The Professional Fiduciary Practice Administrator - A New Kid in Town

by Anne M. Rudolph and Ralph E. Hughes

There are currently over 800 active licensed professional fiduciaries in California.¹ Because only individuals can hold themselves out as professional fiduciaries,² and many professional fiduciaries handle large numbers of cases, the legislature has adopted new Probate Code sections 2469 and 9765 to assist the courts in providing smooth transitions when a professional fiduciary with a large number of cases dies or becomes disabled and there is no existing non-court supervised method for replacing the fiduciary.

Both new sections went into effect on January 1, 2024.³

The two sections are almost mirror images of each other. The main difference is language necessitated by the fact that one statute deals with death (section 9765) and the other deals with incapacity (section 2469). Each provides that, if a licensed professional fiduciary cannot serve because of death or disability—and if there is no non-probate method of replacing the fiduciary (e.g., a nominated successor trustee)—the court can appoint a Professional Fiduciary Practice Administrator⁴ (a “Practice Administrator”) who can function in the absent fiduciary’s place until a permanent replacement can be appointed.

The statutes appear to be designed to deal with situations in which a licensed professional fiduciary has many matters that, at the time of the fiduciary’s death or disability, require attention on what might be called a mass solution basis. There is no indication that the statutes supersede individual remedies in individual matters.

This article is designed to familiarize practitioners with the new laws and to suggest how they might assist licensed professional fiduciaries in planning to work with the new laws. This “high speed pass” discussion covers statutes that are recently effective and not yet interpreted by the courts. Discussion of some questions of application and interpretation has been omitted in favor of a brief and understandable analysis.

The probate court has jurisdiction to appoint a Practice Administrator under the new statutes when there is a “vacancy” because “the instrument under which the [deceased/incapacitated] fiduciary was acting does not name a successor to fill the vacancy and the instrument under which the [deceased/incapacitated] fiduciary was acting does not provide a nonjudicial method to fill the vacancy.”⁵ A vacancy can arise in matters in which the professional fiduciary was serving in a “representative capacity,” including especially “[n]on-court-supervised trusts.”⁶

Vacancies due to suspension or removal related to a professional fiduciary’s dishonesty, fraud, or theft are not covered expressly by the statutes.

A professional fiduciary is considered “incapacitated” when “the person is unable to fulfill their duties as a professional fiduciary because of either temporary or permanent disability, incapacity, or absence.”⁷ This definition — which focuses on a person’s ability to handle someone else’s affairs — is significantly different than the definitions of “incapacitated” used in the conservatorship statutes, which focus on the potential conservatee’s “ability to provide properly for his or her personal needs” and the potential conservatee’s ability to “manage his or her own financial resources or resist fraud or undue influence.”⁸ One can expect then, that a contested hearing on an allegation of a professional fiduciary’s incapacity will present issues and evidence that differ from the issues and evidence presented when a conservator is to be appointed due to an individual’s alleged incapacity. It is not clear that the presumption of capacity and the methods of analysis prescribed by Probate Code sections 810-813 will apply. In addition, a professional fiduciary who wishes to contest an allegation of incapacity may be constrained by the fiduciary’s duty to act “solely in the beneficiaries’ interest (original emphasis)”⁹ —in this case, the interests of the beneficiaries and/or principals of many matters.

When a vacancy exists, a person designated in the statutes may petition for the appointment of “[o]ne or more individuals qualified to act as a professional fiduciary . . . to take [temporary] control of the [deceased/incapacitated] professional fiduciary’s files.”¹⁰ The petitioner can be the deceased or incapacitated fiduciary’s “conservator, agent under a power of attorney for asset management, trustee, or interested person.”¹¹

“The petition shall request an order appointing a professional fiduciary practice administrator as temporary successor, with all of the powers and duties held by the [deceased/incapacitated] fiduciary, in each matter in which the [deceased/incapacitated] fiduciary was acting in a representative capacity.”¹²

Since a petition can request the appointment of “one or more individuals . . . to take temporary control of the [deceased/incapacitated] fiduciary’s files,”¹³ the law appears to contemplate that there can be more than one petition, that one petition could deal with some of the [deceased/ incapacitated] fiduciary’s matters, and that a different petition or petitions could deal with other of the [deceased/ incapacitated] fiduciary’s matters. Different petitions could perhaps nominate different Practice Administrators for different cases.

