BILL NUMBER: SB 105	AMENDED
	BILL TEXT

	AMENDED IN ASSEMBLY  AUGUST 12, 2010
	AMENDED IN ASSEMBLY  AUGUST 2, 2010
	AMENDED IN ASSEMBLY  JUNE 22, 2010

INTRODUCED BY   Senator Harman

                        JANUARY 27, 2009

   An act to amend Section 6103.6 of the Business and Professions
Code, and to amend Sections 2583, 15642, 16062,  and 21310
of,   21310, and 21355 of, and  to add Part
 3.5   3.7  (commencing with Section 21360)
to Division 11 of,  and to repeal Part 3.5 (commencing with
Section 21350) of Division 11 of,  the Probate Code,
relating to donative transfers.



	LEGISLATIVE COUNSEL'S DIGEST


   SB 105, as amended, Harman. Donative transfers: restrictions.
   Existing law generally prohibits an instrument from making a
donative transfer to the person who drafted or transcribed the
instrument and certain other disqualified persons. This provision is
subject to specified exceptions, including when the instrument is
reviewed by an independent attorney who counsels the client about the
nature and consequences of the intended transfer, attempts to
determine if the intended consequence is the result of fraud, menace,
duress, or undue influence, and signs and delivers to the transferor
a certificate of independent review.
   This bill would revise and recast these provisions to establish an
express presumption of fraud or undue influence when a donative
instrument makes a gift to the person who drafted or transcribed the
instrument, and certain other disqualified persons. The bill would
define relevant terms for purposes of these provisions and make other
technical and conforming changes.
   Vote: majority. Appropriation: no. Fiscal committee: no.
State-mandated local program: no.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:

  SECTION 1.  Section 6103.6 of the Business and Professions Code is
amended to read:
   6103.6.  Violation of Section 15687 of the Probate Code, or of
Part 3.5  (commencing with Section 21350) or Part 3.7 
(commencing with Section 21360) of Division 11 of the Probate Code,
shall be grounds for discipline, if the attorney knew or should have
known of the facts leading to the violation. This section shall only
apply to violations that occur on or after January 1, 1994.
  SEC. 2.  Section 2583 of the Probate Code is amended to read:
   2583.  In determining whether to authorize or require a proposed
action under this article, the court shall take into consideration
all the relevant circumstances, which may include, but are not
limited to, the following:
   (a) Whether the conservatee has legal capacity for the proposed
transaction and, if not, the probability of the conservatee's
recovery of legal capacity.
   (b) The past donative declarations, practices, and conduct of the
conservatee.
   (c) The traits of the conservatee.
   (d) The relationship and intimacy of the prospective donees with
the conservatee, their standards of living, and the extent to which
they would be natural objects of the conservatee's bounty by any
objective test based on such relationship, intimacy, and standards of
living.
   (e) The wishes of the conservatee.
   (f) Any known estate plan of the conservatee (including, but not
limited to, the conservatee's will, any trust of which the
conservatee is the settlor or beneficiary, any power of appointment
created by or exercisable by the conservatee, and any contract,
transfer, or joint ownership arrangement with provisions for payment
or transfer of benefits or interests at the conservatee's death to
another or others which the conservatee may have originated).
   (g) The manner in which the estate would devolve upon the
conservatee's death, giving consideration to the age and the mental
and physical condition of the conservatee, the prospective devisees
or heirs of the conservatee, and the prospective donees.
   (h) The value, liquidity, and productiveness of the estate.
   (i) The minimization of current or prospective income, estate,
inheritance, or other taxes or expenses of administration.
   (j) Changes of tax laws and other laws which would likely have
motivated the conservatee to alter the conservatee's estate plan.
   (k) The likelihood from all the circumstances that the conservatee
as a reasonably prudent person would take the proposed action if the
conservatee had the capacity to do so.
   (l) Whether any beneficiary is the spouse or domestic partner of
the conservatee.
   (m) Whether a beneficiary has committed physical abuse, neglect,
false imprisonment, or fiduciary abuse against the conservatee after
the conservatee was substantially unable to manage his or her
financial resources, or resist fraud or undue influence, and the
conservatee's disability persisted throughout the time of the hearing
on the proposed substituted judgment.
  SEC. 3.  Section 15642 of the Probate Code is amended to read:
   15642.  (a) A trustee may be removed in accordance with the trust
instrument, by the court on its own motion, or on petition of a
settlor, cotrustee, or beneficiary under Section 17200.
   (b) The grounds for removal of a trustee by the court include the
following:
   (1) Where the trustee has committed a breach of the trust.
   (2) Where the trustee is insolvent or otherwise unfit to
administer the trust.
   (3) Where hostility or lack of cooperation among cotrustees
impairs the administration of the trust.
   (4) Where the trustee fails or declines to act.
   (5) Where the trustee's compensation is excessive under the
circumstances.
   (6) Where the sole trustee is a person described in 
subdivision (a) of Section 21350 or  subdivision (a) of Section
21380, whether or not the person is the transferee of a donative
transfer by the transferor, unless, based upon any evidence of the
intent of the settlor and all other facts and circumstances, which
shall be made known to the court, the court finds that it is
consistent with the settlor's intent that the trustee continue to
serve and that this intent was not the product of fraud or undue
influence. Any waiver by the settlor of this provision is against
public policy and shall be void. This paragraph shall not apply to
instruments that became irrevocable on or before January 1, 1994.
This paragraph shall not apply if any of the following conditions are
met:
   (A) The settlor is related by blood or marriage to, or is a
cohabitant with, any one or more of the trustees, the person who
drafted or transcribed the instrument, or the person who caused the
instrument to be transcribed.
   (B) The instrument is reviewed by an independent attorney who (1)
counsels the settlor about the nature of his or her intended trustee
designation and (2) signs and delivers to the settlor and the
designated trustee a certificate in substantially the following form:

