CONCURRENCE IN SENATE AMENDMENTS

CSA1 Bill Id:AB 473

Author:(Maienschein)

As Amended Ver:May 7, 2019

Majority vote

SUMMARY:

Increases the dollar limit for small estates that can be disposed of without formal probate and decreases the interest owed to a decedent's estate for certain transfers.

Major Provisions

1. Increases, from $20,000 to $85,900, the maximum value of a decedent's estate for which the decedent's spouse or minor children may petition the court to set aside for them, subject to periodic inflation adjustments under 6), below.
2. Increases, from $150,000 to $166,250, the maximum value of a decedent's estate for which an affidavit or declaration to collect decedent's personal property outside the formal probate process may be used, subject to periodic inflation adjustments under 6), below. 
3. Increases, from $150,000 to $166,250, the maximum value of a decedent's estate, for which a simplified petition to collect an interest in real property outside the formal probate process may be used, subject to periodic inflation adjustments under 6), below.
4. Increases, from $50,000 to $55,425, the maximum value of all real property in decedent's estate, for which an affidavit to transfer decedent's interest in real property may be used outside the formal probate process, subject to periodic inflation adjustments under 6), below. 
5. Increases, from $15,000 to $16,625, the amount of salary or other compensation owed to the deceased spouse by an employer that a surviving spouse can collect outside of the formal probate process, and eliminates the cost-of-living adjustment, but makes the amount subject to periodic inflation adjustments under 6), below.
6. Requires Judicial Council, beginning April 1, 2022 and every three years thereafter, to determine the amount of adjustment, based on the change in the United States city average of the "Consumer Price Index for All Urban Consumers," (CPI) for the previous 40 months, for the various maximum amounts for small estate administration under the Probate Code, rounded to the nearest $25, and to publish a list of the current dollar amounts of the various figures set forth in 1) to 5), above. Provides that the adjustments do not apply if the decedent dies before the date of adjustment.
7. Reduces the interest that a surviving spouse must pay to anyone with a superior right by testate succession for the deceased spouse's half of the community property and quasi-community property that the surviving spouse disposed of from the rate payable on a money judgment (currently 10% per year) to 7% per year. Allows a court, if it finds that the surviving spouse acted reasonably and in good faith under the circumstances known to the surviving spouse, to waive the interest payment, in whole or in part.
8. Reduces the interest that a person must pay to a decedent's estate for real or personal property received from a small estate that the person disposed of, but is later required to return to the estate, from the rate payable on a money judgment (currently 10% per year) to 7% per year. Allows a court, if it finds that the person acted reasonably and in good faith under the circumstances known to that person, to waive the interest payment, in whole or in part.
9. Makes other technical and conforming changes.

The Senate Amendments:

Were technical and non-substantive.

COMMENTS:

Existing law provides various options for the disposition of a decedent's estate, or parts of the estate, without formal probate administration, which can be a time-consuming and costly process. While the formal probate process provides for significant judicial oversight to prevent fraud, theft, or other abuse, with small estates particularly, such oversight may not be necessary or cost-effective. The California Law Revision Commission (CLRC) has studied the issue of disposition of estates without full probate proceedings for several years and has developed a series of recommendations to ease the process and make it fairer. As recommended by the CLRC, this bill increases the size of estates that may be administered outside of the formal probate process, based on the Consumer Price Index (CPI) and then resets those limits every three years based on the CPI. This bill also reduces the amount the interest that a recipient of property from an estate outside of the formal probate process has to pay if the property must be returned to the estate from 10% to 7% per year, and also allows a court to waive the interest payment entirely if it finds that the person acted reasonably under the circumstances.

According to the Author:

The author writes that the bill's increase in the dollar amounts to avoid formal probate administration seeks to "preserve the balance struck by the Legislature regarding the availability of the Probate Code's simplified procedures for disposition of a decedent's estate." Additionally, the reduction in interest charged to those who must return an item to the estate is necessary to "ensure that a recipient of the decedent's property under these simplified procedures is not subject to excessive liability for interest."

Arguments in Support:

In support of the bill, the Professional Fiduciary Association of California (PFAC) writes:

Our association supports the provisions of AB 473 that would increase the threshold value of small estates and portions of estates to qualify for disposition without a full probate administration.

In addition PFAC supports the provisions that decrease the interest applicable if a recipient of property under these provisions must provide restitution to the rightful recipient of the property.

Arguments in Opposition:

None

FISCAL COMMENTS:

According to the Senate Appropriations Committee, pursuant to Senate Rule 28.8, negligible state costs.

VOTES:

ASM JUDICIARY: 12-0-0

YES: Mark Stone, Gallagher, Chau, Chiu, Gonzalez, Holden, Kalra, Kiley, Maienschein, Obernolte, Petrie-Norris, Reyes

ASM APPROPRIATIONS: 17-0-1

YES: Gonzalez, Bigelow, Bloom, Bonta, Brough, Calderon, Carrillo, Chau, Diep, Eggman, Fong, Gabriel, Friedman, Obernolte, Petrie-Norris, Quirk, Robert Rivas

