BILL ANALYSIS Ó
AB 699
Page 1
ASSEMBLY THIRD READING
AB 699 (Wagner)
As Amended March 25, 2011
Majority vote
JUDICIARY 9-1 APPROPRIATIONS 15-0
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|Ayes:|Feuer, Wagner, Atkins, |Ayes:|Fuentes, Harkey, |
| |Dickinson, Silva, Huber, | |Blumenfield, Bradford, |
| |Huffman, Jones, Monning | |Charles Calderon, Campos, |
| | | |Davis, Donnelly, Gatto, |
| | | |Hall, Hill, Lara, |
| | | |Mitchell, Nielsen, |
| | | |Solorio |
|-----+--------------------------+-----+--------------------------|
|Nays:|Wieckowski | | |
| | | | |
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SUMMARY : Seeks to establish, until January 1, 2017, a new,
non-probate method for conveying real property upon death through a
"revocable transfer upon death deed" (RTDD). Specifically, this
bill :
1)Allows an interest in real property to be transferred on death by
recording an RTDD signed and acknowledged by the record owner of
the property and designating a beneficiary or beneficiaries. The
deed transfers ownership of that property interest upon the death
of the owner. Is effective for any RTDD made by a transferor who
dies on or after January 1, 2012, regardless of when the RTDD was
executed or recorded. No RTDD may be executed on or after January
1, 2017, but any RTDD properly executed before that date remains
valid and may be revoked after that date.
2)Requires that to be valid an RTDD must be recorded within 60 days
of execution.
3)Provides that an RTDD does not affect any ownership rights during
the transferor's lifetime and nor does it convey any rights to the
beneficiary or the beneficiary's creditors during the transferor's
lifetime. An RTDD is not effective until the transferor's death.
4)Provides a statutory form RTDD and requires that an RTDD must be
in that form. The statutory deed provides information to the
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transferor, including explaining how the RTDD works, how it is
effectuated and some of its consequences.
5)Provides a statutory form for revocation of an RTDD.
6)Provides that an RTDD may have multiple beneficiaries, who take in
equal shares as tenants in common, but does not provide for
alternate beneficiaries. The RTDD does not provide for class
gifts, e.g., gifts to the transferor's unnamed grandchildren.
7)Provides that an RTDD is revocable at any time by a transferor
with testamentary capacity. If an RTDD and another revocable
instrument have both been recorded and both purport to dispose of
the same property, the instrument that has been executed later
prevails. If two deeds - one revocable and one irrevocable - are
both recorded, the irrevocable deed prevails, even if recorded
earlier.
8)Provides that an RTDD must transfer all the transferor's interest
in the property.
9)Provides that property subject to an RTDD is still part of the
transferor's estate for purposes of Medi-Cal eligibility and will
be subject to Medi-Cal reimbursement claims. Property subject to
an RTDD is subject to claims from the transferor's secured and
unsecured creditors. Allows the beneficiary to avoid unsecured
claims by returning the property to the transferor's estate.
10)Requires the beneficiary to effectuate transfer of the property
by recording an affidavit of the transferor's death.
11)Provides that, if property is held in joint tenancy or as
community property with right of survivorship when the transferor
dies, the transfer is void and the property passes pursuant to the
right of survivorship. Provides, in the information accompanying
the statutory deed, that if a transferor wants to sever the joint
tenancy and not have the property pass through right of
survivorship rules, the transferor cannot use the RTDD.
12)Permits contest of the RTDD for, among other things, lack of
capacity to transfer, transfer to disqualified person, fraud,
duress, and undue influence.
13)Requires the California Law Revision Commission (CLRC) to study
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the effects of the RTDD and make recommendations to the
Legislature by January 1, 2016.
EXISTING LAW :
1)Directs the CLRC to study the effect of California's non-probate
transfer provisions and statutes in other states that establish
beneficiary deeds as a means of conveying real property through
non-probate transfers, with the objective of determining whether
such legislation should be enacted in California.
