BILL ANALYSIS                                                                                                                                                                                                    



                                                                       


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          |SENATE RULES COMMITTEE            |                  SB 1575|
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                                 THIRD READING


          Bill No:  SB 1575
          Author:   Sher (D)
          Amended:  4/9/02
          Vote:     21

           
           SENATE JUDICIARY COMMITTEE  :  4-2, 4/2/02
          AYES:  Escutia, Kuehl, Peace, Sher
          NOES:  Ackerman, Haynes


           SUBJECT  :    Wills and trusts:  prohibited transferees:   
          exceptions

           SOURCE  :     Estate Planning, Trust and Probate Section of  
          the State Bar


           DIGEST  :    This bill makes some clarifying changes to the  
          rule that voids transfers made through an instrument or  
          will to specified persons who are disqualified due to a  
          fiduciary relationship with the transferor.  The bill adds  
          a cohabitant of the transferor to those exempt from the  
          rule, as well as exempt transfers of up to $3,000 and  
          transfers made by a nonresident through an instrument  
          signed outside the State, as specified.

           ANALYSIS  :    Existing law voids any provision or provisions  
          in any instrument that makes a donative transfer to the  
          following persons:

           1.  The person who drafted the instrument, or his or her  
              relative by blood or marriage, cohabitant, or employee.

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           2.  Any partner or shareholder of a law firm or  
              corporation in which the person who drafted the  
              instrument holds an interest, or an employee of that  
              law firm or law corporation.

           3.  Any person who is in a fiduciary relationship with the  
              transferor, such as conservator or trustee, who  
              transcribes the instrument or causes the instrument to  
              be transcribed, or that person's relative or  
              cohabitant.

           4.  A care custodian of a dependent adult, as defined.

          Existing law exempts from the prohibited transferee rule,  
          transfers made under the following circumstances:

           1.  If the transferor is related by blood or marriage (as  
              defined) to the person who drafted the instrument.

           2.  If the instrument was reviewed by an independent  
              attorney who counsels the transferor about the nature  
              of the intended transfer and who signs and delivers to  
              the transferor and to the drafter a certificate of  
              independent review stating his or her conclusion that  
              the transfer was not the product of fraud, duress,  
              menace, or undue influence.

           3.  If the court approves the instrument and orders the  
              transfer after full disclosure of the relationships of  
              the persons involved.

           4.  As to specified instruments, if the court determines,  
              upon clear and convincing evidence, excluding the  
              testimony of the prohibited transferee, that the  
              transfer was not the product of fraud, menace, duress  
              or undue influence.  (If it was, disqualified person is  
              required to pay all costs of the proceeding, including  
              attorney's fees.)

           5.  If the transferee is a federal, state, or local  
              entity, a tax-exempt 501(c)(3) or 501(c)(19) entity or  
              a trust holding an interest in the tax-exempt entity or  
              its trustee.








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          This bill:

           1.  Adds to the list of persons exempted from the  
              prohibited transferee rule, a cohabitant with the  
              transferee.

           2.  Exempts transfers of up to $3,000 from the rule, as  
              well as transfers made by a nonresident through an  
              instrument signed outside the State.  The bill  
              specifies this does not apply if the total value of the  
              property in the estate of the transferor does not  
              exceed the amount prescribed in Section 13100 of the  
              Probate Code, which puts forth guidelines that exclude  
              property that does not exceed $200,000, and if 40 days  
              have elapsed since the death of the decendant.
           
            3.  Requires the attorney conducting the independent  
              review to determine whether fraud, duress, menace or  
              undue influence was involved in the transfer provides  
              an original certificate to each of the transferors and  
              the drafter of the instrument.  

              Existing law provides that the above shall apply only  
              to:  a) any instrument other than one making a transfer  
              to a person related by blood or marriage, or b) any  
              instrument executed on or before July 1, 1993, by a  
              person who was a resident of the State at the time the  
              instrument was executed.  This bill adds any instrument  
              executed by a resident of California who was not a  
              resident at the time the instrument was executed.

           4.  Clarifies that the attorney conducting the independent  
              review shall not be considered to otherwise represent  
              the client.

           FISCAL EFFECT  :    Appropriation:  No   Fiscal Com.:  No    
          Local:  No

           SUPPORT  :   (Verified  4/9/02)

          Estate Planning, Trust and Probate Section of the State Bar


          RJG:kb  4/9/02   Senate Floor Analyses 







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                         SUPPORT/OPPOSITION:  SEE ABOVE

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