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SB-333 Trusts: modification or termination.(2017-2018)

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Date Published: 02/13/2017 09:00 PM
SB333:v99#DOCUMENT


CALIFORNIA LEGISLATURE— 2017–2018 REGULAR SESSION

Senate Bill No. 333


Introduced by Senator Anderson

February 13, 2017


An act to amend Sections 15403 and 15404 of the Probate Code, relating to trusts.


LEGISLATIVE COUNSEL'S DIGEST


SB 333, as introduced, Anderson. Trusts: modification or termination.
Existing law authorizes the beneficiaries of an irrevocable trust, upon the consent of all beneficiaries, to compel the modification or termination of the trust upon petition to the court. Existing law prohibits the modification or termination of an irrevocable trust if the continuance of the trust is necessary to carry out a material purpose of the trust, unless the court determines that modification or termination under the circumstances outweighs the interest in accomplishing a material purpose of the trust. Notwithstanding that provision, existing law prohibits the court from terminating a trust that is subject to a valid restraint on the transfer of a beneficiary’s interest.
This bill would revise and recast these provisions to instead require the court, in making the determination described above with respect to a proposed termination of an irrevocable trust, to consider whether the trust is subject to a valid restraint on the transfer of a beneficiary’s interest. The bill would delete the provision that the court is prohibited from terminating an irrevocable trust that is subject to a valid restraint on the transfer of a beneficiary’s interest. The bill would also make clarifying changes.
Existing law authorizes the settlor and the beneficiaries of a trust, upon the consent of the settlor and all beneficiaries, to compel the modification or termination of the trust.
This bill would revise and recast those provisions and instead authorize the trust to be modified or terminated by the written consent of the settlor and all beneficiaries without court approval of the modification or termination.
Vote: MAJORITY   Appropriation: NO   Fiscal Committee: NO   Local Program: NO  

The people of the State of California do enact as follows:


SECTION 1.

 Section 15403 of the Probate Code is amended to read:

15403.
 (a) Except as provided in subdivision (b), if all beneficiaries of an irrevocable trust consent, they may compel modification or termination of the trust upon petition to the court. petition the court for modification or termination of the trust.
(b) If the continuance of the trust is necessary to carry out a material purpose of the trust, the trust cannot be modified or terminated unless the court, in its discretion, determines that the reason for doing so under the circumstances outweighs the interest in accomplishing a material purpose of the trust. Under this section the court does not have discretion to permit termination of a trust that is subject to a valid restraint on transfer of the In making that determination with respect to a proposed termination of an irrevocable trust, the court shall consider whether the trust is subject to a valid restraint on the transfer of a beneficiary’s interest as provided in Chapter 2 (commencing with Section 15300).
(c) If the trust provides for the disposition of principal to a class of persons described only as “heirs” or “next of kin” of the settlor, or using other words that describe the class of all persons who would take under the rules of intestacy, the court may limit the class of beneficiaries whose consent is necessary to modify or terminate a trust to the beneficiaries who are reasonably likely to take under the circumstances.

SEC. 2.

 Section 15404 of the Probate Code is amended to read:

15404.
 (a) If the settlor and all beneficiaries of a trust consent, they may compel the modification or termination of the trust. A trust may be modified or terminated by the written consent of the settlor and all beneficiaries without court approval of the modification or termination.
(b) If any beneficiary does not consent to the modification or termination of the trust, the court may modify or partially terminate the trust upon petition to the court, court by the other beneficiaries, with the consent of the settlor, may compel a modification or a partial termination of the trust if the interests of the beneficiaries who do not consent are not substantially impaired.
(c) If the trust provides for the disposition of principal to a class of persons described only as “heirs” or “next of kin” of the settlor, or using other words that describe the class of all persons who would take under the rules of intestacy, the court may limit the class of beneficiaries whose consent is needed to compel the modification or termination of the necessary to modify or terminate a trust to the beneficiaries who are reasonably likely to take under the circumstances.