Senate Bill 1265 - Marital Deduction Trusts

STATUS: Signed by Governor Brown on August 17, 2016

Fact Sheet (PDF)

Bill Language (PDF)

Legislative Information

SUMMARY:

SB 1265 updates Probate Code section 21524 for two changes in applicable law since the time of its enactment. These technical changes will synchronize section 21524 with federal tax law.

The first change is to allow trusts that give the surviving spouse a unitrust payment to qualify for the marital deduction. This change conforms section 21524 to existing federal tax regulations, and gives the surviving spouse the benefit of both the estate tax marital deduction and the investment flexibility of a payment based upon total return. The net benefit will be to enhance access to the marital deduction for surviving spouses.

The second change also conform section 21524 to existing federal law. When this statute was enacted in 1990, federal law appeared to require that when the surviving spouse died any undistributed income must be paid to his or her estate. Subsection (d) was added to the existing section 21524 to meet this requirement. However, that interpretation of federal law was rejected by the courts. SB 1265 deletes subsection (d) because it does not reflect current federal estate tax law and the California Principal and Income Act. This change will clarify the law and bring the statute up to date.

PRESS:

Governor Brown Signs Moorlach 'Marital Deduction Trusts' Bill