BILL ANALYSIS                                                                                                                                                                                                    ”



                                                                    AB 1779


                                                                    Page  1





          ASSEMBLY THIRD READING


          AB  
          1779 (Gatto)


          As Amended  May 4, 2016


          Majority vote


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          |Committee       |Votes|Ayes                  |Noes                |
          |                |     |                      |                    |
          |                |     |                      |                    |
          |                |     |                      |                    |
          |----------------+-----+----------------------+--------------------|
          |Judiciary       |10-0 |Mark Stone, Wagner,   |                    |
          |                |     |Alejo, Chau, Chiu,    |                    |
          |                |     |Gallagher,            |                    |
          |                |     |                      |                    |
          |                |     |                      |                    |
          |                |     |Cristina Garcia,      |                    |
          |                |     |Holden, Maienschein,  |                    |
          |                |     |Ting                  |                    |
          |                |     |                      |                    |
          |----------------+-----+----------------------+--------------------|
          |Appropriations  |20-0 |Gonzalez, Bigelow,    |                    |
          |                |     |Bloom, Bonilla,       |                    |
          |                |     |Bonta, Calderon,      |                    |
          |                |     |Patterson, Daly,      |                    |
          |                |     |Eggman, Gallagher,    |                    |
          |                |     |Eduardo Garcia, Roger |                    |
          |                |     |HernŠndez, Holden,    |                    |
          |                |     |Jones, Obernolte,     |                    |
          |                |     |Quirk, Santiago,      |                    |
          |                |     |Wagner, Weber, Wood   |                    |








                                                                    AB 1779


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          SUMMARY:  Expands the California Law Revision Study of the  
          revocable transfer on death deed (RTDD) pilot program.   
          Specifically, this bill requires the California Law Revision  
          Commission (CLRC), as part of its study of the RTDD, to address  
          whether it is feasible and appropriate to expand the RTDD to  
          include 1) transfers of stock cooperatives or other common  
          interest developments and 2) transfers to a trust or other legal  
          entity.


          EXISTING LAW:  


          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.  The pilot program 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)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.  


          3)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  








                                                                    AB 1779


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            how the RTDD works, how it is effectuated and some of its  
            consequences.  


          4)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.  


          5)Permits contest of the RTDD for, among other things, lack of  
            capacity to transfer, transfer to a disqualified person,  
            fraud, duress, and undue influence.  


          6)Requires the CLRC to study the effects of the RTDD and make  
            recommendations to the Legislature by January 1, 2020.  (AB  
            139 (Gatto), Chapter 293, Statutes 2015.)


          7)Defines "person" for purposes of the Probate Code to be an  
            individual, corporation, government or governmental  
            subdivision or agency, business trust, estate, trust,  
            partnership, limited liability company, association or other  
            entity.  


          FISCAL EFFECT:  According to the Assembly Appropriations  
          Committee, minor absorbable costs for the CLRC to expand its  
          study.  (The commission's annual budget is almost $900,000, and  
          includes funding for five staff positions.)


          COMMENTS:  For the last 10 years, an assortment of legislators  
          have tried to create a simplified process to transfer real  
          property outside of probate and without use of a trust.  (AB 250  








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          (DeVore) of 2007, AB 724 (DeVore) of 2009, AB 699 (Wagner) of  
          2011).  All of those efforts were unsuccessful until last year's  
          AB 139 (Gatto), Chapter 293, Statutes of 2015, which finally  
          established a five-year pilot program allowing owners of real  
          property, until January 1, 2021, to transfer their property upon  
          death, outside the normal probate procedure, through a written  
          instrument known as a "revocable transfer upon death deed."   
          Because of significant concerns about the effect of the RTDD and  
          its likelihood of creating confusion, impact on Medi-Cal  
          reimbursement and, most importantly, creating new opportunity  
          for fraud and elder abuse, the bill was limited to transfers of  
          only certain small amounts of property and the beneficiaries and  
          how they take the property was similarly limited to keep the  
          program as uncomplicated as possible to truly help those who are  
          likely house-rich, but otherwise have no need for estate  
          planning.  In addition, the bill limited the impact to just a  
          five-year pilot with directions for the California Law Revision  
          Commission to study the impact of the RTDD and report its  
          findings and recommendations back to the Legislature by January  
          1, 2020.


          This bill expands the CLRC study to address whether it is  
          feasible and appropriate to expand RTDDs to include 1) transfers  
          of stock cooperatives or other common interest developments and  
          2) transfers to a trust or other legal entity.  Certain common  
          interest development property may not be owed as real property  
          but may in fact be owned in some other fashion, such as stock in  
          the housing cooperative.  This bill directs CLRC to study  
          whether the pilot program should be expanded to include transfer  
          of these types of property.  


          This bill also directs CLRC to study whether the law should be  
          explicitly expanded to include transfer to someone other than an  
          individual.  Currently, an RTDD may be used to transfer property  
          to a beneficiary, defined as a person named in a RTDD as the  
          transferor of the property.  However, the Probate Code more  
          generally defines person as "an individual, corporation,  








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          government or governmental subdivision or agency, business  
          trust, estate, trust, partnership, limited liability company,  
          association, or other entity."  Thus it is arguable that the  
          existing pilot RTDD already permits transfer of property to  
          trusts or other legal entities.  This bill ensures that whether  
          it is indeed appropriate to be so inclusive is fully studied.




          Analysis Prepared by:                                             
                          Leora Gershenzon / JUD. / (916) 319-2334  FN:  
          0003085