ABS, ABST OR NV: Maienschein

ASSEMBLY FLOOR: 72-0-8

YES: Aguiar-Curry, Bauer-Kahan, Bigelow, Bloom, Boerner Horvath, Bonta, Brough, Burke, Calderon, Carrillo, Cervantes, Chau, Chen, Choi, Chu, Cooper, Cunningham, Dahle, Daly, Diep, Eggman, Flora, Fong, Friedman, Gabriel, Gallagher, Cristina Garcia, Gipson, Gloria, Gonzalez, Gray, Grayson, Holden, Irwin, Jones-Sawyer, Kalra, Kamlager-Dove, Kiley, Lackey, Limón, Maienschein, Mathis, Mayes, McCarty, Medina, Melendez, Mullin, Muratsuchi, Nazarian, O'Donnell, Obernolte, Patterson, Petrie-Norris, Quirk, Quirk-Silva, Ramos, Reyes, Luz Rivas, Robert Rivas, Rodriguez, Blanca Rubio, Salas, Santiago, Smith, Mark Stone, Ting, Voepel, Waldron, Weber, Wicks, Wood, Rendon

ABS, ABST OR NV: Arambula, Berman, Chiu, Cooley, Frazier, Eduardo Garcia, Levine, Low

SENATE FLOOR: 39-0-1

YES: Allen, Archuleta, Atkins, Bates, Beall, Borgeas, Bradford, Caballero, Dahle, Dodd, Durazo, Galgiani, Glazer, Lena Gonzalez, Grove, Hertzberg, Hill, Hueso, Hurtado, Jackson, Jones, Leyva, McGuire, Mitchell, Monning, Moorlach, Morrell, Nielsen, Pan, Portantino, Roth, Rubio, Skinner, Stern, Stone, Umberg, Wieckowski, Wiener, Wilk

ABS, ABST OR NV: Chang

UPDATED:

VERSION: May 7, 2019

CONSULTANT: Leora Gershenzon / JUD. / (916) 319-2334 FN: 0001183

 CONSENT  

Bill No: AB 473

Author: Maienschein (D)

Amended: 5/7/19 in Senate

Vote: 21

SENATE JUDICIARY COMMITTEE: 9-0, 6/4/19

AYES: Jackson, Borgeas, Allen, Caballero, Jones, Monning, Stern, Umberg, Wieckowski

SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8

ASSEMBLY FLOOR: 72-0, 4/11/19 (Consent) - See last page for vote

SUBJECT: Disposition of estate without administration

SOURCE: California Law Revision Commission

DIGEST:

This bill (1) increases the threshold value of small estates and portions of estates that may be administered outside of probate, and (2) decreases from 10 percent to 7 percent the interest applicable if a recipient of property under these provisions must provide restitution to the rightful recipient of the property.

ANALYSIS:

Existing law:

1. Provides that a petition may be filed to request a court order to set aside a decedent’s estate to the decedent’s surviving spouse and minor children, as specified, if the net value of the estate does not exceed $20,000. (Prob. Code § 6602.)^[1]
2. Excludes certain property from inclusion in the decedent’s estate for purposes of determining the value of the estate, including up to $15,000 of salary or other compensation owed to the deceased spouse by his or her employer. (§ 13050.)
3. Allows for the use of an affidavit or declaration to collect a decedent’s personal property without going through probate, if the gross value of decedent’s real and personal property’s value does not exceed $150,000. (§ 13100.)
4. Allows for a decedent’s successor to a real property interest to use a simplified petition to obtain a court order determining that the party has succeeded to that real property, if the gross value of decedent’s real and personal property’s value does not exceed $150,000. (§ 13151.)
5. Allows for a decedent’s successor to a real property interest to obtain that property by filing an affidavit with specified information about the property, including that the property’s gross value does not exceed $50,000. (§ 13200.)
6. Allows a surviving spouse to collect, outside of formal probate, salary or other compensation owed to the deceased spouse by an employer, in an amount not to exceed $15,000, subject to a cost-of-living adjustment. (§ 13600.)
7. Requires a recipient of a decedent’s property collected under a procedure that allows for disposition of property without estate administration, if probate estate administration is commenced or requested by the decedent’s personal representative, to return the property or, if the property was disposed of, the net income received for the property, plus interest on the fair market value of the property from the date of disposition “at the rate payable on a money judgement,” which is 10 percent per year. (§§ 13111-12, 13206-07; Code Civ. Proc. § 685.010.) Establishes similar requirements applicable to a surviving spouse’s one-half share of community and quasi-property when another person has a superior right by testate succession. (§ 13560.)

This bill:

1. Increases from $20,000 to $85,900 the maximum value of a decedent’s estate for which the decedent’s spouse or minor children may petition the court to set aside for them.
2. Increases, from $15,000 to $16,625 the maximum value of salary or other compensation owed to the decedent that is excluded from the valuation of the estate.
3. Increases from $150,000 to $166,250 the maximum value of a decedent’s estate for which an affidavit or declaration to collect decedent's personal property outside the formal probate process may be used. 
4. Increases from $150,000 to $166,250 the maximum value of a decedent’s estate for which a simplified petition to collect the decedent’s real property outside the formal probate process may be used.
5. Increases from $50,000 to $55,425 the maximum value of all real property in decedent’s estate, for which an affidavit to transfer decedent’s interest in real property may be used outside the formal probate process.

1. Increases from $15,000 to $16,625 the amount of salary or other compensation owed to the deceased spouse by an employer that a surviving spouse can collect outside of the formal probate process.
2. Requires Judicial Council, beginning April 1, 2022 and every three years thereafter, to determine the amount of adjustment, based on the change in the United States city average of the CPI for the previous 40 months, for the various maximum amounts for small estate administration under the Probate Code, rounded to the nearest $25, and to publish a list of the current dollar amounts of the various figures set forth in 1) to 5), above. Provides that the adjustments do not apply if the decedent dies before the date of adjustment.
3. Reduces the interest rate that a recipient of a small estate or portion of an estate who disposes of the property may be required to pay to the rightful recipient of the property from 10 percent to 7 percent per year. Allows a court, if it finds that the person acted reasonably and in good faith under the circumstances known to the person, to waive the interest payment, in whole or in part.
4. Makes other technical and conforming changes.

