BILL ANALYSIS Ó
AB 139
Page 1
CONCURRENCE IN SENATE AMENDMENTS
AB
139 (Gatto)
As Amended August 26, 2015
Majority vote
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|ASSEMBLY: | 78-0 | (April 9, |SENATE: | 40-0 | (August 31, |
| | |2015) | | |2015) |
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Original Committee Reference: JUD.
SUMMARY: Seeks to establish, until January 1, 2021, 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 certain residential real property to be
transferred on death by recording an RTDD signed and
acknowledged by the record owner of the property, with the
capacity to contract, 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,
2016, regardless of when the RTDD was executed or recorded.
No RTDD may be executed on or after January 1, 2021, 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
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days of execution.
3)Provides that an RTDD does not affect any ownership rights
during the transferor's lifetime, 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 a substantially similar form. The statutory deed
provides information to the 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. Provides that if a beneficiary dies
prior to the transfer, the remaining beneficiaries take in
equal shares. If all beneficiaries die prior to the transfer,
the RTDD has no effect.
7)Provides that an RTDD is revocable at any time by a transferor
with capacity to contract. 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.
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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 Revisions Commission (CLRC) to
study the effects of the RTDD and make recommendations to the
Legislature by January 1, 2020.
The Senate amendments limit the real property to which a RTDD
may be used, change the capacity requirements for the owner,
specify that a beneficiary's interest lapses if he or she
predeceases the owner, specify that a RTDD can only be revoked
by a recorded document and require that the RTDD contain the
legal description of the property.
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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. (AB 12 (DeVore), Chapter 422, Statutes of 2005.)
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 Senate Appropriations
Committee, pursuant to Senate Rule 28.8, negligible state costs.
COMMENTS: In 2005, the Legislature passed AB 12, which directed
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the CLRC to study California's non-probate transfer provisions
and determine whether California 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 the 2007-08
Regular Session, AB 724 (DeVore) of the 2009-10 Regular Session,
and AB 699 (Wagner) of 2011, sought to implement the
recommendations of the CLRC and create an RTDD in California.
All three bills passed out of the Assembly, but failed passage
in the Senate. This bill is substantially similar to those
bills, except that it does not allow for a life estate as part
of an RTDD and limits what property an RTDD may effect.
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.
In 2009, the National Conference of Commissioners on Uniform
State Laws approved a uniform act on RTDDs. At that time, 13
states had allowed some version of RTDDs. (National Conference
of Commissioners on Uniform State Laws, Uniform Real Property
Transfer on Death Act (2009).) Since that time, ten additional
states plus the District of Columbia have adopted some version
of the uniform act and at least another three states are
considering it this year. Thus nearly half of the states permit
use of RTDDs today.
A simplified RTDD could make it easier to commit financial
abuse. In recognition of the risks associated with an RTDD,
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this bill directs the CLRC to study the effect of the RTDD in
California and report back to the Legislature by January 1,
2020. 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 should be changed to minimize this abuse.
This bill also, by its own terms sunsets on January 1, 2021.
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:
0001756