BILL ANALYSIS Ó
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 | |
| | |Hernández, 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
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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