BILL ANALYSIS
SENATE JUDICIARY COMMITTEE
Senator Ellen M. Corbett, Chair
2009-2010 Regular Session
SB 105
Senator Harman
As Introduced
Hearing Date: May 5, 2009
Business & Professions Code; Code of Civil Procedure;
Probate Code
GMO:jd
SUBJECT
Donative Transfers Restrictions: Care Custodians
DESCRIPTION
This bill would repeal current provisions related to
restrictions on donative transfers to specified persons. The
bill would instead establish an express presumption of fraud or
undue influence if the donative instrument makes a gift to the
person who drafted or who transcribed the instrument or to their
family members, or makes a gift to certain other disqualified
persons, including a caregiver or care custodian, and provide
exceptions to the operation of this presumption. It would
provide that the presumption may be rebutted by preponderance of
the evidence. Finally, the bill would define "degree of
kinship" or consanguinity for the Probate Code.
BACKGROUND
In 2006, the California Supreme Court in Bernard v. Foley (2006)
39 Cal.4th 794 dealt with the presumptive invalidity of donative
transfers (gifts) made by dependent adults to their caregivers.
While the court majority agreed that in Foley the transferees
were caregivers who were subject to the presumption of
invalidity and that the caregivers did not overcome the
presumption, the Chief Justice, in his concurring opinion,
invited the Legislature to make an exception to the presumption
of invalidity when the gift from a dependent adult to a
caregiver predates the date of the caregiving. Bernard v. Foley
overruled two earlier decisions holding that "care custodian"
does not include a personal friend. (Estate of Kathryn McDowell
(more)
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(2004) 125 Cal.App.4th 659, 673-74; Estate of Dolores Davidson
(2003) 113 Cal.App.4th 1035, 1048-50.)
AB 1727 (Asm. Judiciary, Ch. 553, Stats. 2007) was a clean-up
bill to the 2006 Omnibus Conservatorship and Guardianship Reform
Act, and included among its provisions a response to the Supreme
Court's invitation to clarify the rules relating to donative
transfer restrictions. However, the donative transfer
restriction provisions were deleted from AB 1727 and referred to
the California Law Revision Commission for recommendations,
since the CLRC was already studying this subject. SB 105 would
implement the recommendations of the CLRC.
SB 105 also contains corrections to obsolete cross-references to
the no-contest clause provisions of the Probate Code that were
repealed by SB 1264 (Harman, Ch. 174, Stats. 2008). SB 1264
repealed the former no-contest clause statute.
CHANGES TO EXISTING LAW
1. Existing law presumptively invalidates any provision or
provisions of an instrument that makes a donative transfer to
certain disqualified beneficiaries. Disqualified
beneficiaries include:
(a) the person who drafted the instrument;
(b) any relative, domestic partner, cohabitant, or employee
of the person who drafted the instrument;
(c) any partner, shareholder, or employee of a law firm in
which the drafter has an ownership interest;
(d) any person who stands in a fiduciary relationship to the
transferor, or any relative, cohabitant, or domestic
partner of the fiduciary; and
(e) any care custodian of a dependent adult who is the
transferor, or any relative, cohabitant, or domestic
partner of the care custodian. (Prob. Code Sec. 21350.
All references are to the Probate Code unless otherwise
indicated.)
This bill would repeal Probate Code Section 21350 and related
provisions, and reenact and recast the provisions as Section
23160 et seq., with the following changes:
(a) It would limit the definition of "care custodian" to a
person who provides services for remuneration, as a
profession or occupation.
(b) It would limit the definition of "dependent adult" to a
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person who is over 18 years old and (i) who is unable to
provide for personal needs, or (ii) who is unable to manage
his or her own finances or resist fraud or undue influence.
(c) It would extend the definition of "interested witness"
to a will to include a person who is also a devisee of the
will.
(d) It would allow an attorney who drafted the donative
instrument making a gift to a care custodian to also
provide the independent attorney certification if the
attorney has no interest in the gift. It would define
"independent attorney" for this purpose.
(e) It would remove the presumption against "menace" and
"duress," leaving only a presumption of fraud or undue
influence in the making of the donative transfer to a
disqualified person.
(f) It would update the upper limit of the value of the
donative transfer exempt from the restrictions of Probate
Code Section 21350 to $5,000, if the transferor's estate is
valued at or in excess of $100,000 (to reflect increases in
Prob. Code Sec. 13100).
