BILL NUMBER: AB 2846 CHAPTERED
BILL TEXT
CHAPTER 81
FILED WITH SECRETARY OF STATE JULY 22, 2016
APPROVED BY GOVERNOR JULY 22, 2016
PASSED THE SENATE JUNE 30, 2016
PASSED THE ASSEMBLY MAY 12, 2016
AMENDED IN ASSEMBLY MAY 9, 2016
INTRODUCED BY Assembly Member Maienschein
FEBRUARY 19, 2016
An act to amend Sections 610, 611, 613, 625, 633, 634, 640, 641,
642, 650, 651, 652, 660, 661, 662, 671, 672, 673, 674, 680, 681, 682,
683, and 684 of, and to add Sections 621, 675 and 676 to, the
Probate Code, relating to powers of appointment.
LEGISLATIVE COUNSEL'S DIGEST
AB 2846, Maienschein. Powers of appointment.
Existing law provides a statutory body of law relating to powers
of appointment, including the creation and exercise of, and the
revocability of the creation, exercise, or release of, a power of
appointment. Existing law provides that a power of appointment can be
created only by a donor having the capacity to transfer the interest
in property to which the power relates. Existing law for these
purposes defines a person to whom a power of appointment is given or
in whose favor a power of appointment is reserved as a "donee."
This bill would revise and recast those provisions. The bill would
impose additional requirements on the creation of a power of
appointment, including the existence of a legally valid creating
instrument that manifests the donor's intent to create a power of
appointment and that transfers the appointive property, except as
specified. The bill would define the term "power of appointment" for
those purposes. The bill would instead define a person to whom a
power of appointment is given or in whose favor a power of
appointment is reserved as a "powerholder." The bill would require,
if a powerholder exercises a power of appointment in a disposition
that also disposes of property the powerholder owns, the owned
property and the appointive property to be allocated in the
permissible manner in accordance with the terms of the creating
instrument and to carry out the intent of the powerholder. The bill
would require, if a powerholder makes a valid partial appointment to
a taker in default of appointment, the taker in default of
appointment to share fully in unappointed property. The bill would
make property subject to a special power of appointment subject to
the claims of creditors of the powerholder or of the powerholder's
estate or the expenses of administration of the powerholder's estate
under specified circumstances. The bill would make conforming changes
to related provisions, and would make changes to provisions related
to an unexercised general power of appointment, as specified.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 610 of the Probate Code is amended to read:
610. As used in this part:
(a) "Appointee" means the person in whose favor a power of
appointment is exercised.
(b) "Appointive property" means the property or interest in
property that is the subject of the power of appointment.
(c) "Creating instrument" means the deed, will, trust, or other
writing or document that creates or reserves the power of
appointment.
(d) "Donor" means the person who creates or reserves a power of
appointment.
(e) "Permissible appointee" means a person in whose favor a power
of appointment can be exercised.
(f) "Power of appointment" means a power that enables a
powerholder acting in a nonfiduciary capacity to designate a
recipient of an ownership interest in or another power of appointment
over the appointive property. The term does not include a power of
attorney.
(g) "Powerholder" means the person to whom a power of appointment
is given or in whose favor a power of appointment is reserved.
SEC. 2. Section 611 of the Probate Code is amended to read:
611. (a) A power of appointment is "general" only to the extent
that it is exercisable in favor of the powerholder, the powerholder's
estate, the powerholder's creditors, or creditors of the powerholder'
s estate, whether or not it is exercisable in favor of others.
(b) A power to consume, invade, or appropriate property for the
benefit of a person in discharge of the powerholder's obligation of
support that is limited by an ascertainable standard relating to the
person's health, education, support, or maintenance is not a general
power of appointment.
(c) A power exercisable by the powerholder only in conjunction
with a person having a substantial interest in the appointive
property that is adverse to the exercise of the power in favor of the
powerholder, the powerholder's estate, the powerholder's creditors,
or creditors of the powerholder's estate is not a general power of
appointment.
