BILL ANALYSIS
AB 724
Page 1
ASSEMBLY THIRD READING
AB 724 (DeVore)
As Introduced February 26, 2009
Majority vote
JUDICIARY 9-0 APPROPRIATIONS 17-0
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|Ayes:|Feuer, Tran, Brownley, |Ayes:|De Leon, Nielsen, |
| |Evans, Jones, Knight, | |Ammiano, |
| |Lieu, Monning, Nielsen | |Charles Calderon, Davis, |
| | | |Duvall, Fuentes, Hall, |
| | | |Harkey, Miller, |
| | | |John A. Perez, Price, |
| | | |Skinner, Solorio, Audra |
| | | |Strickland, Torlakson, |
| | | |Krekorian |
|-----+--------------------------+-----+--------------------------|
| | | | |
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SUMMARY : Seeks to establish, until January 1, 2015, 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 real property to be transferred on death
by recording a RTDD signed and acknowledged by the record
owner of the property 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,
2010, regardless of when the RTDD was executed or recorded.
No RTDD may be executed on or after January 1, 2015, but any
RTDD properly executed before that date remains valid and may
be revoked after that date.
2)Requires that to be valid a RTDD must be recorded within 60
days of execution.
3)Provides that a RTDD does not affect any ownership rights
during the transferor's lifetime and nor does it convey any
rights to the beneficiary or the beneficiary's creditors
during the transferor's lifetime. A RTDD is not effective
until the transferor's death.
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4)Provides two statutory form RTDDs, one of which must be used.
One form makes the transfer subject to an intervening life
estate by the transferor's designee and the other form does
not. Both statutory deeds provide 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 a RTDD.
6)Provides that a 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.
7)Provides that a RTDD is revocable at any time by a transferor
with testamentary capacity. If a 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 a RTDD must transfer all the transferor's
interest in the property.
9)Provides that property subject to a 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 a 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
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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 Revision Commission (CLRC) to
study the effects of the RTDD and make recommendations to the
Legislature by January 1, 2014.
EXISTING LAW :
1)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.
2)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.
3)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.
FISCAL EFFECT : According to the Assembly Appropriations
Committee:
1)Providing an additional non-probate mechanism to transfer real
property could to some extent reduce the amount of Medi-Cal
claims reimbursements received by the Department of Health
Care Services because the department currently receives
notification of probate actions. Because the department
currently receives notification of the death of any Medi-Cal
recipient, however, these revenue losses should not be major.
According to the department, in 2005-06 probate actions
represented 40% of its recovery cases, but 60% of recovered
revenues ($44.4 million). Based on this annual total, every
1% decline in these recoveries would result in a revenue loss
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to the state of $444,000 ($222,000 General Fund and $222,000
federal funds).
2)Absorbable costs for the CLRC's study and report.
COMMENTS : AB 12 (DeVore), Chapter 422, Statutes of 2005,
directed 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 2007
sought to implement the recommendations of the CLRC and create a
RTDD in California. That bill passed out of the Assembly
without a "no" vote, but failed passage in the Senate Judiciary
Committee. This bill is nearly identical to AB 250.
As directed by the Legislature, the CLRC conducted a study and
determined that a beneficiary deed should be statutorily created
in California. In recommending creation of a 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 the concerns, the CLRC recommended that
California undertake a comprehensive review of all non-probate
transfers and their consequences. However, in the interim, the
CLRC recommended that California establish a carefully crafted
RTDD.
The bill establishes mandatory form RTDDs that must be used when
executing a RTDD. There are two RTDD forms, one for a simple
transfer on death and the other for a transfer with a life
estate. A life estate permits the holder to occupy the property
exclusively during his or her lifetime. The property is then
transferred automatically to the remainder beneficiaries on the
death of the life tenant. Life estates can serve very useful
estate planning purposes. For example, a homeowner, who has
children from a prior marriage, can leave his house to his
children, while still ensuring his second wife has a home to
live for the remainder of her life.
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The RTDD provides for transfer to multiple beneficiaries who
take their interest equally as tenants in common. The bill
requires that the beneficiaries must be specifically named and
cannot include a class of people, such as transfers to "my
children and grandchildren."
In recognition of the risk of financial abuse associated with an
RTDD, the bill directs the CLRC to study the effect of the RTDD
in California and report back to the Legislature by January 1,
2014. The bill also, by its own terms sunsets on January 1,
2015. 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: 0001086