BILL ANALYSIS Ó AB 1305 Page 1 Date of Hearing: April 5, 2011 ASSEMBLY COMMITTEE ON JUDICIARY Mike Feuer, Chair AB 1305 (Huber) - As Introduced: February 18, 2011 Proposed Consent SUBJECT : DECEDENT'S ESTATES KEY ISSUE : SHOULD THE VALUE OF SMALL ESTATES THAT MAY BE ADMINISTERED OUTSIDE OF THE FORMAL PROBATE PROCESS, which has not been raised for 15 years, BE INCREASED? FISCAL EFFECT : As currently in print this bill is keyed non-fiscal. SYNOPSIS This bill, sponsored by the Trusts & Estates Section of the State Bar, increases the size of estates that may be administered outside of the formal probate process. Under current law, the decedent's successor may collect (1) personal property through use of an affidavit or declaration, provided the gross value of the estate is less than or equal to $100,000; (2) real property through use of simplified petition, provided the gross value of the estate is less than or equal to $100,000; and (3) real property through use of an affidavit, provided that the gross value of all decedent's real estate located in California is less than or equal to $20,000. These limits have not been increased for 15 years. This bill increases those caps to $200,000, $200,000 and $100,000, respectively. Additionally, this bill permits a surviving spouse to collect, outside the formal probate process, up to $15,000 from the deceased spouse's employer for salary and other compensation, including compensation for unused vacation. The current limit is $5,000, subject to an annual cost-of-living adjustment. There is no known opposition to the bill. SUMMARY : Increases the threshold value of estates for which formal probate proceedings are required. Specifically, this bill : 1)Increases, from $100,000 to $200,000, the maximum value of a decedent's estate for which an affidavit or declaration to AB 1305 Page 2 collect decedent's personal property outside the formal probate process may be used. 2)Increases, from $100,000 to $200,000, the maximum value of a decedent's estate, for which a simplified petition to collect an interest in real property outside the formal probate process may be used. 3)Increases, from $20,000 to $100,000, the maximum value of all real property in decedent's estate, for which an affidavit to transfer decedent's interest in real property may be used outside the formal probate process. 4)Increases, from $5,000 to $15,000, the amount of salary or other compensation owed to the deceased spouse by an employer that a surviving spouse can collect outside of the formal probate process, and eliminates the cost-of-living adjustment. Exempts from decedent's estate up to $15,000 of the deceased spouse's salary or compensation owed by the employer. EXISTING LAW : 1)Allows for the use of an affidavit or declaration to collect decedent's personal property outside of formal probate, where the gross value of decedent's real and personal property, unless exempt, does not exceed $100,000. (Probate Code Section 13100 et seq. All further references are to that code. ) 2)Allows for use of a simplified petition to collect decedent's interest in real property, where the gross value of decedent's real and personal property, unless exempt, does not exceed $100,000. (Section 13151 et seq.) 3)Allows for use of an affidavit to collect decedent's interest in real property, where the gross value of all real property owned by the decedent in California, unless exempt, does not exceed $20,000. (Section 13200 et seq.) 4)Excludes certain property from inclusion in the decedent's estate for purposes of determining the value of the estate, including property held in a revocable trust and up to $5,000 of salary or other compensation owed to the deceased spouse by his or her employer. (Section 13050.) AB 1305 Page 3 5)Allows a surviving spouse to collect, outside of formal probate, salary or other compensation owed to the deceased spouse by an employer, in an amount not to exceed $5,000, subject to a cost-of-living adjustment. (Section 13600.) COMMENTS : This bill increases the size of estates that may be administered outside of the formal probate process. Under current law, the decedent's successor may collect (1) personal property through use of an affidavit or declaration, provided the gross value of the estate is less than or equal to $100,000; (2) real property through use of simplified petition, provided the gross value of the estate is less than or equal to $100,000; and (3) real property through use of an affidavit, provided that the gross value of all decedent's real estate located in California is less than or equal to $20,000. These limits have not been increased for 15 years. This bill increases those caps to $200,000, $200,000 and $100,000, respectively. Additionally, this