BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | AB 139|
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THIRD READING
Bill No: AB 139
Author: Gatto (D), et al.
Amended: 8/26/15 in Senate
Vote: 21
SENATE JUDICIARY COMMITTEE: 6-0, 7/7/15
AYES: Jackson, Moorlach, Hertzberg, Leno, Monning, Wieckowski
NO VOTE RECORDED: Anderson
SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8
ASSEMBLY FLOOR: 78-0, 4/9/15 (Consent) - See last page for
vote
SUBJECT: Nonprobate transfers: revocable transfer upon death
deeds
SOURCE: Author
DIGEST: This bill creates a new nonprobate residential real
property transfer instrument, the "Simple Revocable Transfer on
Death (TOD) Deed," which would be effective upon death of the
transferor. This bill sunsets on January 1, 2021.
Senate Floor Amendments of 8/26/15 clarify that the bill only
applies to residential real property.
ANALYSIS:
Existing law:
1) Provides various methods by which a person may transfer his
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or her real property interests to another person upon death,
such as through a will, a trust, a joint tenancy with right
of, community property with right of survivorship, an
intervivos transfer with reserved life estate, and a
nonprobate transfer.
2) Provides that, unless otherwise provided, when one spouse
dies intestate leaving property that passes to the other
spouse, or dies testate and by will leaves the property to
the surviving spouse, the property passes to the surviving
spouse, as specified, and no probate administration is
necessary.
3) Provides that title to a decedent's property, subject to
probate administration and the rights of beneficiaries,
creditors, and other persons as provided by law, passes on
the decedent's death to the person to whom it is devised in
the decedent's last will or, in the absence of such a devise,
to the decedent's heirs as prescribed in the laws governing
intestate succession.
4) Authorizes a successor of the decedent (a beneficiary) to
collect personal property of the decedent from the holder of
the property through an affidavit procedure, which requires,
among other things, the successor to declare under penalty of
perjury that no other person has a superior right to the
interest of the decedent in the described property, and, if
the decedent's estate includes real property, an inventory
and appraisal of the real property must be attached to the
affidavit. That procedure can be utilized after 40 days have
elapsed since the date of the decedent's death, the total
gross fair market value of the decedent's real and personal
property is $150,000 or less (a "small estate"), and there
has been no probate administration.
5) Authorizes a person claiming to be a successor of the
decedent to petition the court for transfer of a particular
item of real property, if 40 days have elapsed since the
death of the decedent, without procuring letters of
administration or awaiting probate of the will, and requires
the petitioner to complete an affidavit declaring, among
other things, that the real property is valued at $50,000 or
less and no other person has a superior right to the interest
of the decedent in the described property.
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6) Requires the petitioner to attach an inventory and appraisal
of all of the decedent's real property.
7) Authorizes a successor of the decedent to complete an
affidavit, not earlier than six months after the date of the
decedent's death, to be filed with the clerk of the court,
for transfer of one or more particular items of a decedent's
real property in an amount of $50,000 or less if the gross
fair market value of the decedent's real and personal
property in this state does not exceed $150,000, an inventory
and appraisal of the real property is attached to the
affidavit, and the successor declares, among other things,
that the funeral expenses, expenses of last illness, and all
unsecured debts of the decedent have been paid.
8) Authorizes the trustee of a trust, which is considered a
beneficiary of the deceased settlor, to utilize these
procedures to transfer an item of real or personal property
of the decedent into the trust.
9) Makes the successor personally liable to unsecured creditors
for the debts of the decedent, any person having a superior
right to the property by testate or intestate succession from
the decedent, and liable to the estate.
10)Provides that, when a husband or wife dies intestate leaving
property that passes to the surviving spouse, or dies testate
and by his or her will devises all or a part of his or her
property to the surviving spouse, the property passes to the
survivor subject to creditors and claimants, and no
administration is necessary.
11)Provides, after 40 days from the death of a spouse, to the
surviving spouse or the personal representative, guardian of
the estate, or conservator of the estate of the surviving
spouse, full power to sell, convey, lease, mortgage, or
otherwise deal with and dispose of the community or
quasi-community real property, and the right, title, and
interest of any grantee, purchaser, encumbrancer, or lessee
shall be free of rights of the estate of the deceased spouse
or of devisees or creditors of the deceased spouse to the
same extent as if the property had been owned as the separate
property of the surviving spouse.
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12)Makes the surviving spouse personally liable for the debts
of the decedent.
