This provision applies to a permanent conservator. A temporary conservator must petition for authority to change a conservatee's residence. Prob C §2253(a). As noted above, Prob C §2253 was amended by Chapter 493 to require a court investigator investigation of petitions to change residence unless the court otherwise orders for good cause.)

Amendments to Prob C §2540 modestly impact the contents of petitions seeking authority to sell a personal residence. The statement concerning whether the conservatee has the ability to live in the personal residence now must include a statement of the reasons why other alternatives to removing the conservatee from that residence "including, but not limited to, in-home care services, are not available." Amendments to Prob C §2543 impact reappraisal for sale requirements, generally requiring a reappraisal for sale if the last appraisal was conducted more than 6 months before the confirmation hearing. The court can permit the conservator to use an appraisal conducted not more than 1 year before the sale if it is in the best interests of the conservatee. Prob C §2543(c).

Amended Prob C §2591 and new Prob C §2591.5 modify provisions for sales of real property by a conservator with independent powers. First, Prob C §2591(d) has been modified to list the power to sell a personal residence as a different power than the power to sell other property. New Prob C §2591.5 has the consequence of eliminating much of the "independence" of an independent power to sell a personal residence. The petition seeking the power must "demonstrate to the court that the terms of sale, including the price for which the property is to be sold and the commissions to be paid from the estate, are in all respects in the best interests of the conservatee." Prob C §2591.5(a). There must be a reappraisal for sale if the last appraisal was more than 6 months before execution of the contract for the sale unless the court extends the period to 1 year. Prob C §2591.5(b). Further, within 15 days after close of escrow, a copy of the final escrow settlement statement must be served on all persons entitled to notice of a petition for appointment of a conservator. (These are the persons entitled to notice under Prob C §1822(b) as described above.) The escrow statement also must be filed with the court along with a proof of service. Prob C §2591.5(c). Except for the reappraisal requirements, the court can waive requirements of Prob C §2591.5 for good cause. Prob C §2591.5(d).

Ex parte communications.

Stats 2006, ch 492 (SB 1716-Bowen)

Adds Prob C §1051.

Because of provisions coordinating this chapter with other portions of other chapters, the only provision of this chapter that takes effect is Section 2, enacting new Prob C §1051. This provision attempts to make it possible for a court to take into account ex parte reports of malfeasance by fiduciaries. The statute confirms the traditional prohibition against ex parte communications with judges, but allows the court to take action (including initiating an investigation by a court investigator) in response to an ex parte communication regarding a conservatee, ward, or the performance of duties by a fiduciary. The court must act in a manner consistent with due process, and the Judicial Council is required to adopt a rule of court implementing this statute by January 1, 2008.

Professional Conservators

Professional Fiduciaries Act.

Stats 2006, ch 491 (SB 1550-Figueroa)

Adds Bus & P C §§6500-6597 and Prob C §60.1. Amends, repeals, and adds Prob C §§2340-2345. Amends and repeals Prob C §§2580-2586.

This chapter enacts the Professional Fiduciaries Act, which creates a Professional Fiduciaries Bureau in the Department of Consumer Affairs and requires the bureau to license and regulate professional fiduciaries. Under new Prob C §6501(f):"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 or to each other by blood, adoption, marriage, or registered domestic partnership. "Professional fiduciary" also means 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 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.There are various exceptions to this definition for trust companies, FDIC-insured institutions, specified public employees, and specified persons whose sole activity as a fiduciary is as a registered and regulated broker-dealer, broker-dealer agent, or investment adviser representative. Beginning July 1, 2008, any person who acts as a professional fiduciary, or holds himself or herself out to the public as a professional fiduciary, must be licensed as a professional fiduciary unless that person is licensed as an attorney or a certified public accountant or is enrolled as an agent to practice before the IRS. Bus & P C §6530.

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