Nov 2017 AFR: 2.4%
Gift Annuity State Regulations

California


Intestacy


General Definition

Any part of an estate not disposed of by will passes by intestate succession to the decedent's heirs. Sec. 6400.

Order of Distribution

Distribution of property depends on whether it is classified as community property or separate property. Property goes first to the surviving spouse. The surviving spouse is entitled to his/her one-half of the community property and one-half of the decedent's half of all the community property and quasi-community property owned by the decedent at death. Sec. 6401(a) and (b).

The surviving spouse is entitled to 100% of the separate property owned by the decedent at death if the decedent did not leave any surviving issue, parent, brother, sister, or issue of a deceased brother or sister. Sec. 6401(c).

The surviving spouse will receive one-half of the separate property when the decedent leaves only one child or the issue of one deceased child or the decedent leaves no issue but leaves a parent or parents or their issue or the issue of either of them.

The surviving spouse will receive one-third of the intestate estate when the decedent leaves more than one child, the decedent leaves one child and the issue of one or more deceased children or when the decedent leaves issue of two or more deceased children.

If there is no surviving issue of the decedent, or if no one is qualified to claim the estate, the intestate estate passes to the state. Sec. 6800.

Will Qualifications


Common Law or Community Property

California is a community property state. Upon death of a spouse, the surviving spouse is entitled to one half of the community property. Sec. 100(a).

Capacity

The testator of a valid will must be at least 18 years of age and be of sound mind at the time of the drafting. Sec. 6100.

Drafting

To be valid, a will must be in writing, signed by the testator or in the testator's name by some other individual in the testator's presence and by his/her direction. Sec. 6110(b). A valid will must be witnessed by at least two persons. Each witness must sign, during the testator's lifetime, in one another's presence. Sec. 6110(c)(2).

Holographic wills are permissible if the signature and the material portions of the will are in the handwriting of the testator. Sec. 6111(a).

Beneficiaries

When title to property passes to a beneficiary, other than by laws of intestate succession, and the will does not properly identify the beneficiary, then any person interested in the property as the heir may file a petition in the superior court of the county in which the property or any part is situated. The petition must set forth briefly the title of the petitioner, a description of the property and, so far as known to the heir, the names, ages, and residences of the all other heirs of the deceased. The petition is a request that a decree be entered determining and establishing the identity of the persons insufficiently identified in the will. Sec. 248.

Modifications

A testator may revoke his or her will in whole or in part by executing a new will or by burning, tearing, canceling, obliterating or destroying the will or any part of the will. Sec. 6120.

If after executing a will the testator's marriage is dissolved or annulled, the dissolution or annulment revokes all dispositions of property under the will, powers of appointment, nomination as executor, trustee or conservator. Sec. 6122(a). If the testator and the former spouse later remarry, the provisions, to the extent they were not removed from the testator's will, are revived. Sec. 6122(b).

Probate Process


Naming of Personal Representative

A person has no power to administer an estate until he or she is appointed as the personal representative by the probate court. Appointment becomes effective when the person appointed is issued letters. Sec. 8400(a).

To be qualified to be a personal representative, the person must be of the age of majority (18), must not be subject to a conservatorship of the estate, must be a resident of the United States and may be removed if he or she is a surviving partner of the decedent and an interested party objects to his or her nomination. The residency and surviving partner clauses have no effect if the person is nominated in the decedent's will. Sec. 8402.

Admission to Probate

At any time after a decedent's death, any interested person may commence proceedings for administration of the estate of the decedent by a petition to the court for an order determining the date and place of the decedent's death and for either or both of the appointment of a personal representative and/or the probate of the decedent's will. Sec. 8000.

Submission of Will

If the decedent left a will, the petition to commence probate must include a photographic copy of the will. In the case of a holographic will or other will of which material provisions are handwritten, the petitioner must also attach a typed copy of the will. Sec. 8002(b)(1).

Unless a petition for probate of the will was previously filed, the custodian of a will must, within 30 days after having knowledge of the death of the testator, deliver the will to the clerk of the superior court and mail a copy of the will to the person named in the will as executor, if the person's whereabouts is known to the custodian, or if not, to a person named in the will as a beneficiary, if the person's whereabouts are known to the custodian. Sec. 8200(a)(1) and (2).

Notifications

At least 15 days prior to the hearing of a petition for administration of a decedent's estate, the petitioner must give notice of the hearing by mail or personal delivery to each heir of the decedent that is reasonably ascertainable by the petitioner. And to each devisee, executor and alternative executor named in any will being offered for probate, regardless of whether the devise or appointment is purportedly revoked in a subsequent instrument. Sec. 8110.

