Transfer on Death Deed California

Transfer-on-death (TOD) deeds in California

Upon the death of a current owner, a California transfer-on-death deed automatically transfers property to the new owner. By avoiding probate at the owner’s death, a California TOD deed provides continued control over the property during their lifetime.

On January 1, 2016, California became the first state to allow TOD deeds, joining most other states that allow revocable deeds that transfer property upon death. California real estate professionals typically use transfer-on-death or TOD deeds (or simply TODD) instead of revocable transfer-on-death deeds.

Revocable” is typically omitted in California’s TOD deed law. Transfer-on-death instruments (Illinois) and deed-upon-death (Nevada) also exist for equivalent deeds in other states.

 

A California TOD deed serves what purpose?

A California TOD deed functions much like a POD or beneficiary designation on a bank account for real estate. A TOD deed allows property owners to keep flexibility during their lives while avoiding probate at their death. Owners can determine who will receive their home after their deaths during life.

The sponsor of the TOD deed law in California, Assemblyman Mike Gatto, said the following regarding TOD deeds:

A TOD deed can allow individuals to transfer property cleanly and avoid the expensive probate process, just like one can designate a bank account to pass upon death.

The only way to avoid probate in California before 2016 was to transfer real estate to a living trust. When a living person dies, their estate ceases to exist by the living person and cannot pass through probate. UNLIKE LIVING TRUSTS, California TOD deeds are relatively easy and inexpensive to use.

 

TOD deeds: How they work

TOD deeds allow the current owner to designate one or more beneficiaries who automatically own the property upon the current owner’s death. An individual or an organization, for example, a charity, can act as a beneficiary. In some states, TOD deeds serve as beneficiary deeds, TOD instruments, or deeds upon death.

There are some forms of TOD deeds available in the District of Columbia and the following states as of September 2019:

• Alaska,
• Arizona,
• California,
• Minnesota,
• Missouri,
• Montana,
• Nebraska,
• Nevada,
• New Mexico,
• North Dakota,
• Oklahoma,
• Oregon,
• South Dakota,
• Texas,
• Utah,
• Virginia,
• Colorado,
• Hawaii,
• Illinois,
• Indiana,
• Kansas,
• Maine,
• Washington,
• West Virginia,
• Wisconsin,
• And Wyoming is among them.

 

A TOD affidavit

A TOD affidavit replaced the TOD deed in Ohio, but the effect is the same. In the future, more states may permit TOD deeds. Some states, such as Michigan, use different deeds, commonly called the Lady Bird deed.

The property transfer to a living trust may also avoid probate if you live in a state allowing TOD deeds.

 

Joint tenants with survivorship

A married couple typically owns the property “as joint tenants with survivorship” or “tenants by the entirety.” Upon the death of one spouse, the surviving spouse becomes sole proprietor. ToD deeds are also available to married couples. Beneficiaries cannot acquire property until their second spouses die, but surviving spouses can revoke TOD deeds.

Don’t just designate the beneficiary by their relationship to you and name. You may also designate an alternative or successor beneficiary if the first beneficiary dies. It is advisable to indicate how two or more beneficiaries will take title — “by survivorship” or “by tenant in common.”

 

A TOD Deed Has Several Advantages.

A few of the advantages of the TOD deed over other methods of transferring property upon death are as follows:

 

 

Transfer by will.

To transfer property to the new owner, even when a will exists, it must pass through probate. A TOD deed helps avoid probate.

 

Joint ownership.

With a TOD deed, you control the property thoroughly, so if you sell or mortgage the property, all joint owners must consent. Consequently, all joint owners will have equal rights to the property if you sell or mortgage it.

 

Transfer to a living trust.

Although setting up a living trust requires more documentation than a TOD deed to avoid probate, transferring property to it can avoid probate without sacrificing control. It is significantly more expensive to create a living trust if an attorney prepares it than to do a TOD deed. Creating living trusts as part of an estate plan for large estates with several property types may be more advantageous.

 

Some Other Advantages

A TOD deed may also have the following advantages:

 

Maintaining homestead advantages.

It is common for states to provide asset protection and taxation benefits for a resident’s principal residence. However, with a TOD deed, you won’t lose these benefits.

 

Tax savings.

There is no federal gift tax because it is not an immediate transfer. The beneficiary will receive ownership once the current owner dies. A beneficiary’s capital gain will be based not on the value when the original owner acquired the property but upon the value when they sell it.

 

Maintaining Medicaid eligibility.

A person applying for Medicaid may not benefit if they made a gift within a certain period before applying. A probate estate may be liable for reimbursement when a Medicaid recipient dies. ToD deeds do not qualify as gifts or form part of the probate estate, so they cannot receive reimbursement.

 

With A California Tod Deed, What Kind Of Property Can I Transfer?

As defined in California’s TOD law, TOD deeds can only serve to transfer real property interests. 2 Most residential properties with fewer than four dwellings can pass through a TOD deed in California.

