Legislation creating a non-probate method for
conveying interest in real property upon death, Assembly Bill 139, http://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=201520160AB139
is now law in California. The new law, signed into action by Governor Jerry Brown accomplishes the transfer by means of a revocable transfer upon death deed (RTDD). It is called a transfer-on-death TOD deed in other states. The law is effective January 1, 2016. The RTDD automatically transfers ownership of the property – defined to include 1-4 residential units, a condominium, or agricultural land of 40 acres or less – upon the death of the owner, and must contain a legal description. A RTDD may only be revoked by a recorded document.
is now law in California. The new law, signed into action by Governor Jerry Brown accomplishes the transfer by means of a revocable transfer upon death deed (RTDD). It is called a transfer-on-death TOD deed in other states. The law is effective January 1, 2016. The RTDD automatically transfers ownership of the property – defined to include 1-4 residential units, a condominium, or agricultural land of 40 acres or less – upon the death of the owner, and must contain a legal description. A RTDD may only be revoked by a recorded document.
A couple rules pro and con to the law:
Owner must die after 1.1.2016
Deed must be recorded with county 60 days
after executed (notarized)
Transferor must have mental capacity at time
of contract
Beneficiary deed transfer on death avoids
probate
Owner doesn’t make a completed gift for gift
taxes, the owner can change the beneficiary any time before they die
Most beneficiaries’ creditors can’t touch the
property
It’s cheaper than probate, and simple
No tax consequences
Cons:
Unscrupulous relatives who want the property
for their own can get grandfather to sign the deed, it may open up opportunities
for elder abuse
Owner lacked capacity disputes can happen
(also can happen with Joint Tenancy or Living Trust or any other for to hold
title
The deed supersedes a will
Restricts sale of property for 4 months after
owner’s death
BUT MEDI-CAL may be able to recover costs from
the beneficiary
Title companies will not be required to rely
on RTDDs when underwriting a policy of title insurance under the new law – an
especially important detail given that there may be circumstances under which
the RTDD may be void or superseded by another document. In cases where the RTDD
is void or superseded, a probate proceeding or quitclaims deed may be required.
No RTDD may be executed on or after January 1,
2021, which is when the new law is scheduled to be repealed (unless extended by
the legislature prior to that date). However, any RTDD properly executed before
that date remains valid and may also be revoked after that date. To be valid,
the deed must be recorded within 60 days of execution. The deed is only
effective at death and does not affect any ownership rights during the
transferor's lifetime.
The new law contains a statutory form RTDD,
and an RTDD must be in that form or a substantially similar form in order to be
valid. The statutory form provides information to the transferor, including an
explanation of how the RTDD works, how it is effectuated, and some of its
consequences. The law has a statutory form for revocation of an RTDD.
The law also makes provisions for multiple beneficiaries and for what happens
if multiple instruments are recorded affecting the same property.
A beneficiary completes the transfer recording
an affidavit of the transferor's death. However, a purported transfer is void
if property is held in joint tenancy or as community property with right of
survivorship when the transferor dies. A RTDD can be challenged for several
reasons, including lack of capacity to transfer, transfer to disqualified
person, and fraud.
As of today, Twenty three states have versions
of RTDDs, with three additional states considering their implementation this
year. Missouri has TOD law since 1989 with no claims of elder abuse.
I am not an attorney. This is not legal advice. The law is of interest to mortgage professionals and real estate agents, realtors and title officers in advising Borrowers, property owners, homeowners in this new law in California as regards to how to hold their single family, condominium, townhouse or 1-4 unit home. This type of vesting has been used in other states for 25 years.