If the will includes a testamentary trust of property for charitable purposes with a designated trustee who is a resident of California, or involves a devise for charitable purposes without an identified charitable beneficiary, notice of the hearing along with a copy of the petition and the will must be given to the Attorney General. Sec. 8111.

Notice must also be published in a newspaper in the city where the decedent resided at the time of death, or where the decedent's property is located. If there is no such newspaper, then notice should be published in a newspaper in the county where the decedent resided or the property is located. If there is no such newspaper, the notice should be published in a newspaper in California nearest to the county seat of the county in which the decedent resided or the property is located, and which is circulated within the area of the county in which the decedent resided or the property is located. Sec. 8121(b). The caption of the published notice must be in 8-point or larger font and the text must be in 7-point or larger font. Sec. 8123. The first publication date of the notice may be no less than 15 days before the probate hearing. There must be three publications in a newspaper with at least one publication per week with at least five days intervening between the first and last publication date. Sec. 8121(a).

Inventory

The personal representative must file an inventory of property to be administered in the decedent's estate together with an appraisal of property in the inventory. Sec. 8800(a). The inventory and appraisal shall be filed within four months after letters are first issued to a general personal representative. Sec. 8800(b). The inventory and appraisal must separately list each item and state the fair market value of the item at the time of the decedent's death. Sec. 8802.

Homestead, Family Allowance and the Spousal Share

The court, in its discretion, may set apart the homestead for the benefit of the surviving spouse and minor children. Sec. 6520.

The surviving spouse and minor children are entitled to a reasonable family allowance out of the estate as is necessary for their maintenance according to their circumstances during administration of the estate. Sec. 6540. The family allowance terminates no later than the entry of the order for final distribution of the estate or, if the estate is insolvent, no later than one year after the granting of letters. Sec. 6543.

Upon the death of a married person, one-half of the community property belongs to the surviving spouse and the other half belongs to the decedent. Sec. 100.

Debts and Distributions

The personal representative must give notice of administration of the estate to the known or reasonably ascertainable creditors of the decedent. Sec. 9050(a). The notice must be given within the later of four months after the date letters are first issued or thirty days after the personal representative first has knowledge of the creditor. Sec. 9051.

A creditor must file a claim before the later of four months after the date letters are first issued to a personal representative or sixty days after the date notice of administration is mailed or personally delivered to the creditor. Sec. 9100(a).

The personal representative or any interested party may file with the probate court a petition for a partial or final distribution of the estate. The court will set a date for a distribution hearing and each known heir, devisee and the attorney general must be given notice of the hearing. Sec. 11600. However, no petition may be filed unless at least two months have lapsed from the issuance of papers to the personal representative. Sec. 11620.

After all of the debts have been paid, the personal representative may file a petition for final distribution of the estate. Sec. 11640. Once the court issues an order setting a final account and authorizes a final distribution, the personal representative may immediately distribute the property in the estate to the persons entitled to distribution, without further notice or proceedings. Sec. 11641.

Estate/Inheritance Tax


California imposes an estate tax equal to the amount of the credit for state death taxes against the federal estate tax. Sec. 13302.

Income Tax Charitable Deductions and/or Credits


California allows a taxpaying resident to deduct itemized charitable gifts in the same manner as the IRS. Cal. Rev. & Tax Code §17201(a)-(c).

Gift Annuity Requirements


California, a "registration" state, regulates the issuance of charitable gift annuities under INS. CODE SECS. 11520-11524. Charities must obtain a Certificate of Authority from the Department of Insurance and agree to observe the annual filing requirements before issuing gift annuities in this state.

To qualify, applying charities must have been in continuous operation for 10 years and must maintain a segregated reserve fund in trust for California annuitants only that is both legally and physically separated from the charity's other accounts and assets.

Application Process

To register for a Certificate of Authority, the charity must submit a detailed application. The Application fee is $4,305 (or $4,233 without the $72 fee for appointing an in-state agent for service of process with the Department for charities incorporated in California). The Application for Certificate of Authority as a Grants and Annuities Society includes: the charity's articles of incorporation and bylaws, an authorization for disclosure of financial records, the most recent independently audited financial statement (sworn to by an officer or CPA responsible for its preparation), the charity's maximum gift annuity payout rate schedule, a completed questionnaire, a board resolution authorizing the creation of the segregated reserve trust account and investment restrictions, both organizational and individual affidavits, description of investment experience of the individuals or entity investing the fund, a Declaration of Trust by the investing charity or a Trust Agreement executed with the Trustee of the fund, proposed advertising and solicitation materials, two copies of each sample gift annuity agreement and more. The financial statement should provide the financial condition of the current annuity program nationwide, sworn by the officer responsible for the financial statement. This should include a report of the present value of all outstanding gift annuities for the charity's entire program (not just California annuities). The sample gift annuity agreements should satisfy state requirements. These requirements include the property value, the annuity payment amount, the manner and frequency of payment, age of annuitant, effective date of agreement, donor signature and disclosure statement. As of January 1, 2006 charities are no longer required to include the reasonably commensurate value (RCV) in California contracts. However, for all contracts issued on 12/31/2005 or before, the RCV is based on the time of issuance. For example, gift annuity agreements entered into between 1/1/2005 and 12/31/2005 are subject to Bulletin 2004-02 which states the minimum reserve basis for life annuities shall be based on the Annuity 2000 Mortality Table at 4.5% interest and the RCV shall not be exceed by more than 15% of the net single premium. The Bulletin states that RCVs can be obtained by inputting the gender and ages on the worksheets provided on the Department's website.

