BILL ANALYSIS SENATE JUDICIARY COMMITTEE Senator Ellen M. Corbett, Chair 2009-2010 Regular Session SB 1041 (Harman) As Introduced Hearing Date: May 4, 2010 Fiscal: No Urgency: No TW:jd SUBJECT Hearsay Evidence: Wills and Revocable Trusts DESCRIPTION This bill would allow evidence at a hearing or trial of a statement made by an unavailable declarant that he or she made or did not make a revocable trust. BACKGROUND Under the hearsay rules of evidence, out-of-court statements offered to prove the truth of the matter asserted are inadmissible in court unless the actual declarant testifies or the testimony fits into one of the categorical exceptions to the rule. (Evid. Code Sec. 1200 et seq.) The general exclusion of hearsay from evidence is premised on the notion that out-of-court statements are inherently more unreliable than live testimony. Specifically, hearsay statements are not made under oath, the adverse party has no opportunity to cross-examine the declarant, and the jury cannot observe the declarant's demeanor while making the statements. (People v. Duarte (2000) 24 Cal.4th 603, 610.) Courts developed categorical exceptions to the hearsay rule because of the perception that certain statements are inherently reliable despite the absence of direct testimony and because the need for certain evidence outweighs the risks. (See Mathews, Making the Crucial Connection: A Proposed Threat Hearsay Exception, 27 Golden Gate U. Law Rev. 117 (1993).) For example, statements made when the declarant knows he or she is about to die or excited statements made without an opportunity to reflect (more) SB 1041 (Harman) Page 2 of ? are considered more believable because the declarant has neither the motive nor the time to fabricate the statement. (Evid. Code Sec. 1240 (spontaneous, contemporaneous, or dying declarations as an exception to the hearsay rule).) In general, however, hearsay is presumptively unreliable. This bill, sponsored by the Conference of California Bar Associations, would amend the Evidence Code to extend the hearsay exception to a statement made by a declarant who is unavailable as a witness that he or she has or has not established a revocable trust, or has or has not revoked his or her revocable trust, or that identifies his or her revocable trust, or any amendment thereto. CHANGES TO EXISTING LAW Existing law provides that "hearsay evidence" is evidence of a statement that was made other than by a witness while testifying at a trial or hearing and that is offered to prove the truth of the matter stated. Except as provided by law, hearsay evidence is inadmissible. (Evid. Code Sec. 1200(a) and (b).) Existing law provides exceptions to the hearsay rule, including evidence of a statement made by a declarant who is unavailable as a witness that he or she has or has not made a will. (Evid. Code Sec. 1260.) Existing law , for the purposes of the Evidence Code, provides that "unavailable as a witness," means that the declarant is any of the following: (a) exempt or precluded on the ground of privilege from testifying concerning the matter to which his or her statement is relevant; (b) disqualified from testifying to the matter; (c) dead or unable to attend or to testify at the hearing because of then existing physical or mental illness or infirmity; (d) absent from the hearing and the court is unable to compel his or her attendance by its process; or (e) absent from the hearing and the proponent of his or her SB 1041 (Harman) Page 3 of ? statement has exercised reasonable diligence but has been unable to procure his or her attendance by the court's process. (Evid. Code Sec. 240(a)(4).) This bill would add to the existing hearsay rule exception that evidence of a statement made by a declarant who is unavailable as a witness that he or she has or has not established or amended a revocable trust or evidence that identifies his or her revocable trust or amendment thereto, is not made inadmissible by the hearsay rule. COMMENT 1. Stated need for the bill The author writes: Evidence Code [Section] 1260 establishes [an] exception for a statement made by a declarant that he or she has or has not made or revoked a will, or which identifies such a will. The basis for the exception, of course, is that in most such situations the declarant is dead and therefore unavailable to testify. In recent years, however, living trusts have become increasingly common as a substitute for wills. However, there is no corresponding exception to the hearsay evidence rule for a statement made by a declarant that he or she has or has not made or revoked a trust, or which identifies such a trust, even though the same rationale for exception exists (i.e., the fact that the declarant is very often dead and therefore unavailable to testify). In an era when many estate plans are contained in trusts rather than in wills, it is important to the courts to have available evidence as to the existence of a living trust and to identify such a trust, if it does exist. Often the best probative evidence is that of statements made by the decedent while living. The existing law works well for wills, and its expansion to include trusts will improve the conduct of trials with regard to the estate plans of decedents. SB 1041 (Harman) Page 4 of ? 