BILL ANALYSIS
SENATE JUDICIARY COMMITTEE
Martha M. Escutia, Chair
2001-2002 Regular Session
AB 1784 A
Assembly Member Harman B
As Amended April 30, 2002
Hearing Date: June 18, 2002 1
Probate Code 7
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SUBJECT
Wills, Trusts and Estate Planning Instruments: Rules of
Construction
DESCRIPTION
This bill would adjust the rules of construction applicable
to wills, trusts and other estate planning instruments as
recommended by the California Law Revision Commission.
BACKGROUND
The rules of construction provided in the Probate Code are
intended as aids to interpretation where the instrument
being construed is silent or ambiguous. They are default
rules in the sense that if the instrument is clear on the
matter, they are inapplicable. [Probate Code Section
21102(b).]
According to the California Law Revision Commission (CLRC),
the extension of the rules of construction beyond wills,
that until recently were the principal mode by which
estates were transferred, has been driven by the evolution
of the inter vivos trust and other nonprobate transfer
instruments as will substitutes. Thus, the modern rules of
construction for wills, enacted in California in 1983 and
subsequently amended by legislation sponsored by the Estate
Planning, Trust and Probate Law Section of the State Bar,
need further modification "to ensure their proper
functioning in the environment of their expanded
(more)
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application to trusts and other instruments."
The modifications to the rules of construction proposed in
this bill would parallel those already made to the Uniform
Probate Code.
CHANGES TO EXISTING LAW
Existing law provides specific rules of construction to be
used by the courts as aids to interpretation where the
instrument being construed is silent or ambiguous. These
rules apply to wills, trusts, deeds, and any other
instrument.
[Probate Code Sections 21101 et seq. All references
hereafter are to the Probate Code, unless indicated
otherwise.]
This bill would modify the existing rules of construction
as follows:
1) Clarify that extrinsic evidence may be used to
determine the intention of a transferor. [Sec. 21102.]
2) Substitute the term "at-death transfer " for
"testamentary gift" in the rules of construction, and
define "at-death transfer" as a transfer that is
revocable during the lifetime of the transferor, and
would specifically exclude joint tenancy as a form of
at-death transfer entitled to special treatment under
the rules.
3) Delete all references to "beneficiary" in the rules,
substituting instead the term "transfer," which has been
used interchangeably with "beneficiary" to refer to the
donee of a donative transfer.
4) Repeal several provisions that are duplicative of those
found in other codes and that are therefore unnecessary
(e.g., delete Section 21106, which is a less complete
statement than its equivalent in Civil Code Section 686,
and delete Civil Code Section 1073, which is duplicative
of Section 21108), and repeal provisions that are
inconsistent, based on flawed presumptions, or no longer
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serve a useful purpose. Other provisions would be
eliminated because they are redundant or they would be
consolidated into other relevant provisions.
5) Limit the application of a clause that requires the
beneficiary to survive a donor to gifts that remain
revocable during the life of the donor. [Sec. 21109(a).]
6) Directly state that a provision in an instrument
requiring the transferee to survive the transferor
constitutes an intention of the transferor that the
antilapse statute not apply. [Sec. 21110(b).]
7) Clarify that absent operation of an antilapse statute,
a failed gift passes in the transferor's estate, and that
in case of an intestacy, the applicable intestate
distribution is determined according to the general class
gift rules. Accordingly, the bill also would clarify
that a gift of "my estate" is to be treated as a
residuary gift. [Sec. 21114.]
8) Recast the provisions governing determination of
beneficiaries entitled to take under a class gift in
conformance with the Uniform Probate Code. [Sec. 21114.]
9) Conform the rules relating to intestacy that interpret
class gifts to "heirs" and to "issues" so that the
determination is made under the intestate succession laws
in effect at the time the transfer is to take effect in
enjoyment. [Secs. 21114 and 21115.]
10) Establish an applicable standard for determining the
value of property selected to satisfy a pecuniary gift,
drawn from regulations of the U.S. Treasury. [Sec.
21118.]
11) Conform California law to provisions of the Uniform
Probate Code governing gifts of securities that have
changed in form (by merger, sale, reinvestment, etc.),
and limit their application to at-death transfers
generally. [Sec. 21132.]
12) Conform existing rules for construing the donor's
intent where the donor has made a specific gift of
property but the property is no longer part of the
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donor's estate to the revised Uniform Probate Code
provisions and address a gap concerning ademption by
satisfaction, where an inter vivos gift of property to
the beneficiary named in the instrument is a
satisfaction of that specific gift. [Secs. 21133-21135.]
13) Make other technical changes and conforming revisions.
