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.
Revoking a Transfer on Death Deed
There are three ways the transferor/owner can revoke a transfer on death deed.
- The owner can record a formal notice of revocation.
- A new transfer on death deed may be recorded.
- 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?
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?
Q 21. Does the TOD deed help me to avoid gift and estate taxes?
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?
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.