        ""CERTIFICATE OF INDEPENDENT REVIEW
I, _______________________________, have reviewed
              (attorney's name)
____________________and have counseled my client,
       (name of instrument)
__________, fully and privately on the nature and
        (name of client)
legal effect of the designation as trustee of ___
                            (name of trustee)
contained in that instrument. I am so
disassociated from the interest of the person
named as trustee as to be in a position to
advise my client impartially and confidentially
as to the consequences of the designation. On
the basis of this counsel, I conclude that the
designation of a person who would otherwise be
subject to removal under paragraph (6) of
subdivision (b) of Section 15642 of the Probate
Code is clearly the settlor's intent and that
intent is not the product of fraud or undue
influence.
____________________________ __________________''
      (Name of Attorney)            (Date)


This independent review and certification may occur either before or
after the instrument has been executed, and if it occurs after the
date of execution, the named trustee shall not be subject to removal
under this paragraph. Any attorney whose written engagement signed by
the client is expressly limited to the preparation of a certificate
under this subdivision, including the prior counseling, shall not be
considered to otherwise represent the client.
   (C) After full disclosure of the relationships of the persons
involved, the instrument is approved pursuant to an order under
Article 10 (commencing with Section 2580) of Chapter 6 of Part 4 of
Division 4.
   (7) If, as determined under Part 17 (commencing with Section 810)
of Division 2, the trustee is substantially unable to manage the
trust's financial resources or is otherwise substantially unable to
execute properly the duties of the office. When the trustee holds the
power to revoke the trust, substantial inability to manage the trust'
s financial resources or otherwise execute properly the duties of the
office may not be proved solely by isolated incidents of negligence
or improvidence.
   (8) If the trustee is substantially unable to resist fraud or
undue influence. When the trustee holds the power to revoke the
trust, substantial inability to resist fraud or undue influence may
not be proved solely by isolated incidents of negligence or
improvidence.
   (9) For other good cause.
   (c) If, pursuant to paragraph (6) of subdivision (b), the court
finds that the designation of the trustee was not consistent with the
intent of the settlor or was the product of fraud or undue
influence, the person being removed as trustee shall bear all costs
of the proceeding, including reasonable attorney's fees.
   (d) If the court finds that the petition for removal of the
trustee was filed in bad faith and that removal would be contrary to
the settlor's intent, the court may order that the person or persons
seeking the removal of the trustee bear all or any part of the costs
of the proceeding, including reasonable attorney's fees.
   (e) If it appears to the court that trust property or the
interests of a beneficiary may suffer loss or injury pending a
decision on a petition for removal of a trustee and any appellate
review, the court may, on its own motion or on petition of a
cotrustee or beneficiary, compel the trustee whose removal is sought
to surrender trust property to a cotrustee or to a receiver or
temporary trustee. The court may also suspend the powers of the
trustee to the extent the court deems necessary.
   (f) For purposes of this section, the term "related by blood or
marriage" shall include persons within the seventh degree.
  SEC. 4.  Section 16062 of the Probate Code is amended to read:
   16062.  (a) Except as otherwise provided in this section and in
Section 16064, the trustee shall account at least annually, at the
