BILL ANALYSIS Ó SENATE JUDICIARY COMMITTEE Senator Noreen Evans, Chair 2011-2012 Regular Session AB 1305 (Huber) As Amended May 31, 2011 Hearing Date: June 7, 2011 Fiscal: No Urgency: No TW SUBJECT Decedents' Estates: Summary Disposition of Smaller Estates DESCRIPTION This bill would increase the monetary value of small estates consisting of real and personal property that may be summarily disposed of using simplified non-probate procedures such as the filing of an affidavit and a petition for a court order of succession to real property. This bill would: increase the value of specified personal property that the successor to a decedent may collect without letters of administration or waiting for probate of a will from $100,000 to $150,000; increase the value of an item of real property that a person may receive as successor to a decedent by using an affidavit procedure, from $20,000 to $50,000; increase the value of a small estate from $100,000 to $150,000, where a person may petition the court to determine succession to property; increase from $5,000 to $15,000 the amount of salary or other compensation to be excluded from the determination of the value of the decedent's estate; and increase from $5,000 to $15,000 the amount of salary or compensation owed the decedent that a surviving spouse may collect by affidavit. BACKGROUND The Probate Code provides several procedures by which some estates may be disposed of summarily or by affidavit to expedite the settlement of these smaller estates and avoid unnecessary (more) AB 1305 (Huber) Page 2 of ? expenses related to court supervision. Some of the procedures may be undertaken by a person to whom the decedent devised the property directly or by a personal representative of the decedent who permits a direct heir to specified property to collect and transfer the property outside of probate. The value limits designated for some procedures were amended last in 1996, while others were amended last in 2004. AB 2267 (Huff, 2006) contained provisions identical to this bill and failed passage in the Assembly Committee on Judiciary because, at that time, concern was raised that an increase on the threshold limits on estates that could be transferred outside of probate would increase the workload for public guardians. SB 553 (Aanestad, 2007), supported by California Association of Public Administrators, Public Guardians, and Public Conservators, was substantially similar to this bill and was amended in this committee to decrease the value amounts of property to the same limits as the current version of this bill that could be transferred outside of probate. SB 553 passed out of this committee but was gutted and amended to relate to an unrelated subject. This bill, sponsored by the Trusts and Estates Section of the State Bar of California, would increase the monetary value of small estates consisting of real and personal property that may be summarily disposed of using simplified non-probate procedures in order to recognize current property values. CHANGES TO EXISTING LAW 1. Existing law provides a list of property that is excluded from the determination of a decedent's property or estate. The property excluded are: (1) property held by a decedent as a joint tenant; (2) property in which a decedent held a terminable life estate; (3) property passing to a surviving spouse without court administration; (4) multi-party accounts, whether or not community property, as long as moneys on deposit are payable on death to the payee; (5) specified registered vehicles, specified registered vessels or boats and registered manufactured homes, mobilehomes, commercial coaches, truck campers or floating homes; (6) any wages due for military services rendered; and (7) any wages or compensation due to the decedent in an amount not exceeding $5,000. (Prob. Code Sec. 13050.) This bill would raise the limit on the excludable wages or AB 1305 (Huber) Page 3 of ? compensation due to the decedent from $5,000 to $15,000. This bill would increase the limit on wages or compensation due to a decedent that a surviving spouse may collect without letters of administration or waiting for probate of a will from $5,000 to $15,000. 2. Existing law authorizes a surviving spouse or guardian or conservator of the estate of the surviving spouse, without procuring letters of administration or awaiting probate of the will, to collect salary or other compensation owed by an employer for personal services of the deceased spouse, including compensation for unused vacation, not in excess of $5,000 net. This bill would increase the limit on wages or compensation due to a decedent that a surviving spouse may collect without letters of administration or waiting for probate of a will from $5,000 to $15,000. 3. Existing law provides an affidavit procedure by which a successor to a decedent's estate that does not exceed $100,000 of the gross value of personal and real property, unless otherwise excluded, may collect, receive, or have transferred to the successor any particular item of property that belongs to or is due to the decedent. (Prob. Code Secs. 13100 and 13101.) This bill would increase this limit on the gross value of a decedent's property, unless otherwise excluded, from $100,000 to $150,000. 4. Existing law provides that if, unless otherwise excluded, a decedent owned real property in the state and the gross value of both real and personal property of the decedent in this state is not greater than $100,000, the successor of the decedent to a particular interest in real property may seek a court determination of his or her succession to the real property interest without obtaining letters of administration or waiting for probate of the decedent's will. (Prob. Code Secs. 13151, 13152, and 13154.) This bill would make this procedure available to successors in interest to real property of a decedent where the gross value of both real and personal property of the decedent in this state does not exceed $150,000, rather than $100,000. AB 1305 (Huber) Page 4 of ? 