(g) It would reduce the burden of proof, on the part of the
disqualified person against whom the presumption would
operate, from clear and convincing evidence that the
donative transfer was not the product of fraud, menace,
duress, or undue influence, to preponderance of the
evidence to rebut the presumption created by this act.
(h) It would continue the existing rule as to the effect of
a failed gift, but remove the exception for an intestate
share.
2. Existing law does not describe how degree of kinship or
consanguinity is determined for purposes of the Probate Code.
This bill would define lineal kinship or consanguinity as the
relationship between two persons, one of whom is a direct
descendant of the other (parent and child, for example) and by
counting the generations separating one from the other.
This bill would define collateral kinship or consanguinity as
the relationship between two people who spring from a common
ancestor, but neither person is the direct descendant of the
other (thus siblings are related in the second degree, an aunt
or niece is related to the person in the third degree, and a
first cousin is related in the fourth degree).
3. This bill contains various provisions intended to conform
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the statutes to the changes made by SB 1264 (Harman, Chap.
174, Stats. 2008).
COMMENT
1. Stated need for the bill
In 2007, AB 1727 attempted to address the issue of donative
transfers to caregivers, at the invitation of the Foley, supra,
decision. The Chief Justice, in his concurrence opinion in
Foley, suggested eliminating the independent review requirements
for caregivers to receive testamentary gifts, when those gifts
predate their role as caregivers. Such legislation would, as
stated by supporters then, help ensure that the testamentary
wishes of dependent adults are carried out for caregivers with
whom they have had a pre-existing personal relationship, while
still helping prevent abuse in the case of other caregivers.
These provisions were deleted from AB 1727 and sent to the
California Law Revision Commission for recommendations, since
the CLRC earlier had been charged with a study of the
restrictions on donative transfers via testamentary instruments
and the presumptive disqualification of certain classes of
individuals from becoming beneficiaries of donative transfers of
a dependent adult. The need to resolve the issue of donative
transfers to caregivers has not abated, thus the CLRC has
submitted their recommendations in SB 105.
2. Current law and the Foley case
Current law on donative transfers presumptively invalidates
gifts made by a dependent adult to a care custodian or to the
care custodian's relative, spouse, or domestic partner, as well
as to other disqualified beneficiaries (Prob. Code Sec. 21350.)
Current law, however, permits a gift to an otherwise
disqualified beneficiary (including a care custodian) if, among
other things, any of the following conditions are met:
(a) the transferor is related by blood, marriage, or domestic
partnership to the transferee of the person who drafted the
instrument; or
(b) the instrument is reviewed by an independent attorney who:
(i) counsels the transferor about the nature and consequences
of the intended transfer; (ii) attempts to determine if the
proposed transfer is the result of fraud, menace, duress, or
undue influence; and (iii) executes a Certificate of
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Independent Review certifying that the attorney has reviewed
the instrument, counseled the transferor, and concluded that
the transfer was not the result of fraud, menace, duress, or
undue influence; or
(c) the court determines, upon clear and convincing evidence
not based solely on the testimony of the drafter of the
transfer instrument, that the transfer was not the result of
fraud, menace, duress, or undue influence. (Sec. 21351.)
These two provisions, Section 21350 and Section 21351, were
enacted to protect dependent adults from abusive caregivers, as
well as other persons who may exercise undue influence on the
dependent adult, who is usually aging and in need of attention
and care. Thus, the list of presumptively disqualified
beneficiaries includes fiduciaries (including conservators and
trustees), the drafter of the instrument, and care custodians
(also referred to as caregivers).
There is a long line of cases construing these statutes, as
heirs of descendants have challenged the validity of the
decedent's gifts to non-heirs under Section 21350. With respect
to care custodians, decisions in several cases revolve around
whether or not the donative transferees were care custodians as
intended by the statute, or mere friends with a preexisting
relationship with the transferor who ended up providing care in
various forms to the transferor towards the end of the
transferor's life. (Estate of Kathryn McDowell, supra; Estate of
Dolores Davidson, supra; Bernard v. Foley, supra.)
Foley involved friends of a dependent adult who became her
caregivers towards the end of her life. The friends had a
preexisting relationship with the decedent and were not health
care professionals, but shortly before her death, one was named
trustee and both were named residual beneficiaries of the
decedent's trust. The relatives sued, asserting that the
trustee and the other caregiver were disqualified to receive a
testamentary transfer from the decedent because they had been
her care custodians within the meaning of Section 21350. The
trial court initially denied the relatives' suit to invalidate
an amendment to the decedent's revocable living trust that named
the friends as trustee and beneficiaries. The Court of appeal
reversed, and the Supreme Court affirmed the appellate court's
decision.