Background

The Probate Code provides several procedures by which some estates or portions thereof may be disposed of summarily or by affidavit to expedite the settlement of these smaller estates and assets and avoid unnecessary expenses related to court supervision. Some of the procedures may be undertaken by a person to whom the decedent devised the property directly or by a personal representative of the decedent who permits an heir to specified property to collect and transfer the property outside of probate.

The California Law Revision Commission (CLRC) recently studied this matter and concluded that the dollar amounts contained in these provisions should be adjusted using the U.S. Bureau of Labor Statistics Consumer Price Index (CPI) to account for inflation. The CLRC additionally concluded that, every three years, these amounts should be adjusted administratively, based on CPI. The CLRC also studied the related issue of the interest rate applicable when the recipient of property under these provisions must provide restitution to a party with a superior claim to the property, and concluded that the interest rate should be reduced from 10 percent to 7 percent per year. The CLRC also concluded that a court should be granted discretion, if it finds that the person acted reasonably and in good faith, to waive all or part of the interest.

This bill is the vehicle for the CLRC’s recommendations. It has no known opposition.

Comments

1. Increases monetary limits on various low-value estates or assets that may be administered outside of the formal probate process, based on Consumer Price Index. The Probate Code provides for the disposition of small estates, or portions of estates, without probate administration, based on the dollar value of the estates or assets. These provisions allow heirs and beneficiaries of small estates to avoid the burdens and delays of probate administration and prevents these estates and assets from being further depleted due to the costs of that process. These provisions also reduce the burdens on the judicial system and allow the courts to more efficiently focus on matters requiring greater judicial oversight and resources.

The Legislature last raised the maximum dollar amounts for most of these provisions in 2012 (AB 1305, Huber, Chapter 117, Statutes of 2011). However, these changes did not include an adjustment to the dollar limitation in the provision that enables a decedent’s spouse and minor children to petition the court to set aside the decedent’s estate if its value does not exceed $20,000, a figure that was last raised over 40 years ago. (AB 3047 (McVittie, Chapter 1028, Statutes of 1976.)

The CLRC recently studied this issue, noting that “[t]hese dollar limits serve an important function by balancing the need for judicial oversight with the need for judicial economy and the avoidance of unnecessary administration. The dollar limits represent a considered choice in which the Legislature struck a balance between these important, competing policy concerns.”^[2] The CLRC concluded that the dollar amounts contained in these provisions should be adjusted using CPI to account for inflation since the amounts were last adjusted. Based on CLRC’s recommendations, this bill makes the following adjustments:

The CLRC additionally concluded that these amounts should be adjusted administratively every three years. This bill also creates a process for the dollar amounts to be adjusted automatically, every three years based on the CPI, to ensure that the balance between judicial oversight and judicial economy is maintained. This provision is modeled after a cost-of-living adjustment for dollar amount exemptions from the enforcement of money judgments provision under Code of Civil Procedure Section 703.150. Under this procedure, the Judicial Council is required, beginning April 1, 2022 and every three years thereafter, to determine the amount of adjustment, based on the change in CPI for the previous 40 months, for the various maximum amounts for small estate administration under the Probate Code. The Judicial Council must then round the revised amount to the nearest $25, and publish a list of the new dollar amounts of the various figures.

1. Reduces the interest rate that may be charged for certain property required to be returned to the probate estate. When a small estate or portion of an estate is administered outside of the formal probate process, the recipient of the property may be held liable for the property’s value if it turns out that there is a party who has a superior claim to that property. If the recipient has disposed of or improved the property, the recipient’s liability may include interest on the property’s value, which is the same rate applicable to judgements on monetary debts—10 percent per year. (See §§ 13206 & 13111; see also Code Civ. Proc. § 685.010.)

This bill reduces that rate to 7 percent per year. According to the CLRC, the 10 percent rate far exceeds the expected value of investing the proceeds of a sale of property, and thus “acts as a de facto penalty, imposing liability on the recipient far in excess of the value that the recipient could expect to realize from the decedent’s property.”^[3] The CLRC continues: “This places the recipient of the decedent’s property in a worse position than if the recipient had not received the property at all.”^[4] In recognition of the fact that even a 7 percent interest rate may be punitively high, this bill also enacts another recommendation of the CLRC by allowing a court, if it finds that the person acted reasonably and in good faith under the circumstances known to the person, to waive the interest payment, in whole or in part.

FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: No

SUPPORT: (Verified 6/25/19)

California Law Revision Commission (source)

OPPOSITION: (Verified 6/25/19)

None received

ARGUMENTS IN SUPPORT: The author writes:

This bill seeks to preserve the balance struck by the Legislature regarding the availability of the Probate Code’s simplified procedures for disposition of a decedent’s estate. Additionally, the reduction in interest charged to those who must return an item to the estate is necessary to ensure that a recipient of the decedent’s property under these simplified procedures is not subject to excessive liability for interest.