(d) A power of appointment that is not "general" is "special."
(e) A power of appointment may be general as to some appointive
property, or an interest in or a specific portion of appointive
property, and be special as to other appointive property.
SEC. 3. Section 613 of the Probate Code is amended to read:
613. A power of appointment is "imperative" where the creating
instrument manifests an intent that the permissible appointees be
benefited even if the powerholder fails to exercise the power. An
imperative power can exist even though the powerholder has the
privilege of selecting some and excluding others of the designated
permissible appointees. All other powers of appointment are
"discretionary." The powerholder of a discretionary power is
privileged to exercise, or not to exercise, the power as the
powerholder chooses.
SEC. 4. Section 621 is added to the Probate Code, to read:
621. (a) A power of appointment is created only if all of the
following are satisfied:
(1) There is a creating instrument.
(2) The creating instrument is valid under applicable law.
(3) Except as provided in subdivision (b), the creating instrument
transfers the appointive property.
(4) The terms of the creating instrument manifest the donor's
intent to create in a powerholder a power of appointment over the
appointive property exercisable in favor of a permissible appointee.
(b) Paragraph (3) of subdivision (a) does not apply to the
creation of a power of appointment by the exercise of a power of
appointment.
SEC. 5. Section 625 of the Probate Code is amended to read:
625. (a) A power of appointment can be exercised only by a
powerholder having the capacity to transfer the interest in property
to which the power relates.
(b) Unless the creating instrument otherwise provides, a
powerholder who is a minor may not exercise a power of appointment
during minority.
SEC. 6. Section 633 of the Probate Code is amended to read:
633. (a) If the creating instrument requires the consent of the
donor or other person to exercise a power of appointment, the power
can only be exercised when the required consent is contained in the
instrument of exercise or in a separate written instrument, signed in
each case by the person whose consent is required.
(b) Unless expressly prohibited by the creating instrument:
(1) If a person whose consent is required dies, the power may be
exercised by the powerholder without the consent of that person.
(2) If a person whose consent is required becomes legally
incapable of consenting, the person's guardian or conservator may
consent to an exercise of the power.
(3) A consent may be given before or after the exercise of the
power by the powerholder.
SEC. 7. Section 634 of the Probate Code is amended to read:
634. A power of appointment created in favor of two or more
powerholders can only be exercised when all of the powerholders unite
in its exercise. If one or more of the powerholders dies, becomes
legally incapable of exercising the power, or releases the power, the
power may be exercised by the others, unless expressly prohibited by
the creating instrument.
SEC. 8. Section 640 of the Probate Code is amended to read:
640. (a) The exercise of a power of appointment requires a
manifestation of the powerholder's intent to exercise the power.
(b) A manifestation of the powerholder's intent to exercise a
power of appointment exists in any of the following circumstances:
(1) The powerholder declares, in substance, that the powerholder
exercises specific powers or all the powers the powerholder has.
(2) The powerholder purports to transfer an interest in the
appointive property that the powerholder would have no power to
transfer except by virtue of the power.
(3) The powerholder makes a disposition that, when considered with
reference to the property owned and the circumstances existing at
the time of the disposition, manifests the powerholder's
understanding that the powerholder was disposing of the appointive
property.
(c) The circumstances described in subdivision (b) are
illustrative, not exclusive.
SEC. 9. Section 641 of the Probate Code is amended to read:
641. (a) A general residuary clause in a will, or a will making
general disposition of all the testator's property, does not exercise
a power of appointment held by the testator unless specific
reference is made to the power or there is some other indication of
intent to exercise the power.
(b) This section applies in a case where the powerholder dies on
or after July 1, 1982.
SEC. 10. Section 642 of the Probate Code is amended to read:
642. If a power of appointment existing at the powerholder's
death, but created after the execution of the powerholder's will, is
exercised by the will, the appointment is effective except in either
of the following cases:
(a) The creating instrument manifests an intent that the power may
not be exercised by a will previously executed.