In a lengthy decision that detailed the history of Sections
21350 and 21351, the court concluded that "care custodian" as
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defined in Welfare and Institutions Code Section 15610.17 (which
is cross-referenced in both sections) includes any person
providing care or health services to a dependent adult, does not
contemplate a professional or occupational limitation, and does
not provide for a preexisting personal friendship exception.
Moreover, the statutory scheme does not suggest that an
individual has to receive compensation in order to be a care
custodian of a dependent adult. Thus, the presumptive
disqualification of care custodian donees was applicable.
In a concurring opinion to the 4-3 decision, Chief Justice
George acknowledged the Legislature's wisdom in enacting
Sections 21350 and 21351 and in implicitly recognizing that "an
individual acting in a caregiving capacity on behalf of a
dependent adult who requires substantial, if not total, care
assumes a role uniquely susceptible to exerting substantial
influence over the dependent person, regardless of the formality
of the arrangement." However, the opinion questions "whether
the uncompensated individual who in a nonoccupational capacity
provides substantial, ongoing health services to a dependent
adult for an extended period and eventually is made is or her
beneficiary, should be subject to the identical presumptive
disqualification and burden of proof imposed upon an individual
who assumes the role of an unpaid caregiver for a relatively
brief period preceding the dependent adult's favorable
modification of a testamentary disposition, at a time that is
fairly proximate to death. ? As a matter of policy, it is of
doubtful social efficacy to apply the statutory presumption and
evidentiary burden to an individual who in a nonprofessional
capacity undertakes the serious responsibilities attending the
long-term care of a dependent adult."
The Legislature sent the questions raised by Foley back to the
CLRC for a more complete examination of the donative transfer
restriction to disqualified persons. The resulting
recommendation is the repeal of Section 21350 and related
statutes and the recasting of those statutes in Section 23160 et
seq, reflecting the various changes recommended by the CLRC in
light of Foley and related cases.
3. Major changes to the donative transfer statutes
The major changes to the donative transfer statutes are
enumerated on pages 2 and 3. The following comments are to only
a few of those changes, as the CLRC's comments are extensive and
reflected in their written work product.
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a. Persons to whom a gift is presumed to be the product of
fraud or undue influence
Thus, under SB 105, a provision of an instrument making a
donative transfer to the following list of persons is presumed
to be the product of fraud or undue influence:
(1) the person who drafted the instrument;
(2) a person in a fiduciary relationship with the transferor
who transcribed the instrument or caused it to be
transcribed;
(3) a care custodian of a transferor who is a dependent adult
but only if the instrument was executed during the period
in which the care custodian provided services to the
transferor;
(4) an interested witness, as defined (to include a witness
to a will who is also a devisee of a will);
(5) a person who is related by blood or affinity, within the
third degree, to any of the above persons (paragraphs 1 to
4 above);
(6) a cohabitant of any of the persons in paragraphs (1) to
(4) (using the definition of cohabitant in the Penal Code
provision related to domestic violence); and
(7) a partner, shareholder, or employee of a law firm in
which a person described in paragraph (1) or (2) above has
an ownership interest.
A "care custodian" would be limited to someone who is paid to
provide health and social services, as defined, to a dependent
adult for remuneration, which does not have to be paid by the
dependent adult. "Health and social services" would be
defined in broad enough terms (administration of medicine,
medical testing, wound care, assistance with hygiene,
companionship, housekeeping, shopping, cooking, and assistance
with finances) so as to cover the many and varied needs of a
dependent adult. With these changes, SB 105 would address the
Foley problem by limiting the presumption of fraud or undue
influence to situations where the instrument making the gift
was executed during the period in which the care custodian
provided the services to the transferor.
The following example provides an illustration: Grandma Annie
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bequeaths the sum of $50,000 to a long-time friend in a will
prior to Grandma getting sick and needing care. The friend
will escape the presumption of fraud or undue influence when
the friend and Grandma Annie's family finds out that the
friend, who was Grandma Annie's companion in the last months
of her life when she was unable to take care of her finances,
is a beneficiary of the will.