ASSEMBLY FLOOR: 72-0, 4/11/19

AYES: Aguiar-Curry, Bauer-Kahan, Bigelow, Bloom, Boerner Horvath, Bonta, Brough, Burke, Calderon, Carrillo, Cervantes, Chau, Chen, Choi, Chu, Cooper, Cunningham, Dahle, Daly, Diep, Eggman, Flora, Fong, Friedman, Gabriel, Gallagher, Cristina Garcia, Gipson, Gloria, Gonzalez, Gray, Grayson, Holden, Irwin, Jones-Sawyer, Kalra, Kamlager-Dove, Kiley, Lackey, Limón, Maienschein, Mathis, Mayes, McCarty, Medina, Melendez, Mullin, Muratsuchi, Nazarian, Obernolte, O'Donnell, Patterson, Petrie-Norris, Quirk, Quirk-Silva, Ramos, Reyes, Luz Rivas, Robert Rivas, Rodriguez, Blanca Rubio, Salas, Santiago, Smith, Mark Stone, Ting, Voepel, Waldron, Weber, Wicks, Wood, Rendon

NO VOTE RECORDED: Arambula, Berman, Chiu, Cooley, Frazier, Eduardo Garcia, Levine, Low

Prepared by: Josh Tosney / JUD. / (916) 651-4113

6/26/19 15:52:07

**** END ****

1. All further statutory references are to the Probate Code unless otherwise specified. ↑

2. (CLRC, Disposition of Estate Without Administration: Dollar Amounts, p. 2 (Aug. 2018).) ↑

3. Disposition of Estate without Administration: Interest Rate, Staff Draft, Tentative Recommendation (Mar. 29, 2018), p. 2. ↑

4. Id. at 2-3. ↑

SENATE JUDICIARY COMMITTEE

Senator Hannah-Beth Jackson, Chair

2019-2020 Regular Session

Bill No: AB 473 (Author:Maienschein)

Version: May 7, 2019

Hearing Date: June 4, 2019

Fiscal: Yes

Urgency: No

Consultant: JT

SUBJECT

Disposition of estate without administration

DIGEST

This bill (1) increases the threshold value of small estates and portions of estates that may be administered outside of probate, and (2) decreases from 10 percent to 7 percent the interest applicable if a recipient of property under these provisions must provide restitution to the rightful recipient of the property.

EXECUTIVE SUMMARY

The Probate Code provides several procedures by which some estates or portions thereof may be disposed of summarily or by affidavit to expedite the settlement of these smaller estates and assets and avoid unnecessary expenses related to court supervision. Some of the procedures may be undertaken by a person to whom the decedent devised the property directly or by a personal representative of the decedent who permits an heir to specified property to collect and transfer the property outside of probate.

The California Law Revision Commission (CLRC) recently studied this matter and concluded that the dollar amounts contained in these provisions should be adjusted using the U.S. Bureau of Labor Statistics Consumer Price Index (CPI) to account for inflation. The CLRC additionally concluded that, every three years, these amounts should be adjusted administratively, based on CPI. The CLRC also studied the related issue of the interest rate applicable when the recipient of property under these provisions must provide restitution to a party with a superior claim to the property, and concluded that the interest rate should be reduced from 10 percent to 7 percent per year. The CLRC also concluded that a court should be granted discretion, if it finds that the person acted reasonably and in good faith, to waive all or part of the interest.

This bill is the vehicle for the CLRC’s recommendations. It has no known opposition.

PROPOSED CHANGES TO THE LAW

Existing law:

1. Provides that a petition may be filed to request a court order to set aside a decedent’s estate to the decedent’s surviving spouse and minor children, as specified, if the net value of the estate does not exceed $20,000. (Prob. Code § 6602.)^[1]
2. Excludes certain property from inclusion in the decedent’s estate for purposes of determining the value of the estate, including up to $15,000 of salary or other compensation owed to the deceased spouse by his or her employer. (§ 13050.)
3. Allows for the use of an affidavit or declaration to collect a decedent’s personal property without going through probate, if the gross value of decedent’s real and personal property’s value does not exceed $150,000. (§ 13100.)
4. Allows for a decedent’s successor to a real property interest to use a simplified petition to obtain a court order determining that the party has succeeded to that real property, if the gross value of decedent’s real and personal property’s value does not exceed $150,000. (§ 13151.)
5. Allows for a decedent’s successor to a real property interest to obtain that property by filing an affidavit with specified information about the property, including that the property’s gross value does not exceed $50,000. (§ 13200.)
6. Allows a surviving spouse to collect, outside of formal probate, salary or other compensation owed to the deceased spouse by an employer, in an amount not to exceed $15,000, subject to a cost-of-living adjustment. (§ 13600.)
7. Requires a recipient of a decedent’s property collected under a procedure that allows for disposition of property without estate administration, if probate estate administration is commenced or requested by the decedent’s personal representative, to return the property or, if the property was disposed of, the net income received for the property, plus interest on the fair market value of the property from the date of disposition “at the rate payable on a money judgement,” which is 10 percent per year. (§§ 13111-12, 13206-07; Code Civ. Proc. § 685.010.) Establishes similar requirements applicable to a surviving spouse’s one-half share of community and quasi-property when another person has a superior right by testate succession. (§ 13560.)

This bill:

1. Increases from $20,000 to $85,900 the maximum value of a decedent’s estate for which the decedent’s spouse or minor children may petition the court to set aside for them.
2. Increases, from $15,000 to $16,625 the maximum value of salary or other compensation owed to the decedent that is excluded from the valuation of the estate.
3. Increases from $150,000 to $166,250 the maximum value of a decedent’s estate for which an affidavit or declaration to collect decedent's personal property outside the formal probate process may be used. 
4. Increases from $150,000 to $166,250 the maximum value of a decedent’s estate for which a simplified petition to collect the decedent’s real property outside the formal probate process may be used.
5. Increases from $50,000 to $55,425 the maximum value of all real property in decedent’s estate, for which an affidavit to transfer decedent’s interest in real property may be used outside the formal probate process.