Unless the other state authorizes TOD deeds, California TOD deeds can only transfer properties located in California. California residents who own property in other states cannot transfer the out-of-state property with a California TOD deed. If the other state authorizes TOD deeds, they may be able to use them.

 

What Is The Revocability Of A California TOD Deed?

In California, homeowners can revoke their TOD deeds until their death. They can either create a new TOD deed and record it in the land records or file a written revocation. To revoke a TOD deed under California’s TOD statute, a specific form is required–Revocation of Revocable Transfer-on-Death Deed.

While an owner is still alive, they can transfer the property to someone else to cancel the TOD deed. When another deed transfers the property during the owner’s life and after the TOD deed, it takes precedence over the TOD deed.

 

Creating a Deed of Transfer on Death

A real estate deed must comply with state laws like any other real estate document. The grantor’s name, the grantee’s name, the property’s legal description, the grantor’s signature, and the notary and witness provisions required by law must all appear in every real estate deed. There may be other requirements to accommodate recording stamps, such as minimum type size and format.

The TOD deed must contain particular language so that the beneficiary is often referred to as the grantee beneficiary. The transfer will occur upon the death of the current owner.

An original TOD deed must appear in the county’s property records before the death of the present owner. To obtain this, you just need to take the original TOD document to the county’s public records office, typically an office of the register or clerk, and pay a modest cost. Recording clerks receive deeds to stamp the dates that they were received.

 

Uncertainties and Risks Associated With Transfer on Death Deeds

 

Inappropriate use

People have expressed concerns about the possibility of its misuse, as with most laws. ToD Deed opponents are concerned that scammers or senior predators may attempt to persuade elderly and incompetent people to file a deed on their behalf. It is impossible to sell TOD properties within 120 days of a transferor’s death due to a safeguard included by California legislators.

Unfortunately, a family member or close friend who suspects a situation like the one described above may opt to prosecute the TOD Deed.

 

Liabilities of the beneficiary

When a TOD beneficiary inherits a property after the decedent dies. The deceased’s mortgage or other unpaid debts can affect the beneficiary financially.

The beneficiary will also receive any liens on the property from possible creditors after the owner dies. Additionally, the homeowner must consider the beneficiary’s age; the beneficiary must be 18, or the courts must appoint a legal representative.

 

Your loved ones may have better alternatives…

In addition, a TOD Deed does not assist with managing the property if the owner becomes incapacitated before death. However, this would be a rare occurrence. It is possible for a homeowner to have a reputable trustee represent them, however, with a Revocable Living Trust.

Taking over a house using a TOD Deed can be simple, but title insurers are cautious. A TOD Deed is often easier to transfer than a conventional title, but refinancing the property has sometimes proved challenging for beneficiaries.

 

Frequently Asked Questions about California Transfer on Death Deeds

If you’re creating a TOD deed in California, please read the following Q&A by the California legislature.

 

How Does the Tod Deed Work?

ToD deeds are not practical until the beneficiary dies, so that you can revoke them anytime. The property will automatically transfer to the beneficiary after you die.

 

How Can I Transfer Non-Residential Property With This Deed?

There is no way to use this deed for transferring a unit in a stock cooperative or any agricultural land more significant than 40 acres.

 

Is This Deed Valid For Transferring A Mobile House?

Regulation 18551 of the Health and Safety Code states that a mobile home may only be a fixture or improvement. You may want to consult an attorney if you’re not sure if your mobile home qualifies as a fixture. You may lose the transfer of your mobile home if you make an error.

 

In What Manner Can I Use The Tod Deed?

Two witnesses must simultaneously witness the signing or acknowledgment of the form. Please complete this form. The deed must be recorded 60 days after the date it was notarized; otherwise, it will not take effect.

 

Would it be possible for someone else to sign my name on the deed if I cannot?

Your property may fail to transfer under this deed if the person signing for you would benefit from this transfer. It is recommended to speak with an attorney before proceeding.

 

Can A Witness Signing A Deed Be A Beneficiary As Well?

If you use a beneficiary as a witness, you may encounter severe legal problems, including invalidation of the deed.

 

Does The Property Need A “Legal Description?

Yes, of course.

 

What Is The ‘Legal Description’ Of This Property?

This information may be on the deed you received when you became a property owner. You can also find it on the county recorder website in the county where the property lies.

 

As A Final Note

This article aims to provide as much information as possible about California’s Transfer of Death Deed. We wouldn’t be surprised if you are overwhelmed or confused by it. It is essential to keep this as simple as possible because that is what the Transfer on Death Deed is about.

A person’s financial situation will determine how easy or complex estate planning is. However, everyone should address it, at least to some extent. The earlier you begin planning, the more efficient it is.

As a result of the writing and passing of the Transfer on Death Deed, legislators and supporters intended to avoid probate as much as possible after the death of a loved one, several Californians have been able to settle estates without the lengthy and expensive probate process by focusing on real estate valued at less than $1 million.

Our California estate planning experts team can guide you through creating a will, a trust, or a TODD.