5. Existing law provides a procedure by which a successor to a decedent's real property in California valued at no greater than $20,000 may, under specified conditions, petition the court to transfer the real property to the successor of the decedent. This procedure involves the simple filing of a Judicial Council form and an affidavit stating specified facts and attaching an inventory and appraisal of the decedent's real property in California, excluding property that is excludable by statute. (Prob. Code Sec. 13200.) This bill would increase the value of the California real property that may be transferred using this procedure from $20,000 to $50,000. 6. Existing law requires the public administrator to petition the court for appointment as personal representative of a decedent's estate if no person of higher priority has petitioned for appointment and the total value of the decedent's estate exceeds $100,000. (Prob. Code Sec. 7620.) This bill would increase the total value of a decedent's estate that would trigger the public administrator's petition for appointment as personal representative of the estate to greater than $150,000. 7. Existing law authorizes a public administrator who has taken possession or control of a decedent's property not exceeding $100,000 (the limit stated in Probate Code Section 13100) to request the court on an ex parte application to issue an order for the public administrator to summarily dispose of the decedent's estate. (Prob. Code Sec. 7660(a)(1).) This bill would conform this provision to changes being made to Section 13100, by increasing the size of the decedent's estate for which summary disposition may be requested by the public administrator from $100,000 to $150,000. 8. Existing law authorizes the public administrator, without court authorization, to summarily dispose of a decedent's estate if the total value of the property does not exceed $30,000. (Prob. Code Sec. 7660(a)(2).) This bill would raise the limit for the public administrator's authority to summarily dispose of the decedent's estate AB 1305 (Huber) Page 5 of ? without court authorization from $30,000 to $50,000. COMMENT 1. Stated need for the bill The author writes: The small estate administration limits have not been increased for approximately 15 years. Due to the 15 year window since the last increase in estate limits, many small estates that would have qualified to use the small estate provisions as enacted no longer qualify to use these procedures. Over time, there has been an increase in real property and other asset values, an increase in salaries, inflation, increases in the costs and time delays involved in formal probate administration, and increased burdens on the court system. The Trusts and Estates Section of the State Bar of California (TEXCOM), the sponsor of this bill, writes: 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 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 AB 1305 (Huber) Page 6 of ? administrative expenses. The Legislature has regularly reemphasized the importance of maintaining this balance by adjusting the applicable limits regularly over time. TEXCOM believes these limits should again be increased so these statutes may . . . continue to serve the purpose for which they were enacted. 2. Recent amendments to this bill decrease the property threshold limits When SB 553 (Aanestad, 2007) was heard in this committee in 2007, it was amended to decrease the threshold limits of real and personal property that could be transferred outside of probate. In order to be consistent with this committee's prior action, the author recently amended the bill to decrease the threshold value of a decedent's real and personal property from $200,000 to $150,000, and the threshold value of a decedent's real property was lowered from $100,000 to $50,000. The requested lowered limits represent the current Bureau of Labor Statistics Inflation amounts corresponding to each threshold provision based on the year those limits were last modified. Further, the Probate Code provisions authorizing a public administrator or guardian to transfer a decedent's real and personal property outside of probate were added to this bill. Accordingly, this bill would raise the public administrator and guardian threshold limits in accordance with SB 553. 3. Transfers by simplified procedure: preliminary exclusion of property from decedent's estate This bill would increase the amount of wages or compensation due to a decedent at the time of death that may be collected by a spouse or that would be excluded for purposes of calculating the "estate" of the decedent, from $5,000 to $15,000. Existing law provides a simplified procedure for the collection and disposition of decedent's personal and real property under certain conditions, either outside formal probate proceedings or pending probate of a will. (Prob. Code Secs. 13000 et seq. and 13600 et seq.) The basis for the use of the simplified procedure is the size of the estate. Prior to applying the limits on the size of the decedent's estate for purposes of using the simplified procedures however, a preliminary step must be taken, i.e., excluding specified items of property. The following items of property, enumerated in Probate Code Section 13050, must be identified and excluded AB 1305 (Huber) Page 7 of ? from the estate of the decedent: (1) property held by the decedent as a joint tenant; (2) property in which the decedent held a terminable life estate; (3) property passing to the surviving spouse without court