(b) The will manifests an intent not to exercise a power
subsequently acquired.
SEC. 11. Section 650 of the Probate Code is amended to read:
650. (a) The powerholder of a general power of appointment may
make an appointment:
(1) Of all of the appointive property at one time, or several
partial appointments at different times, where the power is
exercisable inter vivos.
(2) Of present or future interests or both.
(3) Subject to conditions or charges.
(4) Subject to otherwise lawful restraints on the alienation of
the appointed interest.
(5) In trust.
(6) Creating a new power of appointment.
(b) The listing in subdivision (a) is illustrative, not exclusive.
SEC. 12. Section 651 of the Probate Code is amended to read:
651. Subject to the limitations imposed by the creating
instrument, the powerholder of a special power may make any of the
types of appointment permissible for the powerholder of a general
power under Section 650.
SEC. 13. Section 652 of the Probate Code is amended to read:
652. (a) Except as provided in subdivision (b), the powerholder
of a special power of appointment may appoint the whole or any part
of the appointive property to any one or more of the permissible
appointees and exclude others.
(b) If the donor specifies either a minimum or maximum share or
amount to be appointed to one or more of the permissible appointees,
the exercise of the power must conform to the specification.
SEC. 14. Section 660 of the Probate Code is amended to read:
660. (a) The powerholder of a power of appointment that is
presently exercisable, whether general or special, can contract to
make an appointment to the same extent that the powerholder could
make an effective appointment.
(b) The powerholder of a power of appointment cannot contract to
make an appointment while the power of appointment is not presently
exercisable. If a promise to make an appointment under such a power
is not performed, the promisee cannot obtain either specific
performance or damages, but the promisee is not prevented from
obtaining restitution of the value given by the promisee for the
promise.
(c) Unless the creating instrument expressly provides that the
powerholder may not contract to make an appointment while the power
of appointment is not presently exercisable, subdivision (b) does not
apply to the case where the donor and the powerholder are the same
person. In this case, the powerholder can contract to make an
appointment to the same extent that the powerholder could make an
effective appointment if the power of appointment were presently
exercisable.
SEC. 15. Section 661 of the Probate Code is amended to read:
661. (a) Unless the creating instrument otherwise provides, a
general or special power of appointment that is a discretionary
power, whether testamentary or otherwise, may be released, either
with or without consideration, by a written instrument signed by the
powerholder and delivered as provided in subdivision (c).
(b) A releasable power may be released with respect to the whole
or any part of the appointive property and may also be released in
such manner as to reduce or limit the permissible appointees. No
partial release of a power shall be deemed to make imperative the
remaining power that was not imperative before the release unless the
instrument of release expressly so provides. No release of a power
that is not presently exercisable is permissible where the donor
designated persons or a class to take in default of the powerholder's
exercise of the power unless the release serves to benefit all
persons designated as provided by the donor.
(c) A release shall be delivered as follows:
(1) If the creating instrument specifies a person to whom a
release is to be delivered, the release shall be delivered to that
person, but delivery need not be made as provided in this paragraph
if the person cannot with due diligence be found.
(2) In a case where the property to which the power relates is
held by a trustee, the release shall be delivered to the trustee.
(3) In a case not covered by paragraph (1) or (2), the release may
be delivered to any of the following:
(A) A person, other than the powerholder, who could be adversely
affected by the exercise of the power.
(B) The county recorder of the county in which the powerholder
resides or in which the deed, will, or other instrument creating the
power is filed.
(d) A release of a power of appointment that affects real property
or obligations secured by real property shall be acknowledged and
proved, and may be certified and recorded, in like manner and with
like effect as grants of real property, and all statutory provisions
relating to the recordation or nonrecordation of conveyances of real
property and to the effect thereof apply to a release with like
effect, without regard to the date when the release was delivered, if
at all, pursuant to subdivision (c). Failure to deliver, pursuant to
subdivision (c), a release that is recorded pursuant to this
subdivision does not affect the validity of any transaction with
respect to the real property or obligation secured thereby, and the
general laws of this state on recording and its effect govern the
transaction.