1. Increases from $15,000 to $16,625 the amount of salary or other compensation owed to the deceased spouse by an employer that a surviving spouse can collect outside of the formal probate process.
2. Requires Judicial Council, beginning April 1, 2022 and every three years thereafter, to determine the amount of adjustment, based on the change in the United States city average of the CPI for the previous 40 months, for the various maximum amounts for small estate administration under the Probate Code, rounded to the nearest $25, and to publish a list of the current dollar amounts of the various figures set forth in 1) to 5), above. Provides that the adjustments do not apply if the decedent dies before the date of adjustment.
3. Reduces the interest rate that a recipient of a small estate or portion of an estate who disposes of the property may be required to pay to the rightful recipient of the property from 10 percent to 7 percent per year. Allows a court, if it finds that the person acted reasonably and in good faith under the circumstances known to the person, to waive the interest payment, in whole or in part.
4. Makes other technical and conforming changes.

COMMENTS

1. Increases monetary limits on various low-value estates or assets that may be administered outside of the formal probate process, based on Consumer Price Index

The Probate Code provides for the disposition of small estates, or portions of estates, without probate administration, based on the dollar value of the estates or assets. These provisions allow heirs and beneficiaries of small estates to avoid the burdens and delays of probate administration and prevents these estates and assets from being further depleted due to the costs of that process. These provisions also reduce the burdens on the judicial system and allow the courts to more efficiently focus on matters requiring greater judicial oversight and resources.

The Legislature last raised the maximum dollar amounts for most of these provisions in 2012. (AB 1305 (Huber), Ch. 117, Stats. 2011.) However, these changes did not include an adjustment to the dollar limitation in the provision that enables a decedent’s spouse and minor children to petition the court to set aside the decedent’s estate if its value does not exceed $20,000, a figure that was last raised over 40 years ago. (AB 3047 (McVittie, Ch. 1028, Stats. 1976.)

The CLRC recently studied this issue, noting that “[t]hese dollar limits serve an important function by balancing the need for judicial oversight with the need for judicial economy and the avoidance of unnecessary administration. The dollar limits represent a considered choice in which the Legislature struck a balance between these important, competing policy concerns.”^[2] The CLRC concluded that the dollar amounts contained in these provisions should be adjusted using CPI to account for inflation since the amounts were last adjusted. Based on CLRC’s recommendations, this bill would make the following adjustments:

The CLRC additionally concluded that these amounts should be adjusted administratively every three years. The bill also creates a process for the dollar amounts to be adjusted automatically, every three years based on the CPI, to ensure that the balance between judicial oversight and judicial economy is maintained. This provision is modeled after a cost-of-living adjustment for dollar amount exemptions from the enforcement of money judgments provision under Code of Civil Procedure Section 703.150. Under this procedure, the Judicial Council is required, beginning April 1, 2022 and every three years thereafter, to determine the amount of adjustment, based on the change in CPI for the previous 40 months, for the various maximum amounts for small estate administration under the Probate Code. The Judicial Council must then round the revised amount to the nearest $25, and publish a list of the new dollar amounts of the various figures.

2. Reduces the interest rate that may be charged for certain property required to be returned to the probate estate

When a small estate or portion of an estate is administered outside of the formal probate process, the recipient of the property may be held liable for the property’s value if it turns out that there is a party who has a superior claim to that property. If the recipient has disposed of or improved the property, the recipient’s liability may include interest on the property’s value, which is the same rate applicable to judgements on monetary debts—10 percent per year. (See §§ 13206 & 13111; see also Code Civ. Proc. § 685.010.)

This bill would reduce that rate to 7 percent per year. According to the CLRC, the 10 percent rate far exceeds the expected value of investing the proceeds of a sale of property, and thus “acts as a de facto penalty, imposing liability on the recipient far in excess of the value that the recipient could expect to realize from the decedent’s property.”^[3] The CLRC continues: “This places the recipient of the decedent’s property in a worse position than if the recipient had not received the property at all.”^[4] In recognition of the fact that even a 7 percent interest rate may be punitively high, this bill would also enact another recommendation of the CLRC by allowing a court, if it finds that the person acted reasonably and in good faith under the circumstances known to the person, to waive the interest payment, in whole or in part.

SUPPORT

California Law Revision Commission (sponsor)

OPPOSITION

None known

RELATED LEGISLATION

Pending Legislation: None known

Prior Legislation: AB 1305 (Huber, Ch. 117, Stats. 2011), last raised the dollar limit for small estates.

PRIOR VOTES:

Assembly Floor (Ayes 72, Noes 0)

Assembly Appropriations Committee (Ayes 17, Noes 0)

Assembly Judiciary Committee (Ayes 12, Noes 0)

**************

1. All further statutory references are to the Probate Code unless otherwise specified. ↑

2. (CLRC, Disposition of Estate Without Administration: Dollar Amounts, p. 2 (Aug. 2018).) ↑

3. Disposition of Estate without Administration: Interest Rate, Staff Draft, Tentative Recommendation (Mar. 29, 2018), p. 2. ↑

4. Id. at 2-3. ↑

Date of Hearing: April 3, 2019

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Lorena Gonzalez, Chair

ABPCA Bill Id:AB 473

Author:(Maienschein) – As Introduced Ver:February 11, 2019

Urgency: No State Mandated Local Program: No Reimbursable: No

SUMMARY:

This bill adjusts the dollar amount for a small estate to qualify for disposition without full probate administration beginning April 1, 2022, and at each three-year interval. Specifically, this bill:

1. Requires Judicial Council to determine the amount of the adjustment based on changes in the “Consumer Price Index for All Urban Customers” from the December 40 months prior to the adjustment to the December immediately preceding the adjustment, with each adjusted amount rounded to the nearest $25.
2. Requires Judicial Council to publish a list of current dollar amounts together with the date of the next scheduled adjustment.