13)Provides that a surviving registered domestic partner,
following the death of the other partner, shall have the same
rights, protections, and benefits, as are granted to and
imposed upon a widow or a widower.
14)Permits the nonprobate transfer of property on death,
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.
15)Provides for the nonprobate transfer of real property
insofar as persons may execute a revocable deed to a
beneficiary while reserving a life estate.
16)Provides that upon the death of one joint tenant, real
property held in joint tenancy with right of survivorship
vests immediately in the surviving joint tenant or tenants.
17)Provides that, if a transferee under a will, trust, deed, or
other instrument fails to survive the transferor or is
treated as if the transferee predeceased the transferor, or
fails to survive a future time, the transfer does not lapse
but instead passes to the issue of the deceased transferee,
except as otherwise provided.
This bill:
1) Establishes a new nonprobate transfer instrument, the TOD
deed, to transfer residential real property, as specified,
upon a transferor's death. Specifically, this bill:
Defines the instrument, which transfers real property
to a named beneficiary upon the death of the transferor
outside of probate, and establishes the rules for making
and revoking the instrument;
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Authorizes only the transfer of real property improved
with not less than one nor more than four residential
dwelling units, a condominium unit, including the limited
common elements allocated to the exclusive use thereof
that form an integral part of the condominium unit, or a
single tract of agricultural real estate consisting of 40
acres or less that is improved with a single-family
residence;
Provides a mandatory statutory form of a TOD deed
containing the required information, instructions, and
answers to a long list of "commonly asked questions" about
the instrument;
Establishes rules regarding the effect of the
execution and recordation of a TOD deed, and their
interaction with other types of instruments;
Establishes rules for a TOD deed beneficiary's
liability for the debts of a transferor, including rules
for when an action is filed based on the debts, rules for
the beneficiary's liability for restitution under
specified circumstances, who may bring an action to
enforce the beneficiary's liability, and payment of costs
for a proceeding to enforce the beneficiary's liability;
Establishes rules regarding the effectuation of the
property transfer, and a beneficiary's standing vis á vis
a distributee under a final order of distribution if the
property was probated;
Establishes rules for a contest involving the TOD
deed;
Allows only a personal representative to enforce
liability of a beneficiary of a TOD deed or any other
beneficiary of a decedent with a small estate, to the
extent necessary to protect heirs, devisees, and creditors
of the transferor-decedent, and, as to creditors, provide
for recovery of the reasonable cost of a proceeding under
this provision as an extraordinary service by the personal
representative or the attorney of the decedent's estate;
and
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Makes other conforming changes.
1) Directs the California Law Revision Commission (CLRC) to
study the effect of the TOD deed as established by this bill
and to report to the Legislature on or before January 1,
2020, with specific instructions to study:
Whether the TOD deed is working effectively;
Whether the TOD deed should be continued;
Whether the TOD deed is subject to misuse or
misunderstanding;
What changes should be made to the TOD deed or the law
associated with the deed to improve its effectiveness and
to avoid misuse or misunderstanding; and
Whether the TOD deed has been used to perpetuate
financial abuse on property owners and, if so, how the law
should be changed to minimize this abuse.
1) Sunsets on January 1, 2021, however, the sunset does not
affect the validity or effect of a TOD deed executed before
January 1, 2021, and does not affect the authority of the
transferor to revoke a TOD deed.
Background
In 2005, AB 12 (DeVore, Chapter 422, Statutes of 2005) was
introduced as a bill to create the instrument that AB 139 now
calls "revocable transfer on death deed," but was subsequently
amended to instead direct the CLRC to study this type of deed
and determine whether California should create it as a new
nonprobate transfer instrument that becomes effective only upon
the death of the transferor. The study was recommended for the
following reasons: (1) there is a 1914 California case that
already allows for the use of beneficiary deeds (another name
for the revocable TOD deed) that has never been overturned
(Tennant v. John Tennant Memorial Home (1914) 167 Cal. 570); (2)
various parties, including the California Land Title Company,
the California Judges Association, and the Trusts and Estates
Section of the State Bar, expressed strong opposition to the
bill for lack of clarity and failure to address unintended
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consequences; and (3) there existed the possibility of countless
litigation because of the potential impact of a beneficiary deed
on the transferor's property ownership and of fraudulent
transfers.
