New California Legislation for Trust and Estate Attorneys to Watch in 2020

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Highlights

  • California Gov. Gavin Newsom recently signed into law a number of bills that will affect Trust and Estate attorneys, and which are effective as of Jan. 1, 2020.
  • This Holland & Knight alert highlights several of the most interesting developments, including an increase in the maximum allowable amount for small-estate affidavits, the inclusion of broker-dealers and investment advisors as mandated reporters for elder abuse, and the elimination of a caretaker "loophole" in situations where a caretakers marries and inherits from an elder.
  • Three new laws make changes to civil discovery procedures that will also affect all California litigators in the new year.

California Gov. Gavin Newsom recently signed into law a number of bills that will affect Trust and Estate attorneys, and which are effective as of Jan. 1, 2020. In addition, three new laws make changes to civil discovery procedures that will also affect all California litigators this year.

This Holland & Knight alert highlights several of the most interesting developments.

Estate Administration

Increase in Maximum Dollar Amount for Disposition of Estate Without Administration (Small-Estate Affidavits) (AB 473)

For the first time since 2011, the maximum amounts for: 1) small estates to qualify for disposition without a full probate administration through a "small-estate affidavit," and 2) a surviving spouse to collect unpaid compensation from the decedent-spouse's employer have been increased by AB 473. AB 473 also makes several other modifications to the small-estate procedure.

AB 473 changes the small estate provisions of the Probate Code as follows:

  • Small Estate Set-Aside: Probate Code Sections 6602 and 6609, which allow the decedent's spouse and/or minor children to petition the court to set a portion of the decedent's estate aside for them, are amended to increase the set-aside amount from $20,000 to $85,900.
  • Affidavit Procedure for Collection or Transfer of Personal Property: Existing law allows a decedent's successor to collect certain personal property with an affidavit and without a full probate administration when the gross value of the decedent's real and personal property is below a specified dollar amount. Probate Code Section 13100 is amended to increase the specified dollar amount from $150,000 to $166,250.
  • Affidavit Procedure for Real Property of Small Value: Existing law allows a decedent's successor to record a court certified affidavit to transfer title to the decedent's real property to the successor if the gross value of all real property in the decedent's estate located in California is below a specified maximum dollar amount. Section 13200 is amended to increase the specified dollar amount from $50,000 to $55,425.
  • Collection by Affidavit of Compensation Owed Deceased Spouse: Existing law allows a decedent's surviving spouse to collect salary or other compensation owed by an employer for personal services of the deceased spouse. Probate Code Section 13600 is amended to increase the amount of unpaid compensation that can be transferred to a surviving spouse from $15,000 to $16,625.
  • Property Excluded in Determining Value of Decedent's Estate: Probate Code Section 13050 provides a rule for calculating the value of the decedent's property, which is used to determine the availability of small estate affidavit procedures described above. Previously, the law excluded from that calculation up to $15,000 of unpaid compensation owed to the decedent. Probate Code Section 13050(c)(2) is amended to increase the exclusion of unpaid compensation owed to the decedent from $15,000 to $16,625.
  • Restitution: Probate Code Section 13111 is amended to change the restitution amount owed by a person who receives personal or real property from an estate pursuant to the small estate affidavit procedures and is later required to return that property from the fair market value of the property from the date of disposition at the rate "payable on a money judgment" to the rate "of 7 percent per annum."
  • Probate Code Sections 13117 and 13565 are also added to allow a court, in its discretion, to excuse a person from the liability to pay interest, if the person acted reasonably and in good faith.

This law also requires the Judicial Council to adjust the dollar amounts for these thresholds based on the Consumer Price Index, on April 1, 2022, and at each three-year interval ending on April 1 thereafter.

Guardianships/Conservatorships

Compensation of Guardians and Conservators and New Limits for Conservators Selling the Residence of Conservatee (SB 303)

SB 303 amends Probate Code Sections 2640 and 2641 to prohibit guardians, conservators and their attorneys from receiving compensation from any funds of the ward or conservatee having their source in a government benefits program, unless deemed necessary to sustain the support and maintenance of the ward or conservatee up to the maximum permitted by federal laws and regulations.

This law also adds Probate Code Section 2541.5, which changes the evidence standard for a conservator to be granted authority to remove a conservatee from their personal residence. The evidence standard has been changed from a preponderance of the evidence to a clear and convincing standard of evidence.

Lastly, SB 303 amends Probate Code Sections 2591 and 2591.5 to require a conservator seeking to sell the conservatee's personal residence to now report any capital gains income and tax consequences and impact on access to governmental benefits.

Elder Abuse

"Abandonment" Now Considered Elder Abuse – Abandonment of Elders and Dependent Adults (SB 314)

SB 314 expands the Elder Abuse and Dependent Adult Civil Protection Act (EADACPA) to include acts of abandonment, in addition to acts of physical abuse and neglect, as a basis for awarding enhanced remedies to victims of such abuse under Welfare and Institutions Code Section 15657. Abandonment is defined in Welfare and Institutions Code Section 15610.05.

