BILL ANALYSIS                                                                                                                                                                                                    



                                                                  SB 105
                                                                  Page  1

          SENATE THIRD READING
          SB 105 (Harman)
          As Amended  August 12, 2010
          Majority vote 

           SENATE VOTE  :38-0  
           
           JUDICIARY           10-0                                        
           
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          |Ayes:|Feuer, Tran, Brownley,    |     |                          |
          |     |Evans, Hagman, Huffman,   |     |                          |
          |     |Jones, Knight, Monning,   |     |                          |
          |     |Saldana                   |     |                          |
          |-----+--------------------------+-----+--------------------------|
          |     |                          |     |                          |
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           SUMMARY  :  Revises restrictions on donative transfers from  
          dependent adults to care custodians for instruments that become  
          irrevocable on or after January 1, 2011.  Specifically, for  
          instruments that become irrevocable on or after January 1, 2011,  
           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.








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          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, for instruments that become irrevocable on or after  
            January 1, 2011, 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  








                                                                  SB 105
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            existing law.  Provides that nothing in this bill precludes an  
            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  


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