FISCAL EFFECT:

Minor absorbable costs (Trial Court Trust Fund/GF) for Judicial Council to update the dollar amount for small estate disposition without probate and publish the list of dollar amounts.

COMMENTS:

1. Purpose. According to the author, increasing the dollar amount to avoid formal probate administration seeks to:

Preserve the balance struck by the Legislature regarding the availability of the Probate Code’s simplified procedures for disposition of a decedent’s estate. Additionally, the reduction in interest charged to those who must return an item to the estate is necessary to ensure that a recipient of the decedent’s property under these simplified procedures is not subject to excessive liability for interest.

1. Background. The California Law Revision Commission (Commission) studied the use of small estate disposition without full probate and issued a report in 2018. The Commission made several recommendations to improve the use of disposition without full probate for smaller estates by increasing the dollar amount for which an estate would be eligible for disposition without probate. The Commission concluded that:

[U]nless the dollar amounts were adjusted to account for inflation, the availability of these procedures would decrease over time due to inflation. This, in turn, could effectively require more estates to be administered in probate. The Commission believes that these disposition without administration procedures are a useful tool and their availability should be preserved. Therefore, the Commission recommends adjusting the dollar amounts to reflect the cost-of living changes due to inflation since these amounts were last adjusted. The Commission also recommends that these amounts be adjusted and published administratively triennially (every three years) going forward.

Reducing the number of estates requiring probate may result in cost savings to the trial courts since there would be fewer estates requiring court appearances.

1. Prior Legislation.
2. AB 1305 (Huber), Chapter. 117, Statutes. 2011, last raised the dollar limit for small estates.
3. SB 553 (Aanestad), of the 2007-08 Legislative Session, sought to make similar changes to AB 1305 (although with different adjustments) but was amended to affect state property.
4. AB 2267 (Huff), of the 2006-07 Legislative Session, was very similar to AB 1305. It failed passage in this committee.

Analysis Prepared by: Kimberly Horiuchi / APPR. / (916) 319-2081

Date of Hearing: March 19, 2019

ASSEMBLY COMMITTEE ON JUDICIARY

Mark Stone, Chair

ABPCA Bill Id:AB 473

Author:(Maienschein) – As Introduced Ver:February 11, 2019

SUBJECT: SMALL ESTATES: Disposition without administration

KEY ISSUE: SHOULD THE VALUE OF SMALL ESTATES THAT MAY BE ADMINISTERED OUTSIDE OF THE FORMAL PROBATE PROCESS BE INCREASED BASED ON THE CONSUMER PRICE INDEX, AND SHOULD THE INTEREST DUE ON PROPERTY THAT MUST BE RETURNED TO AN ESTATE BE REDUCED FROM 10% TO 7% PER YEAR?

SYNOPSIS

Existing law provides various options for the disposition of a decedent’s estate, or parts of the estate, without formal probate administration, which can be a time- consuming and costly process. While the formal probate process provides for significant judicial oversight to prevent fraud, theft, or other abuse, with small estates particularly, such oversight may not be necessary or cost-effective. The California Law Revision Commission (CLRC) has studied the issue of disposition of estates without full probate proceedings for several years and has developed a series of recommendations to ease the process and make it more fair. As recommended by the CLRC, this bill increases the size of estates which may be administered outside of the formal probate process, based on the Consumer Price Index (CPI) and then resets those limits every three years based on the CPI. The bill also reduces the amount of interest that a recipient of property from an estate outside of the formal probate process has to pay, if the property must be returned to the estate, from 10% to 7% per year, and also allows a court to waive the interest payment entirely if it finds that the person acted reasonably under the circumstances.

The author writes that the bill’s increase in the dollar amounts to avoid formal probate administration seeks to “preserve the balance struck by the Legislature regarding the availability of the Probate Code’s simplified procedures for disposition of a decedent’s estate.” Additionally, the reduction in interest charged to those who must return an item to the estate is necessary to “ensure that a recipient of the decedent’s property under these simplified procedures is not subject to excessive liability for interest.” There is no reported opposition.

SUMMARY: Increases the dollar limit for small estates that can be disposed of without formal probate and decreases the interest owed to a decedent’s estate for certain transfers. Specifically, this bill:

