BILL ANALYSIS SB 105 Page 1 SENATE THIRD READING SB 105 (Harman) As Amended August 2, 2010 Majority vote SENATE VOTE :38-0 JUDICIARY 10-0 ----------------------------------------------------------------- |Ayes:|Feuer, Tran, Brownley, | | | | |Evans, Hagman, Huffman, | | | | |Jones, Knight, Monning, | | | | |Saldana | | | |-----+--------------------------+-----+--------------------------| | | | | | ----------------------------------------------------------------- SUMMARY : Revises restrictions on donative transfers from dependent adults to care custodians. Specifically, this bill : 1)Revises the statutory presumption that a gift by a dependent adult to his or her care custodian is the result of fraud or undue influence if executed during the period of care by the care custodian, or within 90 days of that period. Continues the clear and convincing rebuttal standard to overcome the statutory presumption. 2)Revises the definition of "care custodian" to be a person who provides health or social services, as defined, to a dependent adult, but does not include a person who provided services without remuneration, if the person had a personal relationship with the dependent adult that began: a) at least 90 days before providing those services; b) at least six months before the dependent adult's death; and, c) if the dependent adult was admitted to hospice care, before the dependent adult was admitted to hospice care. Provides that "remuneration" does not include the gift at issue or reimbursement of expenses. Limits the scope of "health or social services" to those services provided to a dependent adult because of that person's dependent condition. SB 105 Page 2 3)Revises the definition of "dependent adult" to be: a) For a person 65 years of age or older: i) the person was unable to provide properly for his or her personal needs for physical health, food, clothing, or shelter; or, ii) due to one or more deficits in mental functions, as defined, the person had difficulty managing his or her own financial resources or resisting fraud or undue influence; or, iii) both i) and ii) apply. b) For a person age 18-64: i) the person was unable to provide properly for his or her personal needs for physical health, food, clothing, or shelter; or, ii) due to one or more deficits in mental functions, as defined, the person had substantial difficulty managing the person's own financial resources or resisting fraud or undue influence; or, iii) both i) and ii) apply. 4)Requires an independent attorney, who certifies that a donative gift from a dependent adult to a care custodian is not the result of fraud or undue influence, to counsel the dependent adult, outside 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. Revises the definition of "independent attorney" to be an attorney with no legal, business, financial, professional or personal relationship with the beneficiary of the donative transfer at issue and who would not be appointed as a fiduciary or receive any benefit as a result of the donative instrument. 5)Increases the value of a small gift that is exempt from the restrictions on donative transfers from $3,000 to $5,000. 6)Clarifies that the statutory presumption in this bill supplements the common law and that this is declarative of existing law. Provides that nothing in this bill precludes an SB 105 Page 3 action to contest a donative transfer under the common law or under any other applicable law. EXISTING LAW : 1)Presumptively invalidates any provision or provisions of an instrument that makes a donative transfer to certain disqualified beneficiaries as the product of menace, duress, fraud or undue influence. Disqualified beneficiaries include: a) The person who drafted the instrument; b) A relative, domestic partner, cohabitant, or employee of the person who drafted the instrument; c) A partner, shareholder, or employee of a law firm in which the drafter has an ownership interest; d) A person who stands in a fiduciary relationship to the transferor, or any relative, cohabitant, or domestic partner of the fiduciary; and, e) A care custodian of a dependent adult who is the transferor, or any relative, cohabitant, or domestic partner of the care custodian. 2)Provides that the statutory presumption in 1) above can be overcome by clear and convincing evidence, not based solely on the testimony of the presumptively disqualified beneficiary, that the transfer was not the product of fraud, menace, duress or undue influence. 3)Exempts from 1), among other gifts, gifts to close relatives of the transferor and small gifts, defined as gifts valued at $3,000 or less if the estate is worth $100,000 or more. 4)Provides the statutory presumption in 1) does not apply if the donative instrument is reviewed by an independent attorney who counsels the transferor about the nature and consequence of the gift and certifies that the gift is not the product of menace, duress, fraud or undue influence. SB 105 Page 4 FISCAL EFFECT : None COMMENTS : In 1993, in response to an attorney in Southern California who had drafted wills for elderly clients that included large gifts to himself, his family and his business partners, the Legislature established the Donative Transfer Restriction Statute, which created a statutory presumption that donative gifts to the drafter of the document are the result of menace, duress, fraud or undue influence. AB 21 (Umberg), Chapter 293, Statutes of 1993. The presumption was expanded in 1997 to include gifts from dependent adults to their care custodians. AB 1172 (Kaloogian), Chapter 724, Statutes of 1997. This bill seeks to revise that presumption. In 2006, the California Supreme Court, in Bernard v. Foley (2006) 39 Cal.4th 794, invalidated a donative gift to alleged friends of a dependent adult who had become her caregivers towards the end of her life. While the Foley majority agreed that the gift recipients were indeed caregivers who were subject to the presumption of invalidity and that the caregivers failed to overcome that presumption, the Chief Justice, in his concurring opinion, invited the Legislature to make an exception to the presumption of invalidity for friends. That same year, the Legislature directed the California Law Revision Commission (CLRC) to study the operation and effectiveness of the statutory restrictions on donative transfers to disqualified individuals and report to the Legislature on its findings and recommendations for revision and improvement of those provisions. AB 2034 (Spitzer), Chapter 215, Statutes of 2006. The CLRC, pursuant to its legislative mandate, issued its report in October 2008, and this bill incorporates most of its recommendations. Analysis Prepared by : Leora Gershenzon / JUD. / (916) 319-2334 FN: 0005204