How Long Should You Save Records?

Decluttering your home is great – but what about all those important papers you have stashed around the house? Which ones do you actually need to keep, when can you get rid of them, and where should you put them in the meantime?

This is actually more important than you may imagine as losing or even just misplacing them could cost you serious money.

Below is a list of suggested ways to store these documents and the recommended amount of time to keep them on hand.

Table

For a pdf version of this flyer, please email me at Emi4Title@gmail.com.

California’s New Revocable Transfer on Death Deed

There are several ways an owner of real property can direct the transfer of real property when they die. Up until recently, the most common way was through a trust, will or owning the property in joint tenancy with another person or persons. Effective January 1, 2016, there is now a new way California allows real property to be transferred upon a person’s death and avoid probate.

Governor Jerry Brown signed Assembly Bill 139, which established a procedure to transfer real property upon death through a revocable transfer on death deed. This revocable transfer on death deed is a new simple and inexpensive way to transfer real property to a beneficiary in California. The deed allows a person to leave their real property to a designated person or persons such as a family member, friend, life-long partner or other loved one, without having to set up a living trust.

Criteria for Transfer on Death Deed (TOD Deed)

The new TOD (transfer on death) deed allows an owner of residential real property to name one or more beneficiaries to receive the property when the owner dies, thus bypassing the need to probate the estate. There are some specific criteria, however, that a person should be aware of when considering recording a revocable transfer on death deed.

  • The real property must be a single family home or condominium unit, or a multiple residence of not more than 4 residential dwelling units, or be a single family residence on no more than 40 acres of agricultural land.
  • A revocable TOD deed must be signed and dated before a notary public to be effective and valid.
  • The transfer on death deed must be recorded within 60 days or less from the date it is signed.
  • The transfer on death deed can be revoked by the transferor at any time.

settlementRevoking a Transfer on Death Deed

There are three ways the transferor/owner can revoke a transfer on death deed.

  1. The owner can record a formal notice of revocation.
  2. A new transfer on death deed may be recorded.
  3. The real property can be transferred to someone else prior to the transferor’s death.

Although the transfer on death deed must be recorded within 60 days or less from the date it is signed and before the owner’s death, it is important to understand that the interest in the real estate only transfers when the owner dies. This means that the beneficiary identified on the TOD deed does not have any rights to the real property when the owner is alive. Furthermore, creditors of a named beneficiary cannot place any liens on the property. While the owner is living, the owner has the right to sell or encumber the property. The property is also subject to involuntary liens that may be recorded by creditors of the owner, which would transfer with the property to the beneficiary upon the owner’s death.

In theory, a person that owns real property in California could execute and record more than one revocable transfer on death deed. The new law provides that the deed with the most recent recording date will be the one in effect.

Downsides to a Transfer on Death Deed

If the person named in the deed as the transfer on death beneficiary dies before the real property owner does, the deed simply has no effect. This could result in the property having to be probated.

If the owner becomes incapacitated through stoke, dementia, or other event, there may be no one to revoke the deed, which may be necessary due to a change in family circumstances or the need to qualify the person for Medicaid assistance.

Two Last Things…

Title companies are not required to rely on TOD Deeds under the new law. Careful review of the legislation and consultation with an attorney are recommended before using a TOD Deed.

Fidelity National Title cannot offer advice on the use of the TOD Deed form. If you or your clients have any further questions, you should consult an attorney.

Now the Q & A…

COMMON QUESTIONS ABOUT THE USE OF THIS FORM

Q 1. What does the TOD deed do?

A When you die, the identified property will transfer to your named beneficiary without probate. The TOD deed has no effect until you die. You can revoke it at any time.

Q 2. Can I use this deed to transfer business property?

A This deed can only be used to transfer (1) a parcel of property that contains one to four residential dwelling units, (2) a condominium unit, or (3) a parcel of agricultural land of 40 acres or less, which contains a single-family residence.

Q 3. How do I use the TOD deed?

A Complete this form. Have it notarized. RECORD the form in the county where the property is located. The form MUST be recorded on or before 60 days after the date you sign it or the deed has no effect.

Q 4. Is the “Legal Description” of the property necessary?

A Yes.

Q 5. How do I find the “Legal Description” of the property?

A This information may be on the deed you received when you became an owner of the property. This information may also be available in the office of the county recorder for the county where the property is located. If you are not absolutely sure, consult an attorney.

Q 6. How do I “Record” the form?

ATake the completed and notarized form to the county recorder for the county in which the property is located. Follow the instructions given by the county recorder to make the form part of the official property records.

Q 7. What if I share ownership of the property?

A This form only transfers YOUR share of the property. If a co-owner also wants to name a TOD beneficiary, that co-owner must complete and RECORD a separate form.

Q 8. Can I revoke the TOD deed if I change my mind?

A Yes. You may revoke the TOD deed at any time. No one, including your beneficiary, can prevent you from revoking the deed.

Q 9. How do I revoked the TOD deed?

