BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | AB 1779|
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CONSENT
Bill No: AB 1779
Author: Gatto (D)
Amended: 5/4/16 in Assembly
Vote: 21
SENATE JUDICIARY COMMITTEE: 7-0, 6/21/16
AYES: Jackson, Moorlach, Anderson, Hertzberg, Leno, Monning,
Wieckowski
SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8
ASSEMBLY FLOOR: 80-0, 5/31/16 - See last page for vote
SUBJECT: Nonprobate transfers: revocable transfer on death
deed
SOURCE: Author
DIGEST: This bill includes additional instructions for the
California Law Revision Commission to study whether it is
feasible and appropriate to expand the transfer on death deed to
include the transfer of stock cooperatives or other common
interest developments; and transfers to a trust or other legal
entity.
ANALYSIS:
Existing law:
1)Allows an interest in certain residential real property to be
transferred on death by recording a transfer on death (TOD)
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deed 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 TOD deed made by a transferor who
dies on or after January 1, 2016, regardless of when the TOD
deed was executed or recorded. No TOD deed may be executed on
or after January 1, 2021, but any TOD deed properly executed
before that date remains valid and may be revoked after that
date.
2)Provides that a TOD deed 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. A TOD deed is not effective
until the transferor's death.
3)Provides a statutory form TOD deed and requires that a TOD
deed must be in a substantially similar form. The statutory
deed provides information to the transferor, including
explaining how the TOD deed works, how it is effectuated and
some of its consequences.
4)Provides that property subject to a TOD deed 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 a TOD deed 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 TOD deed for, among other things, lack
of capacity to transfer, transfer to a disqualified person,
fraud, duress, and undue influence.
6)Defines "person" for purposes of the Probate Code to be an
individual, corporation, government or governmental
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subdivision or agency, business trust, estate, trust,
partnership, limited liability company, association or other
entity.
Existing uncodified language directs the California Law Revision
Commission (CLRC) to study the effect of the TOD deed 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.
This bill includes additional instructions for CLRC to study
whether it is feasible and appropriate to expand the transfer on
death deed to include the transfer of stock cooperatives or
other common interest developments; and transfers to a trust or
other legal entity.
Background
AB 139 (Gatto, Chapter 293, Statutes of 2015) created the
"revocable transfer on death deed," a new nonprobate transfer
instrument that becomes effective only upon the death of the
transferor. In 2005, the Legislature directed the CLRC to
study whether California should create a new nonprobate transfer
instrument that becomes effective only upon the death of the
transferor (AB 12, DeVore, Chapter 422, Statutes of 2005). 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
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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 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. Ultimately, the California Legislature did not
follow the National Conference of Commissioners on Uniform State
Laws recommendations. After numerous failed legislative
attempts by legislators, the author of the bill before this
committee has successfully created a method and mandatory form
for the transfer of real property upon the death of the
transferor. (AB 250 (DeVore, 2007), which incorporated
recommendations of the CLRC failed passage in the Senate
Judiciary Committee. AB 724 (DeVore, 2010) failed passage in
the Senate Appropriations Committee. AB 699 (Wagner, 2011)
failed passage in the Senate Judiciary Committee.)
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AB 139 created a new nonprobate residential real property
transfer instrument, the "Simple Revocable Transfer on Death
(TOD) Deed," which is effective upon death of the transferor.
AB 139 sunsets on January 1, 2021. The CLRC was directed to
study the effect of the TOD deed 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.
This bill includes additional instructions for the CLRC to study
whether it is feasible and appropriate to expand the TOD deed to
include:
The transfer of stock cooperatives or other common interest
developments; and
Transfers to a trust or other legal entity.
Comments
The author writes:
Before AB 139 (Gatto) passed last year, Californians could
name a beneficiary to receive just about every asset upon
passing but could not use the process to transfer real
property, such as a home, to a loved one. Californians were
forced to hire attorneys to write elaborate trusts at costs
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averaging in the low thousands of dollars.
If a family could not afford a trust, they would instead
resort to writing a will, which forced their estates into
probate, a very lengthy process that also costs thousands
of dollars in fees and other expenses. AB 139 created the
Revocable Transfer on Death Deed, an important tool to help
seniors and middle-class Californians transfer property to
loved ones upon death without the hassle or expenses of
hiring an attorney or going through probate.
AB 1779 will ensure that the RTODD process is successful in
its implementation and effectively provides Californians a
straightforward, inexpensive, non-probate option for
transferring assets upon death.
Related/Prior Legislation
AB 139 (Gatto, Chapter 293, Statutes of 2015) See Background.
AB 699 (Wagner, 2011) See Background.
AB 724 (DeVore, 2010) See Background.
AB 250 (DeVore, 2007) See Background.
AB 12 (DeVore, Chapter 422, Statutes of 2005) See Background.
FISCAL EFFECT: Appropriation: No Fiscal
Com.:YesLocal: No
SUPPORT: (Verified8/3/16)
Conference of California Bar Associations
Howard Jarvis Taxpayers Association
Leisure World
Professional Fiduciary Association of California
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OPPOSITION: (Verified8/3/16)
None received
ASSEMBLY FLOOR: 80-0, 5/31/16
AYES: Achadjian, Alejo, Travis Allen, Arambula, Atkins, Baker,
Bigelow, Bloom, Bonilla, Bonta, Brough, Brown, Burke,
Calderon, 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,
O'Donnell, Olsen, Patterson, Quirk, Ridley-Thomas, Rodriguez,
Salas, Santiago, Steinorth, Mark Stone, Thurmond, Ting,
Wagner, Waldron, Weber, Wilk, Williams, Wood, Rendon
Prepared by:Margie Estrada / JUD. / (916) 651-4113
8/3/16 19:22:35
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