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Gianelli & Associates News Blog

Tuesday, February 16, 2016

Transfer on Death Deeds

Assembly Bill No. 139 authorized a new way to contractually pass real estate to someone outside of the probate system. Revocable Transfer on Death (ToD) deeds are designed to help avoid probate and save families the cost and hassle of the California probate process, however, as a lot of new legislation does, it brings with it a number of pitfalls.

The bill requires that a revocable transfer of death (ToD) deed be signed, dated, acknowledged, and recorded within 60 days from execution to be valid.

Some key factors involved with ToD deeds:

1. Ownership doesn't transfer until death and your ToD deed can be changed or revoked at any time.

2. The deceased needs to name their beneficiary and doesn't need to file a PCOR (Preliminary Change in Ownership Report), but may be liable for any applicable property tax reassessments.

3. If the property is titled in joint tenancy or as community property with right of survivorship, it goes to the surviving party regardless of what beneficiary is named on the ToD deed.

4. If the deceased had outstanding debts, this bill limits the liability of beneficiary to the extent of the interest inherited, but doesn't allow someone to avoid their creditors.

5. This bill only applies to certain types of real estate: personal residences, 4-plex or less, condos, and up to a 40 acre farm.

6. No contingent beneficiaries are allowed. For example, you can't say "My son but if he's not alive, then my daughter".

7. If the person you designate as your beneficiary dies before you do, then the ToD deed has no effect and the property will pass under the probate system.

8. If multiple parties are named as beneficiaries, for example: X,Y and Z and X dies, all goes to Y and Z (nothing to X's kids).

9. The beneficiary has the responsibility to notify the Department of Health Services and the property may be liable for Medi-Cal claims pertaining to the decedent's death.

10. The 'Slayer rule' applies - if the beneficiary causes the death of the deceased, then the ToD deed is automatically revoked.

This type of deed seems to be a tempting approach to put your affairs in order simply and cheaply, if all your estate consists of is a house and you want to leave it to your children, but because it does not pass on to grandchildren or other remote beneficiaries, it has its limitations. If you decide to use a ToD deed we recommend that you don't set it and forget it. If you want to utilize alternatives or contingencies in the distribution of your estate, then a trust is the better way to go.

It is never easy to say goodbye to a loved one and untangling legal jargon and paperwork can be arduous. We highly recommend putting your affairs in order to avoid the stress, costs and complications that can arise later. Please reach out to us if you have any questions on ToD deeds or estate planning in general - we'd be honored to help you and your family.


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