BILL ANALYSIS                                                                                                                                                                                                    



                                                                  AB 873
                                                                  Page  1

          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
                                                                  Page  2

          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
                                                                  Page  3

           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