administration; (4) multi-party accounts, whether or not community property, as long as moneys on deposit are payable on death to a payee; (5) specified registered vehicles, specified registered vessels or boats and registered manufactured homes, mobilehomes, commercial coaches, truck campers or floating homes; (6) wages due for military services rendered; and (7) wages or compensation due to the decedent in an amount not exceeding $5,000. This bill would make one change to this list by increasing the amount of wages or compensation due to the decedent from $5,000 to $15,000. The $5,000 limit was enacted in 1996. This bill would increase this amount by 300 percent, which may appear dramatic but is arguably justified in light of high-salaried employees who may leave small estates when they die. By increasing the wages or compensation limit, more middle income families may be able to dispose of a decedent's property summarily or through the simplified procedures identified in this analysis. 4. Collection and disposition of property by affidavit or court order of succession This bill would increase the gross value of a decedent's personal and real property, unless otherwise excluded, that may be collected, received, or transferred to a successor outside of probate proceedings. Existing law provides an affidavit procedure by which a successor to a decedent's estate that does not exceed $100,000 of the gross value of personal and real property, unless otherwise excluded, may collect, receive, or have transferred to the successor any particular item of property that belongs to or is due to the decedent. (Prob. Code Sec. 13100 et seq.) This bill would increase this limit from $100,000 to $150,000. When first enacted in 1986, this limit was $30,000; it was then raised to $60,000 in 1991, then to $100,000 in 1996. According to the Bureau of Labor Statistics Inflation Calculator, $100,000 AB 1305 (Huber) Page 8 of ? in 1996 has the same buying power as $142,426.39 in 2011. Thus, under this bill, excluding all of the property identified in Comment 3 (Prob. Code Sec. 13050), if whatever is left in the estate does not exceed $150,000, the affidavit and simplified procedures for settling the estate would be available to the successor of the decedent, without applying to the court for letters of administration or waiting for the probate of a will. a. Transfer or collection of personal property using the affidavit procedure Under Probate Code Section 13100, if the decedent's estate satisfies the $100,000 upper limit and if 40 days have elapsed since his or her death, the successor of the decedent may do any of the following without procuring letters of administration or awaiting probate of the will: (1) collect any particular item of property that is money due to the decedent; (2) receive any particular item of tangible personal property of the decedent; or (3) have any particular item of property that is evidence of a debt (such as promissory note), interest, right, security (such as stocks and bonds), or chose in action belonging to the decedent transferred, whether or not secured by a lien on real property. The transfer procedure calls for the furnishing of an affidavit or a declaration under penalty of perjury to the holder of the property stating specific information such as: (1) name, date and place of death of the decedent (and a certified copy of the death certificate attached); (2) that no proceeding for administration of the decedent's estate is pending or that the personal representative has consented in writing to the payment, transfer or delivery of the personal property to the affiant or declarant; (4) that 40 days have elapsed since the decedent's date of death (with death certificate attached); (5) that the decedent's gross estate does not exceed $100,000; (6) a description of the property to be transferred or paid; and (7) the name of the successor to the decedent's interest or that the affiant is authorized to act on behalf of the successor with respect to successor's interest in the property. (Prob. Code Sec. 13101.) The procedure further specifies the evidence that must be presented to show the decedent's ownership of the interest (Prob. Code Sec. 13102), requires a copy of the inventory and AB 1305 (Huber) Page 9 of ? appraisal of real property, if the decedent's estate includes real property (Prob. Code Sec. 13103), and the proof of identity of the person executing the affidavit that must be provided (Prob. Code Sec. 13104). This bill would raise the estate size limit to $150,000 for this affidavit procedure to be available to a successor to a decedent's specified personal property. The decedent's other property, excluded from the estate under Probate Code Section 13050, may be the subject of probate proceedings (although some may be disposed of summarily under other provisions of the Probate Code). b. Transfer of real property by court order after petition Under Probate Code Section 13151, where the gross value of a decedent's personal and real property in this state does not exceed $100,000, exclusive of those items enumerated in Probate Code Section 13050, and 40 days have elapsed after the date of death of the decedent, the successor of a decedent to an interest in a particular item of real property may, without procuring letters of administration or awaiting probate of the decedent's will, file a petition with the superior court in the county in which the decedent's estate may be administered, for an order determining that petitioner has succeeded to the real property and that administration of the estate is unnecessary. This procedure is available only if no proceeding is being conducted or has been conducted in the state for the administration of the decedent's estate. This bill would raise the