1. Increases, from $20,000 to $85,900, the maximum value of a decedent's estate for which the decedent’s spouse or minor children may petition the court to set aside for them, subject to periodic inflation adjustments under 6), below.
2. Increases, from $150,000 to $166,250, the maximum value of a decedent's estate for which an affidavit or declaration to collect decedent's personal property outside the formal probate process may be used, subject to periodic inflation adjustments under 6), below. 
3. Increases, from $150,000 to $166,250, the maximum value of a decedent's estate, for which a simplified petition to collect an interest in real property outside the formal probate process may be used, subject to periodic inflation adjustments under 6), below.
4. Increases, from $50,000 to $55,425, the maximum value of all real property in decedent's estate, for which an affidavit to transfer decedent's interest in real property may be used outside the formal probate process, subject to periodic inflation adjustments under 6), below. 
5. Increases, from $15,000 to $16,625, the amount of salary or other compensation owed to the deceased spouse by an employer that a surviving spouse can collect outside of the formal probate process, and eliminates the cost-of-living adjustment, but makes the amount subject to periodic inflation adjustments under 6), below.
6. Requires Judicial Council, beginning April 1, 2022 and every three years thereafter, to determine the amount of adjustment, based on the change in the United States city average of the “Consumer Price Index for All Urban Consumers,” (CPI) for the previous 40 months, for the various maximum amounts for small estate administration under the Probate Code, rounded to the nearest $25, and to publish a list of the current dollar amounts of the various figures set forth in 1) to 5), above. Provides that the adjustments do not apply if the decedent dies before the date of adjustment.
7. Reduces the interest that a surviving spouse must pay to anyone with a superior right by testate succession for the deceased spouse’s half of the community property and quasi-community property that the surviving spouse disposed of from the rate payable on a money judgment (currently 10% per year) to seven percent per year. Allows a court, if it finds that the surviving spouse acted reasonably and in good faith under the circumstances known to the surviving spouse, to waive the interest payment, in whole or in part.
8. Reduces the interest that a person must pay to a decedent’s estate for real or personal property received from a small estate that the person disposed of, but is later required to return to the estate, from the rate payable on a money judgment (currently 10% per year) to seven percent per year. Allows a court, if it finds that the person acted reasonably and in good faith under the circumstances known to that person, to waive the interest payment, in whole or in part.
9. Makes other technical and conforming changes.

EXISTING LAW:

1. Allows a decedent’s spouse or minor children to petition the court to set aside the decedent’s estate for them, provided the estate, less specified exemptions, does not exceed $20,000. (Probate Code Section 6600 et seq. Unless stated otherwise, all further statutory references are to the Probate Code.)
2. Allows for the use of an affidavit or declaration to collect decedent's personal property outside of formal probate, where the gross value of decedent's real and personal property, unless exempt, does not exceed $150,000. (Section 13100 et seq.)
3. Allows for use of a simplified petition to collect decedent's interest in real property, where the gross value of decedent's real and personal property, unless exempt, does not exceed $150,000. (Section 13151 et seq.)
4. Allows for use of an affidavit to collect decedent's interest in real property, where the gross value of all real property owned by the decedent in California, unless exempt, does not exceed $50,000. (Section 13200 et seq.)
5. Excludes certain property from inclusion in the decedent's estate for purposes of determining the value of the estate, including property held in a revocable trust and up to $15,000 of salary or other compensation owed to the deceased spouse by his or her employer. (Section 13050.)
6. Makes a surviving spouse liable for the decedent’s one-half of the community property and quasi-community property to anyone with a superior right by testate succession. If the surviving spouse has disposed of the property, provides that the spouse is liable for the net income received for the property plus interest on the fair market value of the property from the date of disposition “at the rate payable on a money judgement.” (Section 13560 et seq.)
7. Allows a surviving spouse to collect, outside of formal probate, salary or other compensation owed to the deceased spouse by an employer, in an amount not to exceed $15,000, subject to a cost-of-living adjustment. (Section 13600.)
8. Requires a recipient of a decedent’s property collected under a procedure that allows for disposition of property without estate administration, if probate estate administration is commenced or if requested by the decedent’s personal representative, to return the property or, if the property was disposed of, the net income received for the property, plus interest on the fair market value of the property from the date of disposition “at the rate payable on a money judgement.” (Sections 13111-12, 13206-07.)
9. Provides that interest accrues at the rate of 10% per annum on the principal amount of a money judgment remaining unsatisfied. (Code of Civil Procedure Section 685.010.)
10. Provides, under the California Constitution, that the rate of interest upon the loan or forbearance of any money, goods, or things in action, or on accounts after demand, is 7% per year. (California Constitution, Article XV, Section 1.)

FISCAL EFFECT: As currently in print this bill is keyed fiscal.

COMMENTS: Existing law provides various options for the disposition of a decedent’s estate, or parts of the estate, without formal probate administration, which can be a time-consuming and costly process. While the formal probate process provides for significant judicial oversight to prevent fraud, theft, or other abuse, with small estates particularly, such oversight may not be necessary or cost-effective. The California Law Revision Commission (CLRC) has studied the issue of disposition of estates without full probate proceedings for several years and has developed a series of recommendations to ease the process and make it fairer. As recommended by the CLRC, this bill increases the size of estates that may be administered outside of the formal probate process, based on the Consumer Price Index (CPI) and then resets those limits every three years based on the CPI. The bill also reduces the amount the interest that a recipient of property from an estate outside of the formal probate process has to pay if the property must be returned to the estate from 10% to 7% per year, and also allows a court to waive the interest payment entirely if it finds that the person acted reasonably under the circumstances.

The author writes that the bill’s increase in the dollar amounts to avoid formal probate administration seeks to “preserve the balance struck by the Legislature regarding the availability of the Probate Code’s simplified procedures for disposition of a decedent’s estate.” Additionally, the reduction in interest charged to those who must return an item to the estate is necessary to “ensure that a recipient of the decedent’s property under these simplified procedures is not subject to excessive liability for interest.”