This result definitely is a much less harsh result than the
result in Foley. It would allow a volunteer caregiver to be
excluded from the definition of "care custodian." A gift to
that caregiver could still be challenged under the common law
on fraud and undue influence, but would not be presumed to be
the product of fraud or undue influence. If, in the above
example, however, Grandma Annie made the gift to her long-time
friend during her last months of life, when her friend came to
live with her and take care of her, the presumption would
apply.
A scenario where a potential caregiver refuses to commence
providing services unless a gift is first made by the
transferor is highly unlikely, according to the CLRC, if the
care custodian is a person who provides service as a paid
occupation or profession. The problem, they state, is more
likely to arise with family members who are offering to
provide services without pay. They note that family members
are exempt from the care custodian presumption of invalidity.
If the transferor makes the gift, other relatives may
challenge the gift to the family member who provided the
services, but without the presumption going into play.
In another undue influence case, Estate of Shinkle (2002) 97
Cal.App.4th 990, the person who provided care to Mrs. Shinkle
while she was living in a nursing facility was given a gift by
Mrs. Shinkle after she was discharged. Nonetheless, the court
found that the influence exerted by the care custodian during
Mrs. Shinkle's time in the nursing home facilitated later
pressure on Mrs. Shinkle to create the gift to him after she
was discharged and he was no longer her care custodian.
The CLRC did suggest that another way to resolve the timing
issue with respect to the operation of the presumption, i.e.,
the period during which the donative transfer would be
presumed to be invalid, is to make the presumption not apply
to a gift made before the relationship commenced but would
make the presumption apply if transfer is made after the
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relationship had terminated.
SHOULD A GIFT MADE BEFORE A CAREGIVER PROVIDES HEALTH AND
SOCIAL SERVICES BE EXEMPTED FROM THIS PRESUMPTION OF
INVALIDITY?
SHOULD THIS PRESUMPTION APPLY TO GIFTS MADE AFTER THE
CAREGIVER RELATIONSHIP HAS ENDED INSTEAD?
b. Presumption may be overcome by preponderance of the
evidence; duress and menace removed from statute
Under existing law, the invalidity of a transfer provision to
a disqualified person under Section 23150 would not apply if a
court determines, upon clear and convincing evidence, not
based solely on the testimony of the disqualified person, that
the transfer was not the product of fraud, duress, menace, or
undue influence. If the court finds that the transfer was
indeed the product of fraud, duress, menace, or undue
influence, the disqualified person shall bear all costs,
including attorney's fees, of the proceeding.
This bill would do two things: (1) remove the duress and
menace circumstances out of the statute; and (2) reduce the
burden of the disqualified person from clear and convincing
testimony to preponderance of the evidence.
According to the CLRC, the presumption of invalidity should be
limited to fraud and undue influence only, and explains the
change thus:
That approach [in existing law] is reasonable with respect
to the presumption of fraud and undue influence. The
circumstances governed by the statutory presumption bear
many of the common law indicia of fraud and undue
influence, including a confidential relationship between
the transferor and beneficiary, beneficiary participation
in the creation of the gift, undue profit, an opportunity
for the beneficiary to exert undue influence, and
vulnerability of the transferor to undue influence. ? This
is not true for menace and duress. Menace and duress are
terms of art that describe extreme forms of coercion, often
rising to the level of criminal misconduct.
The [CLRC] does not believe that the statutory presumption
should encompass menace and duress. The fact that a
beneficiary of a gift drafted or transcribed the
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instrument, or served as the care custodian of the
transferor, does not justify a presumption that the gift
was procured through the extreme forms of misconduct that
constitute menace and duress. Such beneficiaries should
not be required to prove the absence of menace and duress
in order to receive a gift ?
With respect to the change in the burden of proof from clear
and convincing evidence to preponderance of the evidence, the
CLRC states that the clear and convincing standard, as used in
the current Donative Transfer Restriction Statute, is
counter-intuitive. "The prerequisites for the statutory
presumption under the Donative Transfer Restriction Statute
are easier to establish than the prerequisites for the common
law presumption (of undue influence), yet the presumption
arising under the Donative Transfer Restriction Statute is
considerably harder to rebut ? The purpose of the Donative
Transfer Restriction Statute is to protect a transferor from
fraud or undue influence in circumstances that suggest such
misconduct has occurred. The purpose is not to prohibit gifts
to certain persons or interfere with the operation of gifts
that are freely and intentionally given. If a beneficiary can
prove, by a preponderance of the evidence, that a gift is not
the product of fraud or undue influence, the gift should not
fail. That is true whether the presumption arises under the
common law, under Probate Code Section 6112, or under Probate
Code Section 21350."
c. Failed gift: failure to rebut presumption, no exception
for an intestate share
Under existing law, if a gift fails as a result of the
statutory presumption of fraud or undue influence, the
beneficiary is treated as having predeceased the transferor,
without spouse or child, but only to the extent that the value
of the invalid gift exceeds the amount that the beneficiary
would have received as an heir of a transferor who died
intestate.
