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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