termination of the trust, and upon a change of trustee, to each
beneficiary to whom income or principal is required or authorized in
the trustee's discretion to be currently distributed.
   (b) A trustee of a living trust created by an instrument executed
before July 1, 1987, is not subject to the duty to account provided
by subdivision (a).
   (c) A trustee of a trust created by a will executed before July 1,
1987, is not subject to the duty to account provided by subdivision
(a), except that if the trust is removed from continuing court
jurisdiction pursuant to Article 2 (commencing with Section 17350) of
Chapter 4 of Part 5, the duty to account provided by subdivision (a)
applies to the trustee.
   (d) Except as provided in Section 16064, the duty of a trustee to
account pursuant to former Section 1120.1a of the Probate Code (as
repealed by Chapter 820 of the Statutes of 1986), under a trust
created by a will executed before July 1, 1977, which has been
removed from continuing court jurisdiction pursuant to former Section
1120.1a, continues to apply after July 1, 1987. The duty to account
under former Section 1120.1a may be satisfied by furnishing an
account that satisfies the requirements of Section 16063.
   (e) Any limitation or waiver in a trust instrument of the
obligation to account is against public policy and shall be void as
to any sole trustee who is  a disqualified person as defined in
Section 21350.5 or who is  described in subdivision (a) of
Section 21380 and is not described in Section 21382.
  SEC. 5.  Section 21310 of the Probate Code is amended to read:
   21310.  As used in this part:
   (a) "Contest" means a pleading filed with the court by a
beneficiary that would result in a penalty under a no contest clause,
if the no contest clause is enforced.
   (b) "Direct contest" means a contest that alleges the invalidity
of a protected instrument or one or more of its terms, based on one
or more of the following grounds:
   (1) Forgery.
   (2) Lack of due execution.
   (3) Lack of capacity.
   (4) Menace, duress, fraud, or undue influence.
   (5) Revocation of a will pursuant to Section 6120, revocation of a
trust pursuant to Section 15401, or revocation of an instrument
other than a will or trust pursuant to the procedure for revocation
that is provided by statute or by the instrument.
   (6) Disqualification of a beneficiary under Section 6112  ,
21350,  or 21380.
   (c) "No contest clause" means a provision in an otherwise valid
instrument that, if enforced, would penalize a beneficiary for filing
a pleading in any court.
   (d) "Pleading" means a petition, complaint, cross-complaint,
objection, answer, response, or claim.
   (e) "Protected instrument" means all of the following instruments:

   (1) The instrument that contains the no contest clause.
   (2) An instrument that is in existence on the date that the
instrument containing the no contest clause is executed and is
expressly identified in the no contest clause, either individually or
as part of an identifiable class of instruments, as being governed
by the no contest clause. 
  SEC. 6.    Part 3.5 (commencing with Section
21350) of Division 11 of the Probate Code is repealed. 
   SEC. 6.    Section 21355 of the   Probate
Code   is amended to read: 
   21355.   (a)    This part shall apply to
instruments that become irrevocable on or after September 1, 1993
 , and before January 1, 2011  . For the purposes of this
section, an instrument  which   that  is
otherwise revocable or amendable shall be deemed to be irrevocable if
on  or after  September 1, 1993, the transferor by reason
of incapacity was unable to change the disposition of his or her
property and did not regain capacity before the date of his or her
death. 
   (b) This part shall remain in effect only until January 1, 2014,
and as of that date is repealed, unless a later enacted statute, that
is enacted before January 1, 2014, deletes or extends that date.

