California Probate Code 11604.5 – (a) This section applies when distribution from a decedent’s …
(a) This section applies when distribution from a decedent‘s estate is made to a transferee for value who acquires any interest of a beneficiary in exchange for cash or other consideration.
(b) For purposes of this section, a transferee for value is a person who satisfies both of the following criteria:
Terms Used In California Probate Code 11604.5
- Affidavit: A written statement of facts confirmed by the oath of the party making it, before a notary or officer having authority to administer oaths.
- Beneficiary: means a person to whom a donative transfer of property is made or that person's successor in interest, and:
California Probate Code 24
- Beneficiary: A person who is entitled to receive the benefits or proceeds of a will, trust, insurance policy, retirement plan, annuity, or other contract. Source: OCC
- Claim: means a demand for payment for any of the following, whether due, not due, accrued or not accrued, or contingent, and whether liquidated or unliquidated:
California Probate Code 9000
- Credit report: A detailed report of an individual's credit history prepared by a credit bureau and used by a lender in determining a loan applicant's creditworthiness. Source: OCC
- Damages: Money paid by defendants to successful plaintiffs in civil cases to compensate the plaintiffs for their injuries.
- Decedent: A deceased person.
- Domestic partner: means one of two persons who have filed a Declaration of Domestic Partnership with the Secretary of State pursuant to Division 2. See California Probate Code 37
- Equitable: Pertaining to civil suits in "equity" rather than in "law." In English legal history, the courts of "law" could order the payment of damages and could afford no other remedy. See damages. A separate court of "equity" could order someone to do something or to cease to do something. See, e.g., injunction. In American jurisprudence, the federal courts have both legal and equitable power, but the distinction is still an important one. For example, a trial by jury is normally available in "law" cases but not in "equity" cases. Source: U.S. Courts
- Fraud: Intentional deception resulting in injury to another.
- Heir: means any person, including the surviving spouse, who is entitled to take property of the decedent by intestate succession under this code. See California Probate Code 44
- Instrument: means a will, a document establishing or modifying a trust, a deed, or any other writing that designates a beneficiary or makes a donative transfer of property. See California Probate Code 45
- interested person: includes any of the following:
California Probate Code 48
- Intestate: Dying without leaving a will.
- Person: means an individual, corporation, government or governmental subdivision or agency, business trust, estate, trust, partnership, limited liability company, association, or other entity. See California Probate Code 56
- Personal representative: means executor, administrator, administrator with the will annexed, special administrator, successor personal representative, public administrator acting pursuant to Section 7660, or a person who performs substantially the same function under the law of another jurisdiction governing the person's status. See California Probate Code 58
- Probate: Proving a will
- Recourse: An arrangement in which a bank retains, in form or in substance, any credit risk directly or indirectly associated with an asset it has sold (in accordance with generally accepted accounting principles) that exceeds a pro rata share of the bank's claim on the asset. If a bank has no claim on an asset it has sold, then the retention of any credit risk is recourse. Source: FDIC
- State: includes any state of the United States, the District of Columbia, the Commonwealth of Puerto Rico, and any territory or possession subject to the legislative authority of the United States. See California Probate Code 74
- Transferee: means the beneficiary, donee, or other recipient of an interest transferred by an instrument. See California Probate Code 81.5
(1) The person purchases the interest from a beneficiary for consideration pursuant to a written agreement.
(2) The person, directly or indirectly, regularly engages in the purchase of beneficial interests in estates for consideration.
(c) This section does not apply to any of the following:
(1) A transferee who is a beneficiary of the estate or a person who has a claim to distribution from the estate under another instrument or by intestate succession.
(2) A transferee who is either the registered domestic partner of the beneficiary, or is related by blood, marriage, or adoption to the beneficiary or the decedent.
(3) A transaction made in conformity with the California Financing Law (Division 9 (commencing with Section 22000) of the Financial Code) and subject to regulation by the Department of Financial Protection and Innovation.
(4) A transferee who is engaged in the business of locating missing or unknown heirs and who acquires an interest from a beneficiary solely in exchange for providing information or services associated with locating the heir or beneficiary.
(d) A written agreement is effective only if all of the following conditions are met:
(1) The executed written agreement is filed with the court not later than 30 days following the date of its execution or, if administration of the decedent’s estate has not commenced, then within 30 days of issuance of the letters of administration or letters testamentary, but in no event later than 15 days prior to the hearing on the petition for final distribution. Prior to filing or serving that written agreement, the transferee for value shall redact any personally identifying information about the beneficiary, other than the name and address of the beneficiary, and any financial information provided by the beneficiary to the transferee for value on the application for cash or other consideration, from the agreement.