A There are three ways to revoke a recorded TOD deed: (1) Complete, have notarized, and RECORD a revocation form. (2) Create, have notarized, and RECORD a new TOD deed. (3) Sell or give away the property, or transfer it to a trust, before your death and RECORD the deed. A TOD deed can only affect property that you own when you die. A TOD deed cannot be revoked by will.

Q 10. Can I revoke a TOD deed by creating a new document that disposes of the property (for example, by creating a new TOD Deed or by assigning the property to a trust)?

A Yes, but only if the new document is RECORDED. To avoid any doubt, you may wish to RECORD a TOD deed revocation form before creating the new instrument. A TOD deed cannot be revoked by will, or by purporting to leave the subject property to anyone via will.

Q 11. If I sell or give away the property described in a TOD deed, what happens when I die?

A If the deed or other document used to transfer your property is RECORDED before your death, the TOD deed will have no effect. If the transfer document is not RECORDED before your death, the TOD deed will take effect.

Q 12. I am being pressured to complete this form. What should I do?

A Do NOT complete this form unless you freely choose to do so. If you are being pressured to dispose of your property in a way that you do not want, you may want to alert a family member, friend, the district attorney, or a senior service agency.

Q 13. Do I need to tell my beneficiary about the TOD deed?

ANo. But secrecy can cause later complications and might make it easier for others to commit fraud.

Q 14. What does my beneficiary need to do when I die?

A Your beneficiary must RECORD evidence of your death (Prob. Code § 210), and file a change in ownership notice (Rev. & Tax. Code § 480). If you received Medi-Cal benefits, your beneficiary must notify the State Department of Health Care Services of your death and provide a copy of your death certificate (Prob. Code § 215).

Q 15. What if I name more than one beneficiary?

A Your beneficiaries will become co-owners in equal shares as tenants in common. If you want a different result, you should not use this form.

Q 16. How do I name beneficiaries?

A You MUST name your beneficiaries individually, using each beneficiary’s FULL name. You MAY NOT use general terms to describe beneficiaries, such as “my children.” For each beneficiary that you name, you should briefly state that person’s relationship to you (for example, my spouse, my son, my daughter, my friend, etc.).

Q 17. What if a beneficiary dies before I do?

A If all beneficiaries die before you, the TOD deed has no effect. If a beneficiary dies before you, but other beneficiaries survive you, the share of the deceased beneficiary will be divided equally between the surviving beneficiaries. If that is not the result you want, you should not use the TOD deed.

Q 18. What is the effect of a TOD deed on property that I own as joint tenancy or community property with right of survivorship?

A If you are the first joint tenant or spouse to die, the deed is VOID and has no effect. The property transfers to your joint tenant or surviving spouse and not according to this deed. If you are the last joint tenant or spouse to die, the deed takes effect and controls the ownership of your property when you die. If you do not want these results, do not use this form. The deed does NOT transfer the share of a co-owner of the property. Any co-owner who wants to name a TOD beneficiary must complete and RECORD a SEPARATE deed.

Q 19. Can I add other conditions on the form?

A No. If you do, your beneficiary may need to go to court to clear title.

Q 20. Is property transferred by the TOD deed subject to my debts?

A Yes.

Q 21. Does the TOD deed help me to avoid gift and estate taxes?

ANo.

Q 22. How does the TOD deed affect property taxes?

A The TOD deed has no effect on your property taxes until your death. At that time, property tax law applies as it would to any other change of ownership.

Q 23. Does the TOD deed affect my eligibility for Medi-Cal?

A No.

Q 24. After my death, will my home be liable for reimbursement of the state for medical expenditures?

A Your home may be liable for reimbursement. If you have questions, you should consult an attorney.

 

Keeping It In The Family: Parent to Child Transfer

California law provides for reassessment exclusion for real property transfers:

  • Between parent and child
  • From grandparent to grandchild.

The law is based upon two constitutional initiatives: Propositions 58 and 193. Collectively, they make it easier to keep property “in the family.”

Overview

In general, Proposition 58 states that real property transfers, from parent to child or child to parent, may be excluded from reassessment. Proposition 193 expands this tax relief to include transfers from grandparent(s) to grandchild(ren). In both cases, a claim must be filed within three years of the date of transfer to receive the full benefit of the exclusion.

Download a Guide to Propositions 58 and 193 suitable for presentation to your clients

Requirements & Guidelines

  1. The principal place of residence must have been granted a Homeowners’ Exemption or Disabled Veterans’ Exemption before the transfer. This residence need not be the new principal residence of the person that acquired the property.
  2. No limit is placed on the assessed value of a principal residence that may be excluded from reassessment.
  3. In addition to tax relief on the principal residence, you may claim an exclusion on transfers of other real property with an assessed value of up to $1,000,000.
  4. The $1,000,000 exclusion applies separately to each eligible transferor. A $2,000,000 limit applies to community real property of an eligible married couple.
  5. Transfers by sale, gift, or inheritance qualify for the exclusion.
  6. Transfers between parents and children as individuals, from grandparents to grandchildren as individuals, between joint tenants, from trusts to individuals, or from individuals to trusts may qualify for the exclusion. Transfers from grandchildren to grandparents are not eligible for this tax relief.
  7. Transfers of ownership interests in legal entities, aside from most trusts, do not qualify for the exclusion.
  8. A claim must be filed within 3 years after the date of purchase or transfer for which the claim is filed or prior to transfer to a third party, whichever is earlier, or within 6 months after the mailing of the notice of supplemental or escape assessment, issued as a result of the transfer for which the claim is filed. Untimely filed claims are subject to certain conditions, i.e., the property must not have transferred or resold to a third party and the claim will only apply to future tax years.
  9. If reassessment of your property occurs before the approval and processing of your timely filed claim, the reassessment may be reversed. In these situations, a corrected tax bill and/or a refund will be processed.