The requirement that the petition must request that the Practice Administrator be provided with all of the [deceased/incapacitated] fiduciary’s powers and duties is designed to permit the Practice Administrator to deal completely with the various matters during the period of the Practice Administrator’s temporary appointment.

The new Probate Code sections 2469 and 9765 identify the necessary recipients of a notice of a petition for appointment of a Practice Administrator, but do not specify the duration period for notice. However, both statutes provide that the court, “may dispense with notice if the petition alleges that the immediate appointment of a professional fiduciary practice administrator is required to safeguard the interests of an individual or an asset in a matter in which the incapacitated fiduciary was acting in a representative capacity.”¹⁴

The overriding power of the court to dispense with notice appears to be designed to permit prompt ex parte action in cases of emergency.

It is not clear exactly how this petition will be captioned and processed in the court. Presumably, it might be captioned, “In re Matters of Susan Onoda, [Incapacitated/Deceased] Professional Fiduciary” and assigned a new case number. Since there can probably be more than one petition, it seems likely that all related petitions would be filed under this case number. Whether this logistical solution is correct or not remains to be seen.

A major oversight in the new statutes is that they do
not provide a method by which the petitioner and the petitioner’s attorney may recover fees and costs for the preparation, filing, and potential contest of any or all of the initial petitions.

1. Who Can Be Appointed

A professional fiduciary can exert some control over the identity of the Practice Administrator(s) who will be appointed temporarily to control the professional fiduciary’s cases immediately following death or incapacity.

Nevertheless, the court retains the final authority regarding appointment. “The court shall not make the appointment if the court concludes that the appointment of the nominated person would be contrary to the best interests of, or would create a conflict of interest with, any interested party in a matter in which the [deceased/incapacitated] fiduciary was acting in a fiduciary capacity.”¹⁶

2. Bond Requirement

The Practice Administrator must file a bond “in each matter in which [the Practice Administrator] is appointed temporary successor, in the amount currently required of the [deceased/incapacitated] fiduciary or in another amount as the court deems appropriate.”¹⁷

This requirement could prove problematic. It could limit the number of professional fiduciaries who are eligible to serve in a practical sense, because not all fiduciaries are equally bondable. In addition, the requirement of a bond in “each matter” necessitates an allegation regarding the size of a non-court-supervised trust that is not currently bonded, which information might not be immediately available, especially because it may be extremely private. Finally, bond premiums which are paid on an annual basis might be impractical in the extreme if the period of temporary administration is short.

3. Duration of the Appointment

Revealing a legislative intent that the Practice Administrator should focus on moving the case promptly to a permanent successor, the stated term of the Practice Administrator’s appointment is “45 days after entry of the order of appointment.”¹⁸

4. Duties During the Period of Appointment

After the court has appointed the Practice Administrator, the appointee must:

Within the same 15-day period, the Practice Administrator must notify all reasonably ascertainable interested parties that they can nominate a permanent successor and that the Practice Administrator is obligated to petition for appointment of that person.²⁶ Importantly, the Practice Administrator is also required to notify the same parties that—if no one is nominated within the 15-day period— the Practice Administrator can petition to be appointed permanent successor.²⁷

5. Duties After the Temporary Appointment Has Terminated

After the temporary appointment has terminated with the appointment of a permanent successor fiduciary, the Practice Administrator wraps up the accounting for the deceased/incapacitated fiduciary, accounts for the Practice Administrator’s own actions, and seeks exoneration of the required bond.²⁸ Fees (and presumably costs) are recovered from each matter.²⁹ The current statutes do not provide expressly for the recovery of attorney’s fees and (as noted above) do not provide for recovery of fees and costs for the initial petition(s).

