There are only three certainties in life: taxes, death, and someone is going to be fighting over your estate if you die without putting your intentions in writing, especially if you own real estate. Of course you probably know you should have either a trust or a will, but now there is a new – very simple – way in California to pass on real estate outside of probate. You still need to have a will or a trust, and you should consult with an attorney to be sure your solution is right for you, but when you have that conversation it will help you tremendously to know about this option.
As of January 1, 2016 owners of real property can designate by deed a person or persons to receive their Real Property on their death without probate or without having a will or trust.
In California there are a variety of ways an owner of real property can direct who will become the new owner of that property when he or she dies, either by will; through creation of a trust; or, by owning property either in joint tenancy with right of survivorship or as community property with right of survivorship.
Now there is a new simple and inexpensive way to accomplish this. The California Statutory Transfer on Death Deed [TOD].
There are certain limitations and requirements.
- 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.
- A class designation of beneficiaries will not be effective [e.g. my children, my siblings, etc.].
- The TOD must be in a form proscribed by the statute.
The transfer on death deed can be revoked by the owner at any time (assuming the owner still has capacity to sign legal documents,) and the deed does not need to be delivered to the beneficiary.
There are 3 ways to revoke the TOD:
- A revocation form can be recorded.
- A new and different TOD deed may be recorded.
- The property can be transferred by the owner to someone else, and that deed recorded, prior to the owner’s death.
A new TOD will automatically revoke any prior recorded TOD. The new law provides that the deed with the most recent recording date will be the one in effect.
For people with very few assets, recording a Transfer on Death Deed may be a quick and easy fix to set up beneficiaries to real property and avoid probate as compared to setting up a revocable living trust.
However, since this transfer on death deed only directs the transfer of real property, it is not a great solution for people or couples that have minor children or have other assets that would be better administered through a trust.
A person or couple with minor children should not name their minor children on a TOD deed. Under California law, although a minor may own real property they may not convey or make contracts relating to real property. Additionally, the law is unclear about whether a custodian for the benefit of a minor beneficiary can be named as a beneficiary under a TOD.
It also unclear whether an owner may name contingent beneficiaries (such as, “to John Smith if he survives me, and if he doesn’t then to James Smith.”)
Additionally, since the transfer is to specific beneficiaries, problems could arise if the named beneficiaries are no longer living. If the beneficiary(ies) are no longer living, the Deed will have no effect, and the title stays in the name of the recently deceased owner, and his estate would have to be probated.
Unless the Legislature acts otherwise, the bill will sunset on January 1, 2021; but that would not invalidate any revocable TOD deed executed before that date.
Your situation might require something more sophisticated, so consult your attorney. But the California Statutory Transfer on Death Deed gives you and your attorney one more tool to consider when making your plans.
Martin “Jamie” Elder, Attorney at Law
The views expressed in this article are not necessarily those of C2 Financial Corporation or Casey Fleming.