(e) This section does not impair the validity of a release made
before July 1, 1970.
SEC. 16. Section 662 of the Probate Code is amended to read:
662. (a) A release on behalf of a minor powerholder shall be made
by the guardian of the estate of the minor pursuant to an order of
court obtained under this section.
(b) The guardian or other interested person may file a petition
with the court in which the guardianship of the estate proceeding is
pending for an order of the court authorizing or requiring the
guardian to release the ward's powers as a powerholder or a power of
appointment in whole or in part.
(c) Notice of the hearing on the petition shall be given for the
period and in the manner provided in Chapter 3 (commencing with
Section 1460) of Part 1 of Division 4 to all of the following (other
than the petitioner or persons joining in the petition):
(1) The persons required to be given notice under Chapter 3
(commencing with Section 1460) of Part 1 of Division 4.
(2) The donor of the power, if alive.
(3) The trustee, if the property to which the power relates is
held by a trustee.
(4) Other persons as ordered by the court.
(d) After hearing, the court in its discretion may make an order
authorizing or requiring the guardian to release on behalf of the
ward a general or special power of appointment as permitted under
Section 661, if the court determines, taking into consideration all
the relevant circumstances, that the ward as a prudent person would
make the release of the power of appointment if the ward had the
capacity to do so.
(e) Nothing in this section imposes any duty on the guardian to
file a petition under this section, and the guardian is not liable
for failure to file a petition under this section.
SEC. 17. Section 671 of the Probate Code is amended to read:
671. (a) Unless the creating instrument or the powerholder, in
writing, manifests a contrary intent, where the powerholder dies
without having exercised an imperative power of appointment either in
whole or in part, the persons designated as permissible appointees
take equally of the property not already appointed. Where the
creating instrument establishes a minimum distribution requirement
that is not satisfied by an equal division of the property not
already appointed, the appointees who have received a partial
appointment are required to return a pro rata portion of the property
they would otherwise be entitled to receive in an amount sufficient
to meet the minimum distribution requirement.
(b) Where an imperative power of appointment has been exercised
defectively, either in whole or in part, its proper execution may be
adjudged in favor of the person intended to be benefited by the
defective exercise.
(c) Where an imperative power of appointment has been created so
that it confers on a person a right to have the power exercised in
the person's favor, the proper exercise of the power can be compelled
in favor of the person, or the person's assigns, creditors,
guardian, or conservator.
SEC. 18. Section 672 of the Probate Code is amended to read:
672. (a) Except as provided in subdivision (b), if the
powerholder of a discretionary power of appointment fails to appoint
the property, releases the entire power, or makes an ineffective
appointment, in whole or in part, the appointive property not
effectively appointed passes to the person named by the donor as
taker in default or, if there is none, reverts to the donor.
(b) If the powerholder of a general power of appointment makes an
ineffective appointment, an implied alternative appointment to the
powerholder's estate may be found if the powerholder has manifested
an intent that the appointive property be disposed of as property of
the powerholder rather than as in default of appointment.
SEC. 19. Section 673 of the Probate Code is amended to read:
673. (a) Except as provided in subdivision (b), if an appointment
by will or by instrument effective only at the death of the
powerholder is ineffective because of the death of an appointee
before the appointment becomes effective and the appointee leaves
issue surviving the powerholder, the surviving issue of the appointee
take the appointed property in the same manner as the appointee
would have taken had the appointee survived the powerholder, except
that the property passes only to persons who are permissible
appointees, including appointees permitted under Section 674. If the
surviving issue are all of the same degree of kinship to the deceased
appointee, they take equally, but if of unequal degree, then those
of more remote degree take in the manner provided in Section 240.
