BILL ANALYSIS
SB 1575
Page 1
SENATE THIRD READING
SB 1575 (Sher)
As Amended June 28, 2002
Majority vote
SENATE VOTE :23-10
JUDICIARY 8-3
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|Ayes:|Corbett, Jackson, | | |
| |Longville, Shelley, | | |
| |Steinberg, Vargas, Wayne, | | |
| |Aroner | | |
| | | | |
|-----+--------------------------+-----+--------------------------|
|Nays:|Harman, Bates, Robert | | |
| |Pacheco | | |
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SUMMARY : Modifies the exceptions to the prohibition on transfers to
certain persons by instrument. Specifically, this bill :
1)Adds to the list of persons exempted from the prohibited
transferee rule a registered domestic partner.
2)Defines "cohabitant" for the purpose of the list of persons
exempted from the prohibited transferee rule as having the meaning
set forth in Penal Code Section 13700.
3)Requires that an attorney independently reviewing an instrument in
order to permit an otherwise prohibited transfer attempt to
determine if the intended consequence is the result of fraud,
menace, duress or undue influence.
4)Clarifies that for purposes of exempting a transfer on the basis
of an independent review of the instrument, the original
certificate of independent review is to be delivered to the
transferor, with a copy delivered to the drafter.
5)Removes the prohibition on testimony from the transferee when a
court is called upon to determine if a transfer was the product of
fraud, menace, duress or undue influence.
6)Exempts transfers of up to $3,000 from the prohibition on
transfers, except where the total value of the estate is under
SB 1575
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$100,000.
7)Exempts transfers made by an instrument executed by a nonresident
of California who was not a residence at the time of execution and
where the instrument was not signed within California.
FISCAL EFFECT : None
COMMENTS : This bill is sponsored by the Trusts and Estates Section
of the State Bar to update and clarify the provisions of the
prohibited transferee rule. In 1993, California enacted AB 21
(Umberg), Chapter 293, Statutes of 1993, disqualifying specified
persons from receiving a transfer under an instrument, such as the
person who drafted the instrument, his or her employee, relative,
cohabitant, or law partner or law firm shareholder, and generally
persons in a fiduciary capacity relative to the donor or the
transferor. AB 21 was enacted in response to abuses by an attorney
who drafted wills naming himself and his children as major
beneficiaries of his clients.
AB 21 enacting the prohibited transfer rule also enacted exceptions
to that rule, if the relationship between the transferor and the
transferee was such that it was unlikely that the transfer was the
result of undue influence, fraud or duress. Thus, an otherwise
prohibited transfer to the drafter of the instrument could be made,
for example, if the drafter was also the spouse or relative of the
transferor.
This bill refines the exceptions to the prohibited transfer rule.
First, it expressly includes domestic partners in the exceptions to
the prohibited transfer rule. Under the bill, the drafter of an
instrument could be a beneficiary of the instrument if he or she
were the domestic partner of the transferor. This bill also defines
cohabitant for purposes of that existing exemption, incorporating by
reference the definition in Penal Code Section 13700:
For purposes of this subdivision, "cohabitant" means two
unrelated adult persons living together for a substantial
period of time, resulting in some permanency of
relationship. Factors that may determine whether persons
are cohabiting include, but are not limited to, (1) sexual
relations between the parties while sharing the same
living quarters, (2) sharing of income or expenses, (3)
joint use or ownership of property, (4) whether the
parties hold themselves out as husband and wife, (5) the
continuity of the relationship and (6) the length of the
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relationship.
This bill strengthens the provisions allowing an exception to the
prohibited transfer rule if the instrument is reviewed by an
independent attorney. This bill would require the attorney to
discuss the consequences of the proposed instrument with the
transferor, and to attempt to determine if it resulted from fraud,
menace, duress, or undue influence.
This bill removes the restriction on a court receiving the testimony
of the disqualified transferee in determining whether the transfer
was the product of fraud, menace, duress or undue influence. This
bill precludes the court from making its decision solely upon such
testimony. The Trusts and Estates Section notes that such matters
are only heard by judges and states its belief that judges are able
to weigh testimony and decide issues of credibility without a
blanket prohibition.
This bill creates an exemption for transfers of no more than $3,000,
if the total value of the estate does not exceed the small estate
limit set in Section 13100 (currently $100,000), in order to allow
small gifts to service providers in recognition of the service
provided.
Under existing law, an instrument executed by a person who was not a
resident of California at the time of execution, may be exempted
from the prohibited transfer rule if the court determines that the
transfer was not the product of fraud menace, duress, or undue
influence. This bill provides a categorical exemption for
instruments by nonresidents and signed outside of the state.
Finally, this bill modifies the definition of "related by blood or
marriage" for purposes of exemption of transfers to a related person
to include persons related within the fifth degree, instead of the
seventh degree, and adds heirs of the transferor. This avoids
application of the exemption in the case of a distant relative,
while protecting the exemption where a distant relative is an heir
or next of kin of the transferor.
Analysis Prepared by : Kathy Sher / JUD. / (916) 319-2334 FN:
0005677