2. Revocable trusts serve as a will substitute As explained in Restatement Third, Trusts Section 11, Comment b, "the revocable trust serves as a will substitute with respect to all or part of the settlor's estate and has as its primary significance the determination of the persons who will receive the trust property, and in what interests, at the settlor's death. Therefore, the standards applicable to wills are also applicable in determining whether a revocable trust is valid or fails when later challenged by persons who would otherwise be the settlor's successors in interest." The logic behind a revocable trust being used as a will substitute is premised on the standard for mental capacity to make or revoke a will. In order to make a valid will, the individual must be competent. Pursuant to Probate Code Section 6100.5, "[a]n individual is not mentally competent to make a will if at the time of making the will either of the following is true: (1) The individual does not have sufficient mental capacity to be able to (A) understand the nature of the testamentary act, (B) understand and recollect the nature and situation of the individual's property, or (C) remember and understand the individual's relations to living descendants, spouse, and parents, and those whose interests are affected by the will[; or] (2) The individual suffers from a mental disorder with symptoms including delusions or hallucinations, which delusions or hallucinations result in the individual's devising property in a way which, except for the existence of the delusions or hallucinations, the individual would not have done." Thus, if a person is competent to make a will or will substitute but is unavailable to testify, hearsay evidence of the person's statement about making or not making a will is sufficient to qualify as evidence. Accordingly, this bill recognizes the significance of a revocable trust as a satisfactory will replacement and would make the necessary addition to provide for the hearsay exception as it pertains to revocable trusts. 3. Suggested amendments to this bill will account for amendments to revocable trusts As introduced, this bill does not apply to amendments to revocable trusts. The Executive Committee of the Trusts and Estates Section of the State Bar (TEXCOM), a supporter of this bill, addressed this issue as follows: SB 1041 (Harman) Page 5 of ? Litigation over whether a person created or revoked an amendment to a revocable trust or whether an amendment is the decedent's is more likely to arise than litigation posing one or more of these issues with respect to the revocable trust itself. This is because revocable trusts are usually comprehensive documents prepared by lawyers, and laypersons much more often prepare their own trust amendments, which need neither be witnessed nor notarized to be valid. Notably, the definition of "will" in Probate Code Section 88 includes "codicil," the instrument by which a testator amends his or her will. The definition of "trust" in Probate Code Section 82 is extraordinarily comprehensive, but does not include trust amendment. Accordingly, to ensure that the hearsay exceptions applicable to wills and trusts are entirely congruent, TEXCOM suggests that SB 1041 be amended to apply to statements regarding both revocable trusts and amendments to revocable trusts. The sponsor agreed that evidence of amendments to revocable trusts should be included as hearsay exceptions. As discussed above, a revocable trust is a satisfactory will replacement. It follows then that an amendment to a revocable trust would be the replacement for a codicil to a will. Probate Code Section 88 defines a will to include codicils. As applied to the hearsay exception, evidence of codicils is allowed as a hearsay exception. Since amendments to revocable trusts function in the same way as codicils, it is appropriate to add amendments to revocable trusts to the list of testamentary documents falling under the hearsay rule exception. For this reason, the author has agreed to take the following amendments: Suggested Amendments : 1. On page 2, line 1 strike "Evidence of a statement" and insert "Except as provided in subdivision (b), evidence of any of the following statements". 2. On page 2, line 2 strike "that he or she has or has not made a will or established a revocable trust, or has or has not revoked his or her will or revocable trust, or that identifies his or her will or revocable trust,". 3. On page 2, line 5 strike "." and insert ": (1) That the declarant has or has not made a will or SB 1041 (Harman) Page 6 of ? established or amended a revocable trust. (2) That the declarant has or has not revoked his or her will, revocable trust, or an amendment to a revocable trust. (3) That identifies the declarant's will, revocable trust, or an amendment to a revocable trust." 4. The proposed Hearsay Exception compared to Federal Rules Evidence Code Section 1260 was based on Federal Rules of Evidence Rule 803(3) which provides for a hearsay exception when the statement relates to the execution, revocation, identification, or terms of the declarant's will. The Notes of Advisory Committee on Rules state that the hearsay exception as it applies to wills rests on practical grounds of necessity and expediency rather than logic. The courts needed a quick and easy way to determine a decedent's intent of transferring property. Although the Federal Rules of Evidence have yet to provide for a hearsay exception for revocable trusts, this bill will allow California courts to consider evidence regarding revocable trusts for the same purposes that evidence regarding wills currently is used. Support : The Executive Committee of the Trusts and Estates Section of the State Bar; Judicial Council of California Opposition : None Known HISTORY Source : Conference of California Bar Associations Related Pending Legislation : AB 1723 (Lieu, 2010) adds an additional exception to the hearsay rule for statements offered against a party that has engaged in, or knowingly approved of, wrongdoing that was intended to, and did, procure the unavailability of the declarant as a witness. Prior Legislation : AB 333 (Song, Wilson, Foran, Stanton, Whetmore, Ch. 299, Stats. 1967) codified the Federal Rules of Evidence pertaining to hearsay and hearsay exceptions under California law. ************** SB 1041 (Harman) Page 7 of ?