  SEC. 7.  Part  3.5   3.7  (commencing
with Section 21360) is added to Division 11 of the Probate Code, to
read:

      PART  3.5.   3.7.   Presumption of
Fraud or Undue Influence


      CHAPTER 1.  DEFINITIONS


   21360.  The definitions in this chapter govern the construction of
this part.
   21362.  (a) "Care custodian" means a person who provides health or
social services to a dependent adult, except that "care custodian"
does not include a person who provided services without remuneration
if the person had a personal relationship with the dependent adult
(1) at least 90 days before providing those services, (2) at least
six months before the dependent adult's death, and (3) before the
dependant adult was admitted to hospice care, if the dependent adult
was admitted to hospice care. As used in this subdivision,
"remuneration" does not include the donative transfer at issue under
this chapter or the reimbursement of expenses.
   (b) For the purposes of this section, "health and social services"
means services provided to a dependent adult because of the person's
dependent condition, including, but not limited to, the
administration of medicine, medical testing, wound care, assistance
with hygiene, companionship, housekeeping, shopping, cooking, and
assistance with finances.
   21364.  "Cohabitant" has the meaning provided in Section 13700 of
the Penal Code.
   21366.  "Dependent adult" means a person who, at the time of
executing the instrument at issue under this part, was a person
described in either of the following:
   (a) The person was 65 years of age or older and satisfied one or
both of the following criteria:
   (1) The person was unable to provide properly for his or her
personal needs for physical health, food, clothing, or shelter.
   (2) Due to one or more deficits in the mental functions listed in
paragraphs (1) to (4), inclusive, of subdivision (a) of Section 811,
the person had difficulty managing his or her own financial resources
or resisting fraud or undue influence.
   (b) The person was 18 years of age or older and satisfied one or
both of the following criteria:
   (1) The person was unable to provide properly for his or her
personal needs for physical health, food, clothing, or shelter.
   (2) Due to one or more deficits in the mental functions listed in
paragraphs (1) to (4), inclusive, of subdivision (a) of Section 811,
the person had substantial difficulty managing his or her own
financial resources or resisting fraud or undue influence.
   21368.  "Domestic partner" has the meaning provided in Section 297
of the Family Code.
   21370.  "Independent attorney" means an attorney who has no legal,
business, financial, professional, or personal relationship with the
beneficiary of a donative transfer at issue under this part, and who
would not be appointed as a fiduciary or receive any pecuniary
benefit as a result of the operation of the instrument containing the
donative transfer at issue under this part.
   21374.  (a) A person who is "related by blood or affinity" to a
specified person means any of the following persons:
   (1) A spouse or domestic partner of the specified person.
   (2) A relative within a specified degree of kinship to the
specified person or within a specified degree of kinship to the
spouse or domestic partner of the specified person.
   (3) The spouse or domestic partner of a person described in
paragraph (2).
   (b) For the purposes of this section, "spouse or domestic partner"
includes a predeceased spouse or predeceased domestic partner.
   (c) In determining a relationship under this section, Sections
6406 and 6407, and Chapter 2 (commencing with Section 6450) of Part 2
of Division 6, are applicable.
      CHAPTER 2.  OPERATION AND EFFECT OF PRESUMPTION


   21380.  (a) A provision of an instrument making a donative
transfer to any of the following persons is presumed to be the
product of fraud or undue influence:
   (1) The person who drafted the instrument.
   (2) A person in a fiduciary relationship with the transferor who
transcribed the instrument or caused it to be transcribed.
   (3) A care custodian of a transferor who is a dependent adult, but
only if the instrument was executed during the period in which the
care custodian provided services to the transferor, or within 90 days
before or after that period.
   (4) A person who is related by blood or affinity, within the third
degree, to any person described in paragraphs (1) to (3), inclusive.