6. Overriding Court Power to Extend Time Periods

While many of the time periods specified in the statute may appear too short, the court has an overriding power to extend every time period listed in Probate Code sections 2469 and 9765. Each section contains the following provision:

The foregoing procedures only apply if the governing document does not provide a non-court method for determining a successor fiduciary. To avoid the procedures, it is important for trustors and their attorneys to provide for trustee succession when drafting revocable trusts.

If, or to the extent, that a fiduciary is administering matters that would be subject to the Practice Administrator procedures if they became incapacitated or died, it behooves the fiduciary’s attorney to assist the fiduciary in taking steps to control the appointment of the fiduciary’s successor. Some steps that might be taken follow.

First, the fiduciary should seek to control the identity of the person or persons who can petition for a Practice Administrator in the event of the fiduciary’s death or incapacity. The petitioner can be the fiduciary’s conservator, an agent under a power of attorney for asset management, a trustee, or an interested person.³¹ Since a fiduciary probably wishes to avoid probate and certainly cannot completely control the identity of the fiduciary’s conservator, and since the fiduciary probably wants the fiduciary’s personal trustee and the fiduciary’s personal financial affairs as far away from the above procedures as possible, it makes sense for the fiduciary to nominate the person(s) who will petition for the appointment of a Practice Administrator (or different Practice Administrators) in a power of attorney for asset management (or perhaps several such powers of attorney). These powers of attorney can apparently be separate from the fiduciary’s own personal estate planning durable power of attorney.

Second, the fiduciary should seek to control the identity of the person or persons who will be appointed as Practice Administrator(s) to manage the fiduciary’s cases on death or incapacity. This can be done “in a writing, including, but not limited to, the [incapacitated/deceased] fiduciary’s will or trust.”³² Since a “writing” suffices, and since there is no reason to bring the deceased or incapacitated fiduciary’s personal affairs near these proceedings, a logical step would be to identify the desired Practice Administrator(s) in the same power(s) of attorney for asset management that the fiduciary uses to nominate the person who can petition for appointment of a Practice Administrator.

While the above method is not the only way to thread the needle, the method suggests itself due to the wording of the statute authorizing the use of a document entitled “power of attorney for asset management.”³³ It should be possible to limit this particular power of attorney for asset management to identification of persons to fulfill functions under Probate Code sections 2469 and 9765. It should also be possible to employ more than one such power of attorney, because the fiduciary will often wish different people to act with respect to different cases.

Many practitioners will need to deal with the statutes providing for fiduciary succession in the future, and it is wise to be familiar with their general outlines. Attorneys advising professional fiduciaries on their personal matters would be wise to consult with them now to identify individuals who will be available and qualified to implement the fiduciary’s wishes under the processes imposed by new Probate Code sections 2469 and 9765.

* Hughes & Pizzuto, APC, San Diego, California

Anne Rudolph and Ralph Hughes

This article was published in the California Trusts and Estates Quarterly, Volume 29, Issue 4, 2024, copyright Trusts and Estates Section of the California Lawyers Association, printed with permission.

1. Department of Consumer Affairs, Professional Fiduciaries Bureau, Licensing and Enforcement Statistcs July 1, 2022-January 31, 2023 https://fiduciary.ca.gov/about_us/materials/20230315_11_1.pdf (as of April 24, 2023).
2. See Prob. Code, section 60.1 and Bus. & Prof. Code, section 6501, subd. (f). Only an individual can be licensed as a professional fiduciary. There is no such thing as a professional fiduciary corporation under California law. See Corp. Code, section 17701.04, subd. (b).
3. Prob. Code, sections 2469, subd. (a), 9765, subd. (a).
4. Professional Practice Administrator means “the person or persons appointed pursuant to this section to take over the responsibilities of the incapacitated/deceased fiduciary.” Prob. Code, sections 2469, subd. (j)(1), 9765, subd. (j)(1).
5. Prob. Code, sections 2469, subd. (j)(3), 9765, subd. (j)(2). The sections actually provide:

   ‘Vacancy’ means that the instrument under which the [incapacitated/deceased] fiduciary was acting does not name a successor to fill the vacancy, the instrument under which the incapacitated fiduciary was acting does not provide a nonjudicial method to fill the vacancy, and a co- fiduciary, authorized to act solely, was not acting with the [incapacitated/deceased] fiduciary. [Emphasis added.]
   The authors understand that the word “and” is a technical error that will be corrected to “or” to provide that a surviving co-trustee with the capacity and legal authority to act solely, can do so, thus eliminating a potential vacancy.

