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Learn How To Avoid Probate Using a Transfer on Death Deed for Real Estate

What is a California Transfer on Death Deed?  Why Should You Care?

The California transfer on death deed allows property to be transferred to a new owner when the current owner dies The transfer does not require a probate of the estate. The current owner retains ownership and control over the property, including the right to change his or her mind about the transfer, until the owner dies.

If you die without a will or inter vivos trust your property passes to your heirs according to the probate laws of the state. The probate of an estate is a cumbersome process that can be expensive. Using a revocable inter vivos trust can be a good way to avoid probate. If you have a simple estate you may be able to avoid probate without using an inter vivos trust if you plan carefully. One method of transferring your residence without probate or a revocable inter vivos trust is via a transfer on death deed.

If you are interested in creating an estate plan such as a will, revocable inter vivos trust or transfer on death deed, Galen Gentry can help. Contact us.

Beginning on January 1, 2022, There Were Important Changes to the California State Laws Related to Transfer on Death Deeds

Effective January 1, 2022, the California State Legislature enacted changes to the state’s laws governing transfer-on-death deeds.

The recent legislative amendment’s principal objective is to reduce the risk of improperly procured TOD deeds by heightening execution requirements and requiring notice to heirs. The most  significant change is that two witnesses must now sign a California TOD deed. Both witnesses must be present at the same time and must either see the property owner sign the TOD deed or hear the owner acknowledge the signature.

Anyone generally competent to act as a witness can witness a California TOD deed. A TOD deed’s beneficiary, though, should not also be a witness, as California’s statute presumes that an interested witness improperly influenced the property owner to sign the deed.

California’s newly enacted witness requirement complements the existing rule requiring TOD deeds to be signed, notarized, and dated. Only the property owner’s signature must be notarized. Notarization of witness signatures is unnecessary.

A California TOD deed must also be recorded with the county recorder of the county where the property is located. The amended statute requires recording within 60 days of a TOD deed’s notarization date—a minor change from the prior version’s recording deadline of 60 days after execution.

A major change to the TOD law is that a beneficiary now has a duty to provide notice of the TOD deed to the owner’s heirs upon the owner’s death. The notice—which the beneficiary serves with copies of the TOD deed and owner’s death certificate—briefly explains the TOD deed’s effects and informs heirs of their right to contest the transfer. Notice to heirs must be served by mail in a form substantially similar to the model outlined in Cal. Probate Code §5681(b). The beneficiary then records an affidavit verifying service of notice to the owner’s heirs.

The legislative overhaul of California’s TOD deed law includes several more changes.

  • Sunset Date. California’s legislation that originally authorized TOD deeds in 2016 contained a sunset provision automatically repealing the TOD statute on January 1, 2022—unless extended before that date. The legislature’s recent revisions push back the statute’s sunset date ten years—or until January 1, 2032. California TOD deeds executed before January 1, 2032, will remain valid if the legislature allows the TOD statute to expire on January 1, 2032.
  • Recording Deadline for Other Deeds and Liens. Other instruments affecting the real estate—such as liens or deeds—are only operative if recorded no later than 120 days after the beneficiary records the affidavit verifying notice to heirs. The owner’s date of death was the recording-date deadline under the prior version of the law. A lien not recorded in time does not survive the transfer, and an untimely recorded deed does not effectively convey the property.
  • TOD Beneficiary Obligation for Estate Debts. Statutory amendments adjust the procedure and standards for determining a TOD beneficiary’s proportionate liability—if any—for debts owed by the owner’s estate.
  • Judicial Modification of TOD Deeds. New code sections allow a California court to modify a TOD deed to prevent the deed’s failure due to ambiguity or because a charitable beneficiary declines or is unable to accept the property.
  • Updated Definitions for Real Property and BeneficiaryRevisions to the definitions of real property and beneficiary clarify what kind of real estate a California TOD deed can transfer and to whom it may be transferred. Transferrable real estate includes most condominium interests and residential properties with four or fewer dwelling units. The revised statute expressly excludes interests in stock cooperatives and agricultural parcels exceeding 40 acres. The updated definition of beneficiary makes explicit that natural persons, and trust and legal entities may all be TOD beneficiaries.

 

Christopher Moore wrote the article on the 2022 changes to the Transfer on Death Deed and his article can be found here.