Transfer between Parent and Child

  1. The real property must be owned by the eligible transferor who is either the parent or child.
  2. You must be a parent or child. A child may be a son, daughter, son-in-law, daughter-in-law, stepchild, or child adopted before the age of 18.
    • Spouses of eligible children are also eligible until divorce or, if terminated by death, until the remarriage of the surviving spouse, stepparent, or parent-in-law.
  3. You must complete a Claim for Reassessment Exclusion for Transfer between Parent and Child form for a gift or purchase of real property between parent and child.

Transfer from Grandparent to Grandchild

  1. The real property must be owned by the eligible transferor who is the grandparent.
  2. You must be a grandchild whose parent(s) qualify as the deceased child(ren) of the grandparents as of the date of transfer, and you must be the decedent’s child.
  3. You must complete a Claim for Reassessment Exclusion for Transfer from Grandparent to Grandchild form for a gift or purchase of real property from grandparent to grandchild.

 

For expanded definitions of Propositions 58 & 193, see Revenue and Taxation (R & T) Code Section 63.1.

Frequently Asked Questions

 

  1. I recently inherited the family home, but I don’t really want to live there. Do I have to make it my principal residence to qualify for the Proposition 58 exclusion?

No.

  1. My parents just gave me their house that sits on ten acres of land. Isn’t there a limit for excluding the principal residence from reassessment?

Yes. Ten acres exceeds the amount of land necessary for a home site. In your case, only a reasonable amount of land would be considered part of the principal residence.

  1. I’m thinking of giving several properties to my children. Can I decide which child gets the exclusion?

The person who files first will get the exclusion.

  1. My two sisters and I recently bought several properties from our parents. Which one is entitled to the exclusion?

If you jointly own the properties with your sisters, you’ll have to decide that for yourselves. On the other hand, if three separate properties were transferred individually, the first eligible person who files a claim will get the exclusion.

  1. My grandfather gave me his house and seven commercial properties here in Southern California. How do you decide which properties will get the $1,000,000 exclusion?

Assuming you qualify for the exclusion, you must make that decision.

Understanding Living Trusts

Living Trust(Click here to download a pdf version suitable for forwarding to your clients)

Estate planners often recommend “Living Trusts” as a viable option when contemplating the manner in which to hold title to real property. When a property is held in a Living Trust, title companies have particular requirements to facilitate the transaction. While not comprehensive, following are answers to many commonly asked questions. If you have questions that are not answered below, your title company representative may be able to assist you, however, one may wish to seek legal counsel.

Who are the parties to a Trust?

A typical trust is the Family Trust in which the Husband and Wife are the Trustees and, with their children, the Beneficiaries. Those who establish the trust and transfer their property into it are known as Trustors or Settlors. The settlor’s usually appoint themselves as Trustees and they are the primary beneficiaries during their lifetime. After their passing, their children and grandchildren usually become the primary beneficiaries if the trust is to survive, or the beneficiaries receive distributions directly from the trust if it is to close out.

What is a Living Trust?

Sometimes called an Inter-vivos Trust, the Living Trust is created during the lifetime of the Settlors (as opposed to being created by their Wills after death) and usually terminates after they die and the body of the Trust is distributed to their beneficiaries.

Can a Trust hold title to Real Property?

No. The Trustee holds the property on behalf of the Trust.

Is a Trust the best way to hold my property?

Only your attorney or accountant can answer the question; some common reasons for holding property in a Trust are to minimize or postpone death taxes, to avoid a time consuming probate, and to shield property from attack by certain unsecured creditors.

What taxes can I avoid by putting my property in a Trust?

Married persons can usually exempt a significant part of their assets from taxation and may postpone taxes after the first of them to die passes. You should check with your attorney or accountant before taking any action.

Can I homestead property which is held in a Trust?

Yes, if the property otherwise qualifies.

Can a Trustee borrow money against the property?

A Trustee can take any action permitted by the terms of the Trust, and the typical Trust Agreement does give the Trustee the authority to borrow and encumber real property. However, not all lenders will lend on a property held in trust, so check with your lender first.

Can someone else hold title for me “in trust?”

Some people who do not wish their names to show as titleholders make private arrangements with a third party Trustee; however, such an arrangement may be illegal, and is always inadvisable because the Trustee of record is the only one who is empowered to convey, or borrow against, the property, and a Title Insurer cannot protect you from a Trustee who is not acting in accordance with your wishes despite the existence of a private agreement you have with the Trustee.