According to the CLRC, the preservation of the intestate share
exception to the failed gift appears to serve no purpose,
because a gift to an "heir" is already exempt from the
statutory presumption and consequently, the only gifts that
will fail are gifts to non-heirs. By definition, non-heirs
are those persons who take nothing if a transferor dies
intestate. Thus, "[i]t is meaningless to guarantee an
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intestate share to those who have no rights in intestacy." In
addition, there certainly seems to be no reason why a person
who is presumed to have procured a gift by fraud or undue
influence should receive anything from the transferor's
estate.
d. Bill would allow the same attorney to draft the
instrument and certify that the gift to a care custodian is
not the product of fraud or undue influence
SB 105 would carry over from the current statute the provision
that would negate the presumption of invalidity of a gift to a
care custodian if an independent attorney provided a
certification that he or she had reviewed the instrument,
counseled the transferor about the nature and consequences of
the gift, and that the gift was not the product of fraud or
undue influence.
However, this bill would permit the attorney who drafted the
instrument to also certify that the gift to a disqualified
person, as defined under the statute, is not the product of
fraud or undue influence, provided the attorney meets the
definition of an "independent attorney" with the requisite
degree of disassociation from the beneficiary. This change,
according to the CLRC, would help transferors to complete such
gifts, without the need for the services of two different
attorneys. "The attorney who drafts an instrument for a
client is in a good position to counsel and evaluate the
client and determine whether the gift is improper."
e. Should the rules vis-?-vis caregivers and the
presumption of invalidity be changed, even with the
possibility of another Foley result?
The CLRC has received extensive comments about the donative
transfer restriction statute, since it was charged with the
task of making recommendations for change. They state that
some individuals may prefer existing law because it is
stricter, and those individuals are probably more concerned
with protecting elders and dependent adults from financial
abuse than with the risk that the existing statute will
invalidate some gifts that were made knowingly and freely by
transferors. This issue (about transferors being able to make
transfers knowingly and freely) is another major area of
litigation in probate, trusts and estates law, and the courts
have always been protective of the transferor's intent when a
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dispute arises.
SB 105, it seems, finds a balance between the two concerns.
Overall, the revisions would not weaken the current
protections provided to elders and dependent adults. The new
Donative Transfer Restriction Statute would use a more
narrowly tailored approach, avoiding overbroad application to
those who do not need its protections and whose intentions
might be frustrated by application of the statute. The CLRC
gives as examples, a person making a gift to a long-time
friend who provided some care at the end, or a young
paraplegic, with no cognitive impairment, who makes a gift to
a care provider.
4. Degree of kinship or consanguinity: how to count the ways
SB 105 would provide, for the entire Probate Code, guidance on
how to determine kinship or consanguinity and how to calculate
degrees of kinship. Several of the provisions affected by SB
105 refer to "degree of kinship," thus the guidance provided
should help provide consistency throughout the code as well as
the Donative Transfer Restriction Statute.
In 1982, the CLRC had recommended repealing former Probate Code
Sections 251-253, which then contained the general rules of
construction with respect to kinship and consanguinity. At that
time, the CLRC states, the commission felt that the provisions
were not necessary for purposes of the law governing wills and
intestate succession. Since then, many other pieces of
legislation have returned the concept of degree of kinship and
consanguinity to the Probate Code, and it is now relevant once
more to provide guidance. The definitions contained in SB 105
are consistent with the repealed statutes.
The degree of kinship guidelines are found on page 3 of this
analysis.
Support : None Known
Opposition : None Known
HISTORY
Source : California Law Revision Commission
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Related Pending Legislation : None Known
Prior Legislation :
AB 21 (Umberg & Morrow, Ch. 293, Stats. 1993) established the
first restrictions on donative transfers.
AB 1172 (Kaloogian, Ch. 724, Stats. 1997) significantly amended
the Donative Transfer Restriction Statute, expanding the list of
disqualified persons and creating the independent attorney
certification exception.
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