BILL ANALYSIS ------------------------------------------------------------ |SENATE RULES COMMITTEE | SB 1575| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 445-6614 Fax: (916) | | |327-4478 | | ------------------------------------------------------------ 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. CONTINUED SB 1575 Page 2 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. SB 1575 Page 3 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 OPPOSITION : (Verified 4/10/02) SB 1575 Page 4 Campaign for California Families ARGUMENTS IN SUPPORT : The bill is needed, the sponsor says, to update the prohibited transferee rule, clarify its provisions, and make it more effective in its operation. ARGUMENTS IN OPPOSITION : Campaign for California Families opposes SB 1575. They state, "This bill undermines the vote of the people awarding more rights of marriage to homosexual 'domestic partners'. When Californians overwhelmingly passed Proposition 22, the Protection of Marriage Initiative, they wanted to protect all the rights and benefits of marriage for only a man and a woman. This bill cheapens marriage and undermines the will of the people." RJG:kb 4/10/02 Senate Floor Analyses SUPPORT/OPPOSITION: SEE ABOVE **** END ****