   (5) A cohabitant or employee of any person described in paragraphs
(1) to (3), inclusive.
   (6) A partner, shareholder, or employee of a law firm in which a
person described in paragraph (1) or (2) has an ownership interest.
   (b) The presumption created by this section is a presumption
affecting the burden of proof. The presumption may be rebutted by
proving, by clear and convincing evidence, that the donative transfer
was not the product of fraud or undue influence.
   (c) Notwithstanding subdivision (b), with respect to a donative
transfer to the person who drafted the donative instrument, or to a
person who is related to, or associated with, the drafter as
described in paragraph (4), (5), or (6) of subdivision (a), the
presumption created by this section is conclusive.
   (d) If a beneficiary is unsuccessful in rebutting the presumption,
the beneficiary shall bear all costs of the proceeding, including
reasonable attorney's fees.
   21382.  Section 21380 does not apply to any of the following
instruments or transfers:
   (a) A donative transfer to a person who is related by blood or
affinity, within the fourth degree, to the transferor or is the
cohabitant of the transferor.
   (b) An instrument that is drafted or transcribed by a person who
is related by blood or affinity, within the fourth degree, to the
transferor or is the cohabitant of the transferor.
   (c) An instrument that is approved pursuant to an order under
Article 10 (commencing with Section 2580) of Chapter 6 of Part 4 of
Division 4, after full disclosure of the relationships of the persons
involved.
   (d) A donative transfer to a federal, state, or local public
entity, an entity that qualifies for an exemption from taxation under
Section 501(c)(3) or 501(c)(19) of the Internal Revenue Code, or a
trust holding the transferred property for the entity.
   (e) A donative transfer of property valued at five thousand
dollars ($5,000) or less, if the total value of the transferor's
estate equals or exceeds the amount stated in Section 13100.
   (f) An instrument executed outside of California by a transferor
who was not a resident of California when the instrument was
executed.
   21384.  (a) A gift is not subject to Section 21380 if the
instrument is reviewed by an independent attorney who counsels the
transferor, out of the presence of any heir or proposed beneficiary,
about the nature and consequences of the intended transfer, including
the effect of the intended transfer on the transferor's heirs and on
any beneficiary of a prior donative instrument, attempts to
determine if the intended transfer is the result of fraud or undue
influence, and signs and delivers to the transferor an original
certificate in substantially the following form:
        ""CERTIFICATE OF INDEPENDENT REVIEW
  I, ______________________________, have reviewed
              (attorney's name)
_______________and have counseled the transferor,
       (name of instrument)
__________, on the nature and consequences of any
      (name of transferor)
transfers of property to ________________________
     (name of person described in Section 21380 of
                                 the Probate Code)
that would be made by the instrument.
  I am an ""independent attorney'' as defined in
Section 21370 of the Probate Code and am in a
position to advise the transferor independently,
impartially, and confidentially as to the
consequences of the transfer.
  On the basis of this counsel, I conclude that
the transfers to
______________________________________ that would
(name of person described in Section 21380 of
the Probate Code)
be made by the instrument are not the product of
fraud or undue influence.
____________________________ __________________''
       (Name of Attorney)            (Date)


   (b) An attorney whose written engagement, signed by the
transferor, is expressly limited solely to compliance with the
requirements of this section, shall not be considered to otherwise
represent the transferor as a client.
   (c) An attorney who drafts an instrument can review and certify
the same instrument pursuant to this section, but only as to a gift
to a care custodian. In all other circumstances, an attorney who
drafts an instrument may not review and certify the instrument.
   (d) If the certificate is prepared by an attorney other than the
attorney who drafted the instrument that is under review, a copy of
the signed certification shall be provided to the drafting attorney.
   21386.  If a gift fails under this part, the instrument making the
gift shall operate as if the beneficiary had predeceased the
transferor without spouse, domestic partner, or issue.
   21388.  (a) A person is not liable for transferring property
pursuant to an instrument that is subject to the presumption created
under this part, unless the person is served with notice, prior to
transferring the property, that the instrument has been contested
under this part.
   (b) A person who is served with notice that an instrument has been
contested under this part is not liable for failing to transfer
property pursuant to the instrument, unless the person is served with
notice that the validity of the transfer has been conclusively
determined by a court.
   21390.  This part applies notwithstanding a contrary provision in
an instrument.
   21392.  (a) This part shall apply to instruments that become
irrevocable on or after  September 1, 1993  
January 1, 2011  . For the purposes of this section, an
instrument that is otherwise revocable or amendable shall be deemed
to be irrevocable if, on  September 1, 1993   or
after January 1, 2011  , the transferor by reason of incapacity
was unable to change the disposition of the transferor's property
and did not regain capacity before the date of the transferor's
death.
   (b) It is the intent of the Legislature that this part supplement
the common law on undue influence, without superseding or interfering
in the operation of that law. Nothing in this part precludes an
action to contest a donative transfer under the common law or under
any other applicable law. This subdivision is declarative of existing
law.