2)Permits the non-probate transfer on death of non-real property
instruments including an insurance policy, contract of employment,
bond, mortgage, promissory note, certified or uncertified
security, account agreement, custodial agreement, deposit
agreement, compensation plan, pension plan, individual retirement
plan, employee benefit plan, trust, conveyance, deed of gift,
marital property agreement, or other written instrument of a
similar nature.
3)Provides that upon death of one joint tenant, real property held
in joint tenancy with right of survivorship vests immediately in
the surviving joint tenant or tenants.
4)Provides for the non-probate transfer of real property insofar as
persons may execute a revocable deed to a beneficiary while
reserving a life estate. (Tennant v. John Tennant Memorial Home
(1914) 167 Cal. 570.)
5)Provides that, if a transferee under a will, trust, deed or other
instrument fails to survive the transferor, transfer does not
lapse but passes to the issue (decedents) of the transferee if the
transferee is related to the transferor or the transferor's
spouse.
FISCAL EFFECT : According to the Assembly Appropriations:
1)Absorbable costs for the CLRC's study and report.
2)Potential minor savings in probate court costs and backlogs.
COMMENTS : In 2005, the Legislature passed AB 12 (DeVore), Chapter
422, Statutes 2005, which directed the CLRC to study California's
non-probate transfer provisions and determine whether California
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should enact a beneficiary deed - a deed which transfers real
property outside of probate upon death of the transferor. In
October 2006, the CLRC issued its recommendation that California
adopt a revocable transfer on death deed, noting that while the deed
has advantages and disadvantages, creation of such a deed would, on
the whole, be beneficial in California. AB 250 (DeVore) of 2007 and
AB 724 (DeVore) of 2009 sought to implement the recommendations of
the CLRC and create an RTDD in California. Both bills passed out of
the Assembly without a "no" vote, but failed passage in the Senate.
This bill is nearly identical to those bills, except that it does
not allow for a life estate as part of an RTDD.
At the time of the CLRC study, nine other states, including
Colorado, New Mexico, Ohio and Wisconsin, statutorily recognized an
RTDD. (Today four additional states have statutorily authorized
RTDDs.) The CLRC's investigation revealed minor difference between
the states' RTDDs and found that practitioners generally liked
having the option of the RTDD. However, most of the statutes were
too new to provide evidence of their effectiveness or of their
susceptibility to misuse or abuse.
In recommending creation of an RTDD in California, the CLRC balanced
the generally positive, although quite limited, experience of other
states, the need for a simple, low-cost method of conveying real
property with the very real concerns raised by opponents of the
RTDD. In order to address some of opponents' well-founded concerns,
the CLRC recommends that California undertake a comprehensive review
of all non-probate transfers and their consequences. However, in
the interim, the CLRC recommends that California establish a
carefully crafted RTDD.
A simplified RTDD could make it easier to commit financial abuse.
In recognition of the risks associated with an RTDD, the bill
directs the CLRC to study the effect of the RTDD in California and
report back to the Legislature by January 1, 2016. The report must
address the following issues: 1) whether the revocable transfer on
death deed is working effectively; 2) whether the revocable transfer
on death deed should be continued; 3) whether the revocable transfer
on death deed is subject to misuse or misunderstanding; 4) what
changes should be made to the revocable transfer on death deed or
the law associated with the deed to improve its effectiveness and to
avoid misuse or misunderstanding; and, 5) whether the revocable
transfer on death deed has been used to perpetuate financial abuse
on property owners and, if so, how the law associated with the deed
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should be changed to minimize this abuse.
The bill also, by its own terms sunsets on January 1, 2017. RTDDs
executed before that time would remain valid, but RTDDs executed
after that date would not be valid. This sunset, together with the
study by CLRC, should help minimize risks of abuse or misuse
associated with the RTDD, but would not prevent such risks during
the five years that RTDDs would be valid in California.
Analysis Prepared by : Leora Gershenzon / JUD. / (916) 319-2334
FN: 0000298