COMMENT
1. Need for the bill
According to the CLRC, all of the existing rules of
construction are based on previously existing Probate
Code provisions applicable to wills. "The basic idea of
the 1994 extension to trusts and other instruments was to
achieve uniformity among the common estate planning
instruments."
More problematic than the simple extension of the rules
to trusts and other instruments, is the extension of the
same rules to other forms of donative transfers, such as
inter vivos gifts, deeds, joint tenancy, and insurance
policies, the sponsor states. Because the Uniform
Probate Code has been updated since the last revisions to
the California rules of construction, the CLRC recommends
that relevant provisions be paralleled in California.
The comments below will deal only with some of the more
significant changes that AB 1784 would make to the
California rules of construction. The Commission has
prepared Comments for each of the rules of construction
that this bill proposes to amend or repeal. The Comments
will be incorporated into the statute when enacted to
provide background and guidance for the changes adopted.
Courts have ruled that the CLRC's comments provide
legislative history that indicates legislative intent
when change is adopted by the Legislature.
2. Extrinsic evidence to prove intent of donor
Section 21102 suggests that the rules of construction may
only be overridden by an expression of contrary intention
found in the instrument itself. However, existing case
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law allows extrinsic evidence of a testator's intent to
rebut the presumptive effect of the rules of
construction. [ Estate of Anderson , 56 Cal.App.4th 235
(1997).] Recent case law has also recognized that
although the intention of a donor "as expressed in the
instrument" controls the legal effect of dispositions
made in the instrument, expressions in the instrument are
not the exclusive means by which a donor's intention may
be ascertained. [ Estate of Guidotti , 90 Cal.App.4th 1403
(2001).] The parol evidence rule (Code of Civil
Procedure 1856(e)), for example, makes extrinsic evidence
admissible on the issue of a mistake or imperfection of
the writing.
This bill would recognize the role of parol evidence in
the determination of the transferor's intent by the
addition of an express provision to Section 21102
allowing the use of extrinsic evidence.
3. "At-death transfer" instead of "testamentary gift";
exclusion of joint tenancy
According to the Commission, the term "testamentary gift"
in Section 21104 is misleading and suggests that the
rules of construction are limited to gifts made by will,
although the rules are intended to apply to nonprobate
transfers as well. Thus, this bill would substitute the
term "at-death transfer", defined as a "transfer that is
revocable during the lifetime of the transferor." This
new term, the CLRC states, is more consistent with the
use of the transfer-transferor-transferee terminology
used throughout the rules of construction for gifts, such
as Sections 21109 and 21133.
However, joint tenancy, which is a form of at-death
transfer, would be excluded from the definition of
"at-death transfer." Because of its distinguishing
feature of right of survivorship, the application of
antilapse principles to joint tenancy in the same manner
that it is applied to other at-death transfers would
defeat the transferor's intention.
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4. Antilapse statute
Section 21109(a) provides that a transferee who fails to
survive the transferor, or who fails to survive until a
future time required by the instrument, does not take
under the instrument. This is a fundamental rule of
donative transfer, where a gift to a beneficiary fails
(lapses) if the beneficiary does not survive the donor.
The antilapse statute (Section 21110) is designed to
prevent the lapse of a gift to the donor's kindred who
predecease the donor, unless it is clear that the donor's
intention was that such a gift should lapse.
According to the CLRC, California's antilapse statute has
been criticized because it allows "mere words of
survival" in an instrument to negate the antilapse
statute, and it appears to extend the antilapse statute
to future interests. Therefore, the bill proposes
revision of Section 21110 to state directly that a
provision in an instrument requiring the transferee to
survive the transferor constitutes an intention of the
transferor that the antilapse statute not apply.
5. Satisfaction of pecuniary gifts
Section 21118 provides that the property selected to
satisfy a pecuniary gift shall have an aggregate fair
market value on the date or distribution that when added
to any cash distributed will amount to no less than the
amount of the pecuniary gift as stated in the instrument.
This provision, according to the CLRC, has been
criticized as allowing overfunding of a marital or
charitable deduction gift, or other manipulations. In
addition, the section may run afoul of the
generation-skipping transfer tax requirement that assets
allocated in satisfaction of a pecuniary gift must fairly
reflect net appreciation or depreciation in the value of
all assets available for funding the gift.
This bill would adopt standards of valuation of property
to satisfy pecuniary gifts that are in accord with
regulations of the U.S. Treasury.
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Support: Judicial Council; California Judges Assn.
Opposition: None Known
HISTORY
Source: California Law Revision Commission
Related Pending Legislation: None
Prior Legislation: None Known
Prior Vote: Asm. Jud. (Ayes 13, Noes 0);
Asm. Flr. (Ayes 72, Noes 0)
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