Since January of 2016, California residents have been able to transfer real property without having it pass through probate.

Officially named the ‘Revocable Transfer on Death Deed’, and quickly nicknamed the ‘TOD Deed’, and ‘TODD’, the deed directs that a specific beneficiary specified by the transferor will become the new owner of the property upon the transferor’s death.

Much like a Will or Trust, a transfer on death deed is revocable, meaning that the grantor (current owner of the property) can change their mind, deciding that a different person will be granted ownership of the property under his or her death.

As we’ve previously stated, filing, and recording a Transfer on Death Deed is far from difficult. The one-page document can be accessed for free on your local county’s website. Here’s the link for Los Angeles County, but bear in mind that your county’s form may be somewhat different.

1) Fill in the required general information about you including your address. The “Assessor’s Parcel Number” and “Property Description” must match your current property’s deed.

2) Using full legal names only, not descriptors such as “my children” or “my sister”, name your beneficiary or beneficiaries.

If there will be more than one beneficiary of your property upon your death, advise how the title to the property will be assigned. Will they be “joint tenants” with equal shares of the property’s value, or is one child getting a 60% share and another 40%?

3) The TOD Deed will be signed and dated in the presence of a Notary Public and 2 witnesses.

New TOD form

Firstly, if you are filing a new TOD Deed, be certain that you are using the updated California form, effective from January 1, 2022. While the adjusted regulations tighten up the existing rules, the process remains straightforward and inexpensive. A TOD Deed continues to be a plausible consideration for a property owner who wants to maintain control of their real estate for as long as they can, often until death.

You can find the new revised TOD form from the clerk recorder here.

New sunset date

Signed into law by California’s Governor Gavin Newsom in September of 2021, according to Cal. Prob. Code §5600(c) Transfer on Death Deeds issued before January 1, 2021, now have a sunset date of January 1, 2032. This was designed to allow ample time for any new amendments or rewritten language to be processed by the State Legislature without the pressures of the law expiring.

New witness requirements

As stated by Cal. Prob. Code §5624 the TOD Deed must be witnessed by two people, both of whom must be present when the property owner signs the deed.

While an interested person in the property being transferred may be one of the witnesses, it is preferred that this is not the case. It is best to have witnesses who will not be receiving the home from the grantor to remove any accusations of undue influence on the decision to grant them the property.

Notarizations

Finally, the revised law also has an impact on revoked TOD deeds. In such cases, a new document needs to be signed with a notary observing. The form ‘Revocation of a Revocable Transfer on Death (TOD) Deed’ should be used for revocation without selling the property.

Other notable updates:

include new legal language in the California Probate Code that allows a court to adjust an existing TOD Deed that may be debatable, in its opinion. The court is now permitted to modify what it views as an arguable TOD so that it will hold up legally in the future. The court, at the same time, will only make modifications where the property owner’s intentions are clear.

To enhance the security of a TOD Deed, the California law added a requirement that the beneficiary/recipient of the specified property mail notification of the decedent’s passing to the owner’s heirs, along with a copy of the death certificate and the TOD Deed.

This new notification requirement allows traditional heirs an opportunity to contest the TOD Deed, should they so choose. If the property’s recipient does not notify the heirs in this exact way, he or she may have to pay damages to the heirs. An affidavit must be recorded by the property recipient stating that the heirs have been properly notified of the decedent’s death, and about the TOD Deed.

The effect of Prop 19 on the TODD

If you filed a Transfer on Death (TOD) Deed before January 1, 2022, your document remains valid as issued. Proposition 19 changes that were enacted by the California State Legislature in 2022 are for new TOD deeds only.

New parent-child requirements started taking effect on February 16, 2021, including the stipulation that your child/children, to avoid reassessment of a property to be transferred upon the death of the parent who owns the home, must make the property his or her primary place of residence. Additionally, the property must be valued at less than $1 million.

Proposition 19 requirements for rightful transfer:

• Principal residents of parents.

• Under $1m.

• The property transferred will be the intended principal residence of your children.

Yes, a Transfer on Death Deed is completely revocable by the property’s owner before death.

There are three ways to accomplish this revocation, all of which are quite simple:

1. Submit a ‘Revocation of Revocable Transfer on Death Deed’ in the property owner’s county of residence;
2. File and record a new TOD Deed with a newly named beneficiary. By filing this new TOD, any previous TOD Deed will automatically be revoked;
3. Selling or transferring the property to someone else before the owner’s death also revokes an existing Transfer on Death Deed.

Misuse

As with many laws, there are often concerns about its possible misuse. Opponents of TOD Deeds have expressed concerns about the risk of scammers or senior predators attempting to persuade an elderly or incompetent person to file a deed on their behalf. California legislators built in a safeguard that prohibits a beneficiary from selling a TOD property within 120 days of the transferor’s death.

Should the suspicion of a situation such as the above have occurred, family members or close friends may, unfortunately, choose to litigate the TOD Deed in court.

Beneficiary debt liability

A mortgage or other debt, including a line of credit that was left unpaid by the deceased, will transfer to the TOD beneficiary. This could potentially create financial difficulties for the person receiving the property after the death of the owner.

After the property owner passes away, any liens on the home from possible creditors will also be transferred to the beneficiary.

Also, to be considered by the homeowner is the age of the beneficiary; He/she must be an adult (18), or the court will need to appoint a legal representative for the transfer to take place.

There may be better alternatives for your loved ones...

Additionally, though it would be a rare occurrence, if the property owner becomes incapacitated for a period prior to death, a TOD Deed does not assist with managing the real estate in question. However, a Revocable Living Trust would allow a homeowner to be represented by a designated trustee.

Because transferring a house via a TOD Deed is such a simple process, title insurers are cautious with them. Refinancing the transferred property has sometimes been a challenge for beneficiaries during the first three years of ownership.

To wrap things up

With so much information to digest in this article, we wouldn’t be surprised if you are somewhat overwhelmed or confused about California’s Transfer on Death Deed. Let’s try to make this as plain and simple as possible, as that is truly what the Transfer on Death Deed is all about.

Estate planning, depending on your personal financial situation, can be easy, complex, or somewhere in-between. But it is something that should be tackled by everyone, at least to some degree. And the earlier, the better.

The Transfer on Death Deed was written and passed into law by proponents and legislators whose clear intention was to help as many people as possible bypass probate after the death of a loved one.

By singling out real estate valued at less than $1 million, thousands of Californians have been able to settle an estate without the lengthy time, and probable cost, that comes with the probate process.

While no legislation is perfect, there are clearly plusses and minuses with the TOD Deed for all to consider. Still, this valuable option has been embraced and utilized by many satisfied California residents.

If you need help planning your estate, we’re a team of estate professionals that specialise in estate planning in California - we can guide you through the entire process of creating a will, a trust, or TODD. Contact us today.