6. Prob. Code, sections 2469, subd. (b), 9765, subd. (b).
7. Prob. Code, section 2469, subd. (j)(1).
8. Prob. Code, section 1801 [emphasis added].
9. Moeller v. Super. Ct. (1997) 16 Cal.4th 1124, 1134.
10. Prob. Code, sections 2469, subd. (j)(2), 9765, subd. (j)(1).
11. Prob. Code, sections 2469, subds. (a), (b), (c) & (d), 9765, subds. (a), (b), (c) & (d). While the death of the principal generally terminates a power of attorney, death does not terminate the power of attorney “as to specific authority permitted by statute to be exercised after the principal’s death.” (Prob. Code, section 4152, subd. (a)(4).) The agent’s power to petition to fill a vacancy appears to be one of these powers. Similarly, while a conservatorship terminates upon the death of the conservatee (Prob. Code, section 1860, subd, (a)), this express statutory grant of continuing power appears to authorize a professional fiduciary’s conservator to petition to fill a vacancy even after the professional fiduciary’s death. (Compare Prob. Code, section 2467 granting the conservator continuing post-death authority over the conservatee’s property.)
12. Prob. Code, sections 2469, subd. (b), 9765, subd. (b).
13. Prob. Code, sections 2469, subd. (a), 9765, subd. (a).
14. Prob. Code, sections 2469, subd. (f), 9765, subd. (f).
15. Prob. Code, sections 2469, subd. (d), 9765, subd. (d). It is not altogether clear which persons “have legal standing to act on behalf of the [incapacitated/deceased professional fiduciary.” It appears that an agent under a durable power of attorney has standing to act on behalf of both an incapacitated and a deceased professional fiduciary. (See discussion and endnote 11, supra.) But who “has standing to act on behalf of” a decedent?
16. Ibid.
17. Prob. Code, sections 2469, subd. (c), 9765, subd. (c).
18. Prob. Code, sections 2469, subd. (e), 9765, subd. (e).
19. Prob. Code, sections 2469, subd. (h)(1), 9765, subd. (h)(1).
20. Prob. Code, sections 2469, subd. (h)(2), 9765, subd. (h)(2).
21. This requirement is not written into the statutes, but it follows from the requirement that the Practice Administrator should have “all the powers and duties” of the deceased/incapacitated fiduciary. (See Prob. Code, sections 2469, subd. (b), 9765, subd. (b).)
22. Prob. Code, sections 2469, subd. (h)(3), 9765, subd. (h)(3).
23. Ibid.
24. Prob. Code, sections 2469, subd. (h)(3)(A), 9765, subd. (h)(3)(A).
25. Prob. Code, sections 2469, subd. (h)(5), 9765, subd. (h)(5).
26. Prob. Code, sections 2469, subd. (h)(3)(B), 9765, subd. (h)(3)(B).
27. Prob. Code, sections 2469, subd. (h)(3)(C), 9765, subd. (h)(3)(C). The Probate Code sections do not preclude self-appointment, so it is presumed that self-appointment is possible.
28. Prob. Code, sections 2469, subd. (h)(4), 9765, subd. (h)(4).
29. Ibid.
30. Prob. Code, sections 2469, subd. (h)(5)(i), 9765, subd. (h)(5)(i).
31. Prob. Code, sections 2469, subd. (a), 9765, subd. (a).
32. Prob. Code, sections 2469, subd. (d), 9765, subd. (d).
33. Prob. Code, sections 2469, subd. (a), 9765, subd. (a).