2018 Legislation: from Transfer on Death Deeds to Decanting, What a Year, What a Year!

• Publication year: 2019
• Author: By Patrick A. Kohlmann, Esq.* and Jennifer F. Scharre, Esq.*

2018 LEGISLATION: FROM TRANSFER ON DEATH DEEDS TO DECANTING, WHAT A YEAR, WHAT A YEAR!

By Patrick A. Kohlmann, Esq.* and Jennifer F. Scharre, Esq.*

INTRODUCTION

On January 1, 2019, nearly 20 bills relating to trusts, estates, and probate passed and signed by the Governor in 2018 became effective. A bill clarifying the recordation of revocable transfer on death deeds was passed and made immediately effective on July 9, 2018. Changes of note have occurred in conservatorships and guardianships, MediCal eligibility, mediation, advance health care directives, property taxes, and fiduciary litigation.

Many of these bills have been enhanced by the efforts of the Executive Committee of our Section ("TEXCOM"). TEXCOM analyzed, commented upon, supported, or suggested changes to a number of bills, including SB 909, which added a trust decanting statute to the Probate Code. TEXCOM's assistance helped ensure that final legislation passed in a superior technical form to that of its first appearance. TEXCOM's input as an objective third party with technical expertise repeatedly achieves this goal from year to year.

The following summaries highlight what you need to know from this year's legislative session.

I. ESTATE PLANNING

A. California Welcomes Decanting to the Probate Code

SB 909 (Hertzberg) Uniform Trust Decanting Act Status: 9/14/18 Chaptered - Secretary of State - Chapter 407 Statutes of 2018

California enacted the Uniform Trust Decanting Act (the "Act") on September 14, 2018, subject to some California-specific modifications. The Act applies to trusts created on, before, or after January 1, 2019, unless a trust specifically prohibits decanting.

Decanting refers to the power to modify an existing trust, either by changing the terms of that trust or by distributing property from that trust to a second trust. The type of trust will dictate what form the successor trust may take. If there is a valid incentive to pursue decanting, and assuming legal requirements are met, the trustee will then create the terms of the successor trust, in the form of either a modification or reformation, or the creation of a new trust.

Decanting may be helpful to, among other things, restructure successor trustee provisions or to revise poorly drafted or outdated administrative provisions. The requirements for successful decanting are extremely technical. Whether and how a particular trust can be decanted depends upon a number of factors, including the extent of the trustee's discretional distribution authority in the existing trust, whether the trust has a beneficiary with a disability, and whether the existing trust contains specific tax provisions. Each of these factors affects the scope of a trustee's decanting power. Additionally, there are limitations on decanting, i.e., a trustee cannot generally use decanting to change trust terms to increase his or her compensation or to provide greater relief from liability.

The trustee must send notice of the intended decanting to the parties specified in the Act.

The provisions of the new decanting act are reviewed in detail in a separate article in this issue of the Quarterly.

B. Transferors Do Not Need to Record "Common Questions" Page in TOD Deed Form

AB 1739 (Chau) Nonprobate Transfers: Revocable Transfer on Death Deeds

Status: 7/9/18 Chaptered - Secretary of State - Chapter 65 Statutes of 2018

AB 1739 clarifies that the "Common Questions" page appended to the statutory transfer on death (TOD) deed form need not be recorded.

Probate Code section 5642, subdivision (a), prescribes that a TOD deed must be substantially in the statutory form to be validly recorded. The statutory form includes a "Common Questions" page, with information such as "What Does the TOD Deed Do?", and "How do I Use the TOD Deed?" Section 5642, subdivision (b), provides that "subsequent pages of a form executed under this section" also must be substantially in the form of the "Common Questions About the Use of This Form" set forth in that subsection.

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Confusion regarding whether the "Common Questions" is an essential part of the statutory form has arisen in practice. Some transferors omit the questions page when recording TOD deeds. The questions are part of the statutory form, and required inclusion is meant to put a transferor on notice of them, theoretically reducing fraud and abuse. Nevertheless, the questions page has been omitted with numerous recorded TOD deeds, casting a possible cloud on title due to potential invalidity. The legislature therefore relaxed the recordation requirements to provide that failure to record the "Common Questions" will not affect the validity of a TOD deed. This is urgency legislation and effects deeds recorded on, before, or after its enactment on July 9, 2018.

C. Parentage Provisions Revised to Ensure Equal Treatment of Same-Sex Couples

AB 2684 (Bloom) Parent and Child Relationship

Status: 9/28/18 Chaptered - Secretary of State - Chapter 876 Statutes of 2018

AB 2684 amends provisions establishing a marital presumption of parentage (Family Code, section 7540) and permitting voluntary declarations of parentage (Family Code, section 7570 et seq.) to ensure that those provisions treat same-sex parents equally. Existing law provides a procedure to establish parentage through a voluntary declaration of paternity (VDP) signed at the hospital by the natural mother and the man identified as the natural father. Under federal law, an establishment of parentage through the VDP process has the force of a judgment and is entitled to full faith and credit in other states. This bill expands VDPs to apply to any person identified as a parent by the woman who gave birth to the child, including a genetic parent and an intended parent using assisted reproduction. The amended provisions regarding declarations of parentage become operative on January 1, 2020.

This bill defines "gamete bank" as a tissue bank that collects, processes, stores, or distributes gametes, including a facility that provides reproductive services. The bill requires a gamete bank licensed in this state, for gametes collected on or after January 1, 2020, to collect identifying information and medical information from a gamete donor (see new Health and Safety Code section 1644), to provide the gamete donor with specified information, and to obtain a declaration from the gamete donor regarding the disclosure or nondisclosure of his or her identity to a child that results from the donation. A child may request that information on reaching 18 years of age. "Medical information," as defined in section 1644, means information regarding a present illness of the donor, past illness of the donor, and social, genetic, and family history of the donor.

AB 2684 also updates genetic testing provisions to conform to contemporary scientific standards and to reflect gender neutrality (Family Code sections 7541 and 7550 et seq.). This bill deletes the name of the Uniform Act on Blood Tests to Determine Paternity, and revises presumptions and procedures for using genetic testing to establish or challenge a parent and child relationship...