BILL ANALYSIS
AB 873
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Date of Hearing: May 16, 2001
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Carole Migden, Chairwoman
AB 873 (Harman) - As Amended: May 10, 2001
Policy Committee: JudiciaryVote:9-0
Urgency: No State Mandated Local Program:
Yes Reimbursable: Yes
SUMMARY
This bill clarifies the effect of a divorce or annulment on
nonprobate transfers-such as revocable trusts, pay-on-death
accounts, joint tenancy title, and other instruments-that pass
along property upon death while avoiding probate. Specifically,
this bill:
1)Defines "nonprobate transfer" as a provision for transfer upon
death in a contract of employment, bond, mortgage, promissory
note, security, pension plan, IRA, trust, or other similar
transfer (other than by means of a will or life insurance
policy) that avoids probate.
2)Establishes that a nonprobate transfer to the transferor's
former spouse that was executed before or during the marriage
is not valid, and a joint tenancy created before or during the
marriage is severed if the parties have divorced or gotten an
annulment. (Specified exceptions are made to this provision.)
3)Provides, similar to the protections regarding property
disposed of through wills, that the above does not affect the
rights of a subsequent purchaser of subject property, who in
good faith relies upon an apparent severance of a joint
tenancy or the failure of a nonprobate transfer.
4)Expressly prohibits parties, under the terms of the automatic
restraint on disposition of property during the pendency of a
dissolution, from creating or modifying a nonprobate transfer
in a manner that affects the disposition of property without
the written consent of the other party or an order of the
court.
AB 873
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5)Authorizes parties, notwithstanding the automatic restraint on
a party's ability to dispose of property during a pending
divorce, to create, modify, or revoke a will, revoke a
nonprobate transfer (with the exception of insurance policies
or other coverage), eliminate a right of survivorship, or
create an unfunded trust. Notice must be provided before
revoking a nonprobate transfer or eliminating a right of
survivorship.
FISCAL EFFECT
Potential minor reimbursable costs to counties for recording
affidavits made with regards to purchase of real property that
was formerly a non-probate transfer or held in joint tenancy.
AB 873
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COMMENTS
Purpose . This proposal seeks to implement two recommendations
of the California Law Revision Commission. The first addresses
the effect of marital dissolution on named beneficiaries of life
insurance policies, retirement death benefits, revocable trusts,
and other "nonprobate transfers." The second seeks to limit the
reach of automatic temporary restraining orders, concerning the
disposition of property while a marital dissolution is pending,
to allow parties to a dissolution to make certain estate
planning decisions.
The author, drawing from the recommendations of the Law Revision
Commission, notes that "[i]n California, as in most states, the
dissolution or annulment of a person's marriage automatically
revokes a disposition to a former spouse in that person's will.
This policy is based on the general assumption that typical
divorcing parties will not intend or expect a will provision
benefiting a spouse to survive the dissolution of their
marriage?.California law does not extend similar protection to a
divorcing person who has chosen to pass property on death by
means of an instrument other than a will."
The author further argues that "the inconsistent treatment of
probate and nonprobate transfers after dissolution of marriage
does not make sense. If the typical divorcing person does not
intend to maintain a disposition benefiting a spouse in a will,
that person will likewise not wish to preserve a disposition to
a spouse in some other instrument."
Analysis Prepared by : Chuck Nicol / APPR. / (916)319-2081