bill permits a surviving spouse to collect, outside the formal probate process, up to $15,000 from the deceased spouse's employer for salary and other compensation, including compensation for unused vacation. The current limit is $5,000, subject to an annual cost-of-living adjustment. The increased limit would not be subject to a cost-of-living adjustment. The Trust and Estates Section of the State Bar agrees that limits to avoid probate need to be increased. They argue that 15 years have passed since the last increase and as a result, small estates that would have qualified to use the small estate provisions as enacted would no longer qualify to use these procedures. AB 1305 seeks to raise the small estate limits to account for inflation, the rise in asset values that occurs over time, increases in the costs and time delays involved in formal probate administration, and increased burdens on the court system. These small estate provisions serve a valuable purpose by allowing small estates to avoid formal probate administration. These provisions allow heirs and beneficiaries of such small estates to avoid the burdens and delays of formal probate administration. These provisions also allow heirs and beneficiaries to avoid costs which AB 1305 Page 4 amount to a considerable percentage of a small estate. They also reduce the burdens on the judicial system and allow the courts to more efficiently focus on matters requiring greater judicial oversight and resources. But again, inflation values and the fact that the limits have not been increased in 15 years have made these provisions unavailable for an increasing number of small estates that historically would have qualified for the use of these procedures. In originally enacting these provisions, the Legislature sought to balance the need for judicial oversight in formal probate administrations with the needs of judicial economy and to avoid overburdening small estates with administrative expenses. The Legislature has regularly reemphasized the importance of maintaining this balance by adjusting the applicable limits regularly over time. Current law permits the personal property in a decedent's estate to pass to their heirs without an appraisal when it is stated by declaration that the value of all the decedent's property is less than $100,000. This value does not include certain property such as property held in joint tenancy, multiple party accounts, personal vehicles, mobilehomes, truck campers, vessels, money due from service in the armed forces, and an amount not exceeding $5,000 of salary or other employment compensation. This bill increases the $100,000 threshold to $200,000 dollars. It also increases the amount that a surviving spouse may collect from the deceased spouse's employer for wages and other compensation from $5,000 to $15,000, while removing the current cost-of-living adjustment. Current law also provides that, no sooner than six months after the death of a decedent, a person claiming as a successor of the decedent to a particular item of real property, where the gross value of all the real property of the estate located in California does not exceed $20,000, may file an affidavit which is then recorded in the county in which the real property is located. The recorded affidavit has the same force and effect as if there was a court order granting distribution to the affiant. This bill increases the threshold gross value of the real property of the estate from $20,000 to $100,000. The increased thresholds for filing formal probate proceedings should reduce the number of required judicial proceedings, thus reducing the costs to heirs and speeding the distribution process. AB 1305 Page 5 The last time the threshold value of estates that required formal probate was raised was 1996. At that time the limits were raised from $60,000 to $100,000 for use of an affidavit to transfer an interest in personal property and for use of a simplified petition to transfer an interest in real property, and from $10,000 to $20,000 for use of an affidavit to transfer an interest in real property. (AB 2146 (Rainey), Chap. 86, Stats. 1996.) Before that, the threshold for filing formal probate proceedings was last increased in 1984, when it was increased from $30,000 to $60,000 dollars. (AB 2270 (McAlister).) Prior Legislation : In 2006, AB 2267 (Huff), very similar to this bill, failed passage in this committee. In 2007, SB 553 (Aanestad) sought to make similar changes (although with different adjustments), but that bill was amended to affect state property. REGISTERED SUPPORT / OPPOSITION : Support Trust and Estates Section of the State Bar (sponsor) Opposition None on file Analysis Prepared by : Leora Gershenzon / JUD. / (916) 319-2334