The CLRC was directed to address a non-exclusive list of issues
in its study, including, for example, whether and when a
beneficiary deed would be the most appropriate nonprobate
transfer mechanism to use, if a beneficiary deed should be
recorded or held by the grantor or grantee until the time of
death, and, if not recorded, whether a potential for fraud is
created and what effect the recordation of a beneficiary deed
would have on the transferor's property rights after
recordation. The CLRC issued its recommendation in October
2006, noting that while the deed has advantages and
disadvantages, "creation of a TOD deed would be beneficial in
California."
In 2009, the National Conference of Commissioners on Uniform
State Laws finalized a Uniform Real Property Transfer on Death
Act, which provides a simple procedure for the transfer of real
property outside of probate. That Act has been enacted in eight
states, and 19 other states have enacted various acts for the
same purpose. This bill is not based on that Act but, instead,
maintains the CLRC recommended proposal with modifications from
each legislative attempt to enact it. Accordingly, this bill
creates a method and mandatory form for the transfer of real
property upon the death of the transferor.
Comments
The author writes:
California law offers individuals several mechanisms to
transfer real property to a chosen beneficiary at death.
Those mechanisms include, but are not limited to, a will,
trust, joint tenancy, and community property. While some of
the available mechanisms must happen during the property
owner's lifetime, others happen upon death, and each vary in
the cost and ease of transfer, revocability options, ownership
rights, effect on Medi-Cal eligibility, and availability to
creditors.
The most common form of real property transfer upon death, a
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will, must pass through probate, a lengthy legal process that
involves proving in court that a deceased person's will is
valid, inventorying and appraising property, and paying debts
and taxes. The process is often grueling, can take up to a
year, and often results in statutory probate fees in the
thousands of dollars. Similarly, establishment of a revocable
trust can cost upwards of $2,000. For seniors and individuals
whose estate consists primarily of the home, the money to
establish a trust is out of the question.
Although other estate planning options are available to
property owners, the [revocable transfer on death deed
(revocable TOD deed)] is the most simple and inexpensive
transfer mechanism on the market today. Furthermore, it may
be the only tool available to unmarried homeowners who wish to
leave their property to a lifelong partner, family member,
friend or loved one upon death, but who do not want to
transfer present interest (such as joint tenancy) or cannot
afford to set up a trust. Some families attempt to pass real
property to a family member by adding the recipient's name to
the title as a joint tenant with rights of survivorship. The
property will pass to the recipient at the death of the joint
owner, but there are also significant consequences during the
owner's life, such as exposing the property to the joint
tenant's creditors, and gives the joint tenant the power to
approve or disapprove a sale.
Related/Prior Legislation
AB 699 (Wagner, 2011) was substantially similar to AB 139 and
failed passage in the Senate Judiciary Committee.
AB 724 (DeVore, 2010) was substantially similar to AB 139 and
failed passage in the Senate Appropriations Committee.
AB 250 (DeVore, 2007) incorporated recommendations of the CLRC
and was substantially similar to AB 139. AB 250 failed passage
in the Senate Judiciary Committee.
AB 12 (DeVore, Chapter 422, Statutes of 2005) - See Background.
FISCAL EFFECT: Appropriation: No Fiscal
Com.:YesLocal: No
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SUPPORT: (Verified8/26/15)
AARP California
California Communities United Institute
California Senior Legislature
Conference of California Bar Associations
Howard Jarvis Taxpayers Association
OPPOSITION: (Verified8/26/15)
California Advocates for Nursing Home Reform
ASSEMBLY FLOOR: 78-0, 4/9/15
AYES: Achadjian, Alejo, Travis Allen, Baker, Bigelow, Bloom,
Bonilla, Bonta, Brough, Brown, Burke, Campos, Chang, Chau,
Chávez, Chiu, Chu, Cooley, Cooper, Dababneh, Dahle, Daly,
Dodd, Eggman, Frazier, Beth Gaines, Gallagher, Cristina
Garcia, Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez,
Gordon, Gray, Grove, Hadley, Harper, Roger Hernández, Holden,
Irwin, Jones, Jones-Sawyer, Kim, Lackey, Levine, Linder,
Lopez, Low, Maienschein, Mathis, Mayes, McCarty, Medina,
Melendez, Mullin, Nazarian, Obernolte, Olsen, Patterson,
Perea, Quirk, Rendon, Ridley-Thomas, Rodriguez, Salas,
Santiago, Steinorth, Mark Stone, Thurmond, Ting, Wagner,
Waldron, Weber, Wilk, Williams, Wood, Atkins
NO VOTE RECORDED: Calderon, O'Donnell
Prepared by:Tara Welch / JUD. / (916) 651-4113
8/28/15 8:45:11
**** END ****
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