Transfer on Death Deeds are an inexpensive way to transfer real property without having to go through the time and expense of probate or establishing a revocable living trust. Such deeds have been available in many other states, but efforts to permit them in California have failed for nearly ten years.
Starting in January of 2016, and lasting until January 1, 2021 (unless extended), Revocable Transfer on Death deeds will now be legal in California. Just as you can designate a bank account or brokerage account as a “payable on death account,” a Revocable Transfer on Death Deed lets you name beneficiaries for real property. Upon your death, your beneficiaries become the property owners by filing an Affidavit, a death certificate, and notice of change of ownership. That’s it. No probate and no trust administration necessary.
The Revocable Transfer on Death Deed must be substantially similar to the statutory form that will be added to the Probate Code, which includes the name of the grantor, the full names of the beneficiaries and their relationship to the grantor, the property description, and a statement saying that the grantor hereby transfers all of their ownership in the described property to the named beneficiaries upon death. Transfer on Death Death deeds must be notarized and be recorded within 60 days of signing to be effective, and can be revoked at any time during the grantor’s life. If a beneficiary dies before the grantor does, their gift lapses and goes to the surviving beneficiaries, if any. If no beneficiary survives, the transfer doesn’t happen.
Transfer on Death Deeds can only be used for residential property of up to four units, or a single tract of agricultural land that is 40 acres or less that is improved with a single family residence.
An owner must have legal capacity to sign a contract (this is a higher standard than that required to sign a Will) and must (obviously) be the owner of the property that they are transferring. Any such property transferred will still be subject to Medi-Cal reimbursement claims and will transfer subject to any liens or encumbrances that are attached to the real property.
While convenient and inexpensive, Transfer on Death Deeds are not going to solve other estate planning issues. If a grantor wants to leave property in trust, or wants to plan to reduce estate taxes, or wants to make sure that a trusted person can maintain or sell the property during the grantor’s incapacity, a Transfer on Death Deed isn’t going to be the right way to transfer real property and won’t be a substitute for a living trust or Will and Durable Powers of Attorney. That being said, Transfer on Death deeds are a great new tool for people to do simple estate planning and a great alternative to probate.