California law has historically permitted a few different ways to transfer real property on death of the owner without the need for probate. Some of these non-probate transfers include joint tenancy deeds, community property deeds, community property with right of survivorship deeds, and property held in a trust. Each of these methods, however, has their drawbacks. By example, once a person is named as a joint tenant, the original owner cannot remove that person’s name from the deed and the new joint tenant has the same rights as the original owner. You can see that the potential issue here is that although you may want to pass the property on to your family upon your death, you may not want your family to have an ownership interest in the property during your life. Another issue is that community property deeds and community property with right of survivorship deeds are available only for married couples and couples in registered domestic partnerships. Another example is that property in trust requires that a trust be drafted and maintained during the property owner’s lifetime, both of which are costs some people may not want to incur.
As an alternative to these methods, effective January 1, 2016, California law permits the use of a revocable transfer on death deed, or a “Revocable TOD Deed,” to transfer real property on the death of its owner without the need for a probate proceeding. Many other states have recognized this type of deed for many years. However, this is new to California.
The Revocable TOD Deed allows the property owner to name a person or charity who will automatically receive the property upon the death of the owner. Here are the reasons why this type of deed may be very desirable: The named beneficiary has no ownership interest in the property during the owner’s lifetime, the owner can name a different beneficiary or add additional beneficiaries, and the owner can also revoke the beneficiary designation completely during their life. So the Revocable TOD Deed provides more options than any other type of non-probate property transfer available in California that existed before this new law was passed.
However, there may be some issues with this Revocable TOD Deed. There are probably quite a few legal issues that need to work themselves out through the court system before such a deed is truly labeled a good estate planning tool. By example of a possible issue, since California is a community property state, it is not clear what impact such a deed would have if it was used to transfer an interest in real property, let’s say to a charity, upon the death of the deed creator when it turns out that the real property was in fact community property of a marriage rather than the separate property of the deceased. In this example, would the charity or the surviving spouse get the property upon the death of the deed creator? Would they each get fifty percent ownership? This is just one example of many possible issues which may arise and be subject to interpretation by California courts. Because this is new to California and because California has complex estate planning and community property rules, it is not recommended to rush-out and draft and record such a deed without the advice of a California attorney.
Creating a valid Revocable TOD Deed requires the same formalities as other types of deeds, such as capacity of the owner, signature, notary acknowledgement, etc. It is important to note that the California Law Revision Commission is required to study and make recommendations to the California Legislature regarding the Revocable TOD Deed by January 1, 2020. Unless extended, the new Revocable TOD Deed law will expire on January 1, 2021. Anyone who chooses to use this type of deed (again should do so only with the advice of a California attorney) should mark their calendar with this important date to be sure that any Revocable TOD Deeds he or she has implemented will continue to be effective. If you are interested in learning more about how a Revocable TOD Deed may benefit your or your family’s particular circumstances, you should contact Chilina Law Firm or another California attorney who practices in estate planning, trust administration, probate, and real property for further advice on the topic.
Authored by Greg Chilina and Co-Authored by Karen Chilina
Chilina Law Firm, a Professional Corporation, is a full-service estate planning, probate, trust administration, business law, and real property law firm that provides a wide-range of advising, transactional, and litigation services to its clients from its office located in Atascadero, California. The firm’s attorneys represent individuals and business entities in an assortment of transactional and litigation matters involving estate planning (including trusts, wills, powers of attorney, and medical directives), probate, trust administration, as well as general business law, contracts, corporate governance, land use, and real property. Chilina Law can be contacted by telephone at (805) 538-5038 or by email at email@example.com or visit the Chilina Law Firm at www.chilinalaw.com. Chilina Law Firm is based in Atascadero, California and serves North San Luis Obispo County communities, including Santa Margarita, Atascadero, Templeton, Paso Robles, and San Miguel.
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