Disclosure Statement

California requires specific disclosure language in each annuity contract issued by a permitted charity. The state-required disclosure language should be in at least 12-point boldface type and on the same page as and in the immediate proximity of the donor signature line:

"Annuities are subject to regulation by the State of California. Payments under this agreement, however, are not protected or otherwise guaranteed by any government agency or the California Life and Health Insurance Guarantee Association."

Reserve Requirements

The segregated fund must maintain a balance at least equal to the reserves (present value of annuity liabilities) and must be calculated using California's prescribed mortality table and interest rate. The California segregated fund must satisfy the state's investment restrictions limiting investment of these assets to those investments specified in Secs. 1170 though 1184 and in securities up to the lesser of: (i) 50% of its gift annuity fund; or (ii) 100% of the charity's net worth (assets over liabilities and reserves). The securities, however, must be listed and traded on the New York Stock Exchange, the American Stock Exchange, regional stock exchanges, the National Market System of the Nasdaq Stock Market or successors to such exchanges or markets having the same qualifications. Investing in mutual funds is permitted, but California specifically prohibits investing in options or commodity exchanges. Note that neither real nor personal property is a specified investment listed in Secs. 1170 through 1182 (and thus prohibited in the California fund). However, under Sec. 11521.2(b), a charity may seek special written consent of the Commissioner to invest the segregated California annuity fund in any other investments (such as real property).

Annual Filing Requirements

Once a Certificate of Authority is granted, California requires an Annual Statement filed with the Department of Insurance's office in Sacramento within 120 days of the charity's year end (fiscal or calendar, whichever the charity elected in applying for the Certificate of Authority). Both a hard copy and an electronic copy (CD-ROM or DVD) are required. This filing renews the charity's Certificate of Authority and requires very detailed information to be submitted regarding the charity's financials, annuity account investments, reserves and annuity agreements issued and the current condition of the charity's gift annuity program nationwide. Reasonably commensurate values must be reported as well. The reserves are to be calculated using the standard of valuation from the Annuity 2000 Mortality Table at 4.5% interest rate. In determining the reserves amount, a deduction is permitted for any portion of the gift annuities properly reinsured. However, any gift annuity agreements so reinsured require the charity to file a copy of the reinsurance contract and execute a written agreement with the annuitant that if the charity is unable to make annuity payments, the re-insurer will directly pay the annuitant. The actual agreements are not required to be submitted unless requested by the Commissioner. The annual fee for renewing the Certificate is $136.

In addition to annual filings, California requires quarterly reports be filed no later than 30 days after each calendar quarter to the Department of Insurance's office in Los Angeles. Both a hard copy and an electronic copy (CD-ROM or DVD) are required. The reports inform the State about any new California gift annuities issued. Each 4th quarter report has an additional requirement - it must include a Sec. 11523(b) statement certifying all the agreements reported as issued that year comply with Sec. 11523(a). The fee for each quarterly report is based on the number of gift annuities issued during the calendar quarter ($60 for each agreement issued). Fee discounts are available for more than ten (10) agreements.

State Contact Information

California Department of Insurance (for Certificates of Authority)
45 Fremont Street, 24th Floor
San Francisco, CA 94105-2204
(800) 967-9331
Susan Stapp (415) 538-4403
stapps@insurance.ca.gov

California Department of Insurance (for Annual Filings)
PO Box 1799
Sacramento, CA 95812-1799
Rosa Ruiz (213) 346-6451
rosa.ruiz@insurance.ca.gov

California Department of Insurance (for Quarterly Reports)
Financial Analysis Division Office: Grants & Annuities
300 South Spring Street, South Tower, 13th Floor
Los Angeles, CA 90013
(213) 346-6339

State Forms

For more information on state-specific form requirements, please contact Crescendo at 800-858-9154.
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