(b) This section does not apply if either the donor or powerholder
manifests an intent that some other disposition of the appointive
property shall be made.
SEC. 20. Section 674 of the Probate Code is amended to read:
674. (a) Unless the creating instrument expressly provides
otherwise, if a permissible appointee dies before the exercise of a
special power of appointment, the powerholder has the power to
appoint to the issue of the deceased permissible appointee, whether
or not the issue was included within the description of the
permissible appointees, if the deceased permissible appointee was
alive at the time of the execution of the creating instrument or was
born thereafter.
(b) This section applies whether the special power of appointment
is exercisable by inter vivos instrument, by will, or otherwise.
(c) This section applies to a case where the power of appointment
is exercised on or after July 1, 1982, but does not affect the
validity of any exercise of a power of appointment made before July
1, 1982.
SEC. 21. Section 675 is added to the Probate Code, to read:
675. If a powerholder exercises a power of appointment in a
disposition that also disposes of property the powerholder owns, the
owned property and the appointive property shall be allocated in the
permissible manner in accordance with the terms of the creating
instrument and that best carries out the powerholder's intent.
SEC. 22. Section 676 is added to the Probate Code, to read:
676. Unless the terms of the instrument creating or exercising a
power of appointment manifest a contrary intent, if the powerholder
makes a valid partial appointment to a taker in default of
appointment, the taker in default of appointment may share fully in
unappointed property.
SEC. 23. Section 680 of the Probate Code is amended to read:
680. The donor of a power of appointment cannot nullify or alter
the rights given creditors of the powerholder by Sections 682, 683,
and 684 by any language in the instrument creating the power.
SEC. 24. Section 681 of the Probate Code is amended to read:
681. (a) Except as provided in subdivision (b), property covered
by a special power of appointment is not subject to the claims of
creditors of the powerholder or of the powerholder's estate or to the
expenses of the administration of the powerholder's estate.
(b) Property subject to a special power of appointment shall be
subject to the claims of creditors of the powerholder or of the
powerholder's estate or the expenses of administration of the
powerholder's estate under either of the following circumstances:
(1) To the extent that the powerholder owned the property and,
reserving the special power, transferred the property in violation of
the Uniform Voidable Transactions Act (Chapter 1 (commencing with
Section 3439) of Title 2 of Part 2 of Division 4 of the Civil Code).
(2) If the initial gift in default of the exercise of the power is
to the powerholder or the powerholder's estate.
SEC. 25. Section 682 of the Probate Code is amended to read:
682. (a) To the extent that the property owned by the powerholder
is inadequate to satisfy the claims of the powerholder's creditors,
property subject to a general power of appointment that is presently
exercisable is subject to the claims to the same extent that it would
be subject to the claims if the property were owned by the
powerholder.
(b) Upon the death of the powerholder, to the extent that the
powerholder's estate is inadequate to satisfy the claims of creditors
of the estate and the expenses of administration of the estate,
property subject to a general testamentary power of appointment or to
a general power of appointment that was presently exercisable at the
time of the powerholder's death is subject to the claims and
expenses to the same extent that it would be subject to the claims
and expenses if the property had been owned by the powerholder.
(c) This section applies whether or not the power of appointment
has been exercised.
SEC. 26. Section 683 of the Probate Code is amended to read:
683. Property subject to a general power of appointment created
by the donor in the donor's favor, whether or not presently
exercisable, is subject to the claims of the donor's creditors or the
donor's estate and to the expenses of the administration of the
donor's estate, except to the extent the donor effectively
irrevocably appointed the property subject to the general power of
appointment in favor of a person other than the donor or the donor's
estate.
SEC. 27. Section 684 of the Probate Code is amended to read:
684. For the purposes of Sections 682 and 683, a person to whom
the powerholder owes an obligation of support shall be considered a
creditor of the powerholder to the extent that a legal obligation
exists for the powerholder to provide the support.