Broker-Dealers and Investment Advisors Now Mandated Reporters – Financial Abuse of Elders and Dependent Adults (SB 496)

SB 496 expands the categories of mandated reporters of suspected financial elder abuse of an elder to include "broker-dealers" and "investment advisors" through the addition of Section 15630.2 to the Welfare and Institutions Code.

"Broker-dealer" and "investment advisor" are defined by Corporations Code Section 25004 and 25009, respectively.

As with other categories of mandated reporters, broker-dealers and investment advisors who observe or have knowledge of an incident related to the services the professional is providing and that the professional reasonably believes or suspects is financial abuse, are required to immediately report the abuse as specified. The mandated reporters can delay a transaction and/or refuse to honor a power of attorney under specified circumstances.

Mandated reporters acting in good faith and with reasonable care cannot be held civilly liable for reporting. Failure to report where required can result in civil penalties not to exceed $1,000 unless the failure to report is willful, in which case penalties can be as high as $5,000.

Undue Influence

At-Death Transfers Between Spouses (AB 327)

Under existing Family Code Section 721, when spouses enter into a transaction with each other, they are subject to the general rule governing fiduciary relationships, including a duty of the highest good faith and fair dealing, and a spouse is prohibited from taking unfair advantage of the other.

These transactions are subject to the same rights and duties of nonmarital business partners, and include a right to certain disclosures and accountings. Excluded from these provisions are situations involving waivers of spousal rights and duties related to the administration of a trust.

AB 327 adds Probate Code Section 21385, which provides thatan at-death transfer between spouses by will, revocable trust, beneficiary form, or other instrument is not subject to Family Code Section 721 or any presumptions of undue influence created by that section.

The bill clarifies that its provisions do not limit the application of other statutory or common law presumptions of undue influence that may apply to an at-death transfer between spouses.

Donative Transfers to Caregivers (AB 328)

AB 328 closes a loophole that allowed caregivers to obtain the assets of their elderly or mentally incapacitated clients by marrying them.

  • The new law amends Probate Code Section 21380 (the Prohibited Transferee Statute) to add a provision that a care custodian that marries an elder or dependent adult during the service period or within 90 days after services terminated, is presumed to have engaged in undue influence if the instrument was executed less than six months after the marriage occurred. The presumption is rebuttable. This amendment also applies to domestic partnerships or cohabitation.
  • AB 328 also amends Probate Code Section 21611 (the omitted spouse statute) to protect elders or dependent adults in situations where the care custodian does not procure a new estate plan but merely relies on the omitted spouse statute to obtain one-third to one-half of the elder/dependent adult's separate property upon death. If the care custodian marries the elder/dependent adult during the service period or within 90 days after those services ended, and the decedent dies less than six months after the marriage commenced, then a rebuttable presumption of undue influence arises.

The presumption in both Probate Code Sections 21380 and 21611 must be disproven by clear and convincing evidence.

Discovery

Several bills in 2020 alter discovery provisions in the Code of Civil Procedure that will also affect Trust and Estate litigators.

Response to Inspection Demands (SB 370)

SB-370 amends California Code of Civil Procedure Section 2031.280 and eliminates the option to produce documents "as they are kept in the usual course of business" in response to a demand for inspection, copying, testing or sampling.

The law now requires that documents produced in response to a demand for inspection, copying, testing or sampling be "identified with the specific request number to which the documents respond."

Sanctions and Initial Disclosures (SB 17)

SB 17 adds the following two sections to the California Code of Civil Procedure:

  • Section 2023.050 authorizes the imposition of $250 in sanctions, in addition to any other sanctions imposed, for 1) the failure to respond to a request for production of documents, 2) producing documents within seven days of a hearing on a motion to compel, and 3) the failure to communicate in a reasonable and good faith attempt to resolve a dispute over the production of documents. The court may require the lawyer to report the sanctions to the State Bar within 30 days of the imposition of the sanction.
  • Section 2016.090 creates an optional initial disclosure procedure. Currently, federal law provides for a mandatory initial disclosure protocol whereby the parties must simultaneously exchange information on witnesses and documents early in the litigation, and continue to supplement the disclosures as more information is learned in discovery. If stipulated and court-approved, all parties are required to provide initial disclosures within 45 days, including 1) names and contact information of those likely to have discoverable information and the subject of that information; 2) a copy of documents that support the party's claims; 3) any pertinent insurance agreements; and 4) any agreement regarding potential indemnification.

Interrogatories and Requests for Admission (AB 1349)

Under existing law, each response by the responding party to interrogatories and requests for admission is required to include the same number or letter, and be in the same sequence, as the corresponding discovery request, as specified, but is not required to repeat the text of the particular discovery request.

AB 1349 amends California Code of Civil Procedure Sections 2030.210 (interrogatories) and 2033.210 (requests for admission) and now requires the responding party to include the text of the discovery request immediately preceding the response. If requested by the responding party, the propounding party is also required to provide the document propounding the discovery requests in electronic format within three days.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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