This bill increases various limits on small dollar estates which can be administered outside the formal probate process and then ties further increases to the cost-of-living. Formal probate provides significant court oversight and accountability and can help ensure that a decedent’s wishes are complied with fully. However, particularly for small estates, the time and cost of full probate administration may not be necessary and are rarely cost-effective. The Legislature has created exceptions for probate administration for small estates and other selected transfers. These include:

• Allowing a decedent’s spouse and/or minor children to petition the court to set aside the decedent’s estate for them, provided the estate, less specified exemptions, does not exceed $20,000. (Section 6600 et seq.)
• Allowing a surviving spouse to collect, outside of formal probate, salary or other compensation owed to the deceased spouse by an employer, in an amount not to exceed $15,000, subject to a cost-of-living adjustment. (Section 13600.)
• Allowing the use of an affidavit or declaration to collect decedent's personal property outside of formal probate, where the gross value of decedent's real and personal property, unless exempt, does not exceed $150,000. (Section 13100 et seq.)
• Allowing use of a simplified petition to collect decedent's interest in real property, where the gross value of decedent's real and personal property, unless exempt, does not exceed $150,000. (Section 13151 et seq.)
• Allowing use of an affidavit to collect decedent's interest in real property, where the gross value of all real property owned by the decedent in California, unless exempt, does not exceed $50,000. (Section 13200 et seq.)

CLRC notes that “These dollar limits serve an important function by balancing the need for judicial oversight with the need for judicial economy and the avoidance of unnecessary administration. The dollar limits represent a considered choice in which the Legislature struck a balance between these important, competing policy concerns.” (CLRC, Disposition of Estate Without Administration: Dollar Amounts, p. 2 (Aug. 2018).)

The Legislature has raised the maximum dollar amounts of these exceptions from probate administration periodically, generally to keep pace with increases in the cost-of-living. AB 1305 (Huber), Chap. 117, Stats. 2011, last raised the limits for most of the above provision to their current amounts, effective in 2012. However, the dollar limitation in the section allowing a decedent’s spouse and/or minor children to petition the court to set aside the decedent’s estate for them, provided the estate does not exceed $20,000, was last raised in 1976, over 40 years ago. (AB 3047 (McVittie), Chap. 1028, Stats. 1976.)

As part of its study of non-probate estates, the CLRC recommends that the amounts be increased based on the cost-of living adjustment since they were last raised; and this bill does just that, raising the amounts based on the CPI since the particular dollar limit was last raised. This adjustment based on inflation maintains, as of today, the impact of the small estate exception and the balance between judicial oversight, on the one hand, with the need for judicial economy and the avoidance of unnecessary administration, on the other.

The bill also creates a process for the dollar amounts to be adjusted automatically, every three years based on the CPI, to ensure that the balance between judicial oversight and judicial economy is maintained. This again is a recommendation of the CLRC and is modeled after a cost-of-living adjustment for dollar amount exemptions from the enforcement of money judgments provision under Code of Civil Procedure Section 703.150. Under this procedure, the Judicial Council is required, beginning April 1, 2022 and every three years thereafter, to determine the amount of adjustment, based on the change in CPI for the previous 40 months, for the various maximum amounts for small estate administration under the Probate Code. The Judicial Council must then round the revised amount to the nearest $25, and publish a list of the new dollar amounts of the various figures. This is exactly what Judicial Council is already required to do for the amounts of exemptions a judgment debtor may claim, thus limiting any possible burden on the Judicial Council.

This bill also reduces the interest rate that may be charged on certain property that must be returned to probate administration. It is possible that a person appropriately uses a procedure to dispose of a decedent’s property outside of probate, but later full probate administration is commenced and the property, though properly taken at the time, must be returned to the estate. If the recipient has not disposed of the property, it can be returned. If, however, the person has sold the property, that person will be liable to the estate for the net income received for the property plus interest “at the rate payable on a money judgement,” which is 10% per year. CLRC explains the concern with the 10% interest rate in this instance when the person receiving the property did nothing wrong and in fact returned the property as requested:

For example, under Probate Code Section 13101, the successor to the decedent’s property could use an affidavit to collect the decedent’s personal property worth $100,000. The successor could then sell the property immediately after receiving it. If, after three years, the successor received notice that the property must be returned to the estate, the successor would owe, in addition to the $100,000 value from the property sale, approximately $30,000 in interest (not taking into account compounding). If the successor had invested the proceeds of sale in a certificate of deposit offering two percent interest, the investment would have earned roughly $6,000. In this situation, the successor would have a net loss of $24,000 resulting from the imposition of the ten percent interest rate. (CLRC, Disposition of Estate Without Administration: Interest Rate, p. 3 (Aug. 2018) (footnotes omitted).)

To avoid this unfair scenario, CLRC recommends, and this bill proposes, reducing the interest rate to seven percent. Seven percent is still higher than the current interest rates, but it is at least closer to what an individual could actually collect. Seven percent is also the default rate for judgment interest debt in the California Constitution. (California Constitution, Article XV, Section 1.) Moreover, the bill ensures that justice can be achieved by allowing a court, in these instances, if it finds that the person acted reasonably and in good faith under the circumstances known to the person, to waive the interest payment in whole or in part. This should help prevent an unfair result.

Prior Legislation: AB 1305 (Huber), Chap. 117, Stats. 2011, last raised the dollar limit for small estates.

SB 553 (Aanestad), 2007 sought to make similar changes to AB 1305 (although with different adjustments), but that bill was amended to affect state property. 

AB 2267 (Huff), 2006, very similar to SB 1305, failed passage in this Committee.

REGISTERED SUPPORT / OPPOSITION:

Support

None on file

Opposition

None on file

Analysis Prepared by: Leora Gershenzon / JUD. / (916) 319-2334