(2) If the negotiation or discussion between the beneficiary and the transferee for value leading to the execution of the written agreement by the beneficiary was conducted in a language other than English, the beneficiary shall receive the written agreement in English, together with a copy of the agreement translated into the language in which it was negotiated or discussed. The written agreement and the translated copy, if any, shall be provided to the beneficiary.
(3) The documents signed by, or provided to, the beneficiary are printed in at least 10-point type.
(4) The transferee for value executes a declaration or affidavit attesting that the requirements of this section have been satisfied, and the declaration or affidavit is filed with the court within 30 days of execution of the written agreement or, if administration of the decedent’s estate has not commenced, then within 30 days of issuance of the letters of administration or letters testamentary, but in no event later than 15 days prior to the hearing on the petition for final distribution.
(5) Notice of the assignment is served on the personal representative or the attorney of record for the personal representative within 30 days of execution of the written agreement or, if general or special letters of administration or letters testamentary have not been issued, then within 30 days of issuance of the letters of administration or letters testamentary, but in no event later than 15 days before the hearing on the petition for final distribution.
(e) The written agreement shall include the following terms, in addition to any other terms:
(1) The amount of consideration paid to the beneficiary.
(2) A description of the transferred interest.
(3) If the written agreement so provides, the amount by which the transferee for value would have its distribution reduced if the beneficial interest assigned is distributed prior to a specified date.
(4) A statement of the total of all costs or fees charged to the beneficiary resulting from the transfer for value, including, but not limited to, transaction or processing fees, credit report costs, title search costs, due diligence fees, filing fees, bank or electronic transfer costs, or any other fees or costs. If all the costs and fees are paid by the transferee for value and are included in the amount of the transferred interest, then the statement of costs need not itemize any costs or fees. This subdivision shall not apply to costs, fees, or damages arising out of a material breach of the agreement or fraud by or on the part of the beneficiary.
(f) A written agreement shall not contain any of the following provisions and, if any such provision is included, that provision shall be null and void:
(1) A provision holding harmless the transferee for value, other than for liability arising out of fraud by the beneficiary.
(2) A provision granting to the transferee for value agency powers to represent the beneficiary’s interest in the decedent’s estate beyond the interest transferred.
(3) A provision requiring payment by the beneficiary to the transferee for value for services not related to the written agreement or services other than the transfer of interest under the written agreement.
(4) A provision permitting the transferee for value to have recourse against the beneficiary if the distribution from the estate in satisfaction of the beneficial interest is less than the beneficial interest assigned to the transferee for value, other than recourse for any expense or damage arising out of the material breach of the agreement or fraud by the beneficiary.
(g) The court on its own motion, or on the motion of the personal representative or other interested person, may inquire into the circumstances surrounding the execution of, and the consideration for, the written agreement to determine that the requirements of this section have been satisfied.
(h) The court may refuse to order distribution under the written agreement, or may order distribution on any terms that the court considers equitable, if the court finds that the transferee for value did not substantially comply with the requirements of this section, or if the court finds that any of the following conditions existed at the time of transfer:
(1) The fees, charges, or consideration paid or agreed to be paid by the beneficiary were grossly unreasonable.
(2) The transfer of the beneficial interest was obtained by duress, fraud, or undue influence.
(i) In addition to any remedy specified in this section, for any willful violation of the requirements of this section found to be committed in bad faith, the court may require the transferee for value to pay to the beneficiary up to twice the value paid for the assignment.
(j) Notice of the hearing on any motion brought under this section shall be served on the beneficiary and on the transferee for value at least 15 days before the hearing in the manner provided in Section 415.10 or 415.30 of the Code of Civil Procedure.
(k) If the decedent’s estate is not subject to a pending court proceeding under the Probate Code in California, but is the subject of a probate proceeding in another state, the transferee for value shall not be required to submit to the court a copy of the written agreement as required under paragraph (1) of subdivision (d). If the written agreement is entered into in California or if the beneficiary is domiciled in California, that written agreement shall otherwise conform to the provisions of subdivisions (d), (e), and (f) in order to be effective.
(Amended by Stats. 2022, Ch. 452, Sec. 208. (SB 1498) Effective January 1, 2023.)