Section 13151 limit of the decedent's real and personal property holdings in the state from $100,000 to $150,000. Thus, the simplified petition procedure would be available to the successor of a decedent who left all of the excluded property under Section 13050 and a townhome worth $150,000, or an unimproved lot worth $100,000 and cash in the bank worth $50,000 (which is not in a multi-party pay-on-death account). The successor may simply file a petition to the court for an order determining that the petitioner has succeeded to the decedent's interest in the townhome or the unimproved lot. Under current law, neither real property could transfer by petition to the court under Section 13151. A proceeding for administration of the decedent's estate would have to be commenced. c. Transfer of real property of small value by affidavit AB 1305 (Huber) Page 10 of ? Where the real property in the state owned by the decedent at the time of death does not exceed $20,000, it has been at least six months from the date of death, no proceeding for administration of the estate is pending in California, and all funeral expenses and other expenses of last illness and all unsecured debts of the decedent have been paid, the decedent's successor may serve an affidavit (in the form prescribed by the Judicial Council) on the guardian or conservators of the estate of the decedent at the time of the decedent's death and request transfer of the real property to the successor. The contents of the affidavit (and accompanying attachments such as death certificate copy) are specified in the statute, and a certified copy of the affidavit may be recorded in the county recorder's office where the real property is located, with the decedent indexed as the grantor and the successor indexed as the grantee. (Prob. Code Sec. 13200.) In 1991, this statute authorized transfer of real property valued at $10,000 through this procedure. (SB 271 (Kopp, Ch. 1055, Stats. 1991).) Five years later, this value was increased to $20,000. (AB 2146 (Rainey, Ch. 86, Stats. 1996).) Now, fifteen years later, this bill would increase the gross value of real property in the state that may be transferred from decedent to successor in this manner from $20,000 to $50,000. 5. Public Administrators: comparable adjustments in estate size limits This bill would increase the value of real and personal property of a decedent that may be disposed of by a public administrator. If a public employee or officer knows of property of a decedent that may be lost, injured, wasted, or misappropriated and that property ought to be in the possession or control of the public administrator, the officer or employee is obligated to inform the public administrator. The public administrator is duty-bound, if no personal representative has been appointed for the decedent or the decedent's estate, to take prompt possession and control of property of the decedent, make a prompt search for other property, deliver a will to the court if a will is found, deliver instructions for disposition of the property if such instruction is found, and otherwise dispose of property that he or she has taken control of according to the laws of the state. (Prob. Code Sec. 7600 et seq.) A public administrator who takes possession of property under these provisions may AB 1305 (Huber) Page 11 of ? issue a certification of that fact, and the certificate is effective for 30 days. During this time, the public administrator may take possession of other property located in financial institutions, government agencies, retirement fund administrators, licensed securities dealers, and other holders of property. (Prob. Code Sec. 7603.) If, after collecting the decedent's property, the public administrator determines that his or her appointment as personal representative of the estate is proper, the public administrator petitions the court for appointment. (The public administrator is the last in priority of those who may petition for appointment, and is usually called upon to file such a petition only when there is no heir or other qualified person.) Once appointed, the public administrator may summarily dispose of the decedent's estate as follows: (1) If the estate does not exceed $30,000, the public administrator may dispose of the decedent's property without court authorization. This bill would increase this estate size limit that may be disposed of without court authorization to $50,000. (2) If the estate does not exceed $100,000 (as provided in Probate Code Section 13100), the property may be disposed of with court authorization. This limit would be increased to $150,000 under this bill because of the change to Section 13100 (see Comment 4.) If, after collecting decedent's property, the value of the estate exceeds $100,000, the public administrator is required to petition for appointment as personal representative of the estate if a person with higher priority has not petitioned for appointment. This estate size limit would be increased to $150,000 by this bill. It should be noted that this limit would be subject to the exclusions provided under Section 13050 (vehicles, motor homes, stocks and bonds, debts due to the decedent, etc.) for purposes of determining whether or not simplified procedures may be used for the disposition of the property. In all other respects, the rules governing the administration of estates by personal representatives apply to public administrators. Support : None Known AB 1305 (Huber) Page 12 of ? Opposition : None Known HISTORY Source : Trusts and Estates Section of the State Bar of California Related Pending Legislation : None Known Prior Legislation : See Background and Comment 4c. Prior Vote : Assembly Floor (Ayes 74, Noes 0) Assembly Committee on Judiciary (Ayes 10, Noes 0) **************