California’s New Transfer on Death Deed May Be An Ideal Solution For Easy Estate Planning

Transfer on Death Deed

Newport Beach, Costa Mesa, Orange County and all California property owners have a new tool to simplify their estate planning. California’s new (2016) Transfer on Death Deed may be an ideal solution for those who own real property in California, want to ensure the property passes smoothly to a named beneficiary upon their death (i.e. avoid “probate”, the court process of divvying up your estate), but do not necessarily have a complex estate warranting the time or expense of a Trust.

The Transfer on Death Deed accomplishes the simple task of ensuring your real property is transferred to a named beneficiary(ies) upon your death without probate.

Simply complete the deed (which does require the property’s legal description), have it notarized, and record the deed in the county where the property is located. The deed must be recorded on or before 60 days after the date you sign it or the deed has no effect. The deed has no effect until you die. You can revoke it at any time (prior to your death). Upon your death, the beneficiary(ies) then files simple paperwork with the county recorder, discussed below, to finalize the transfer into their name(s).

Some additional technicalities:

If you name more than one beneficiary, they will be equal owners as tenants in common. If you desire another result (such as to more firmly direct what happens to property, set rules for usage, establish what heirs can live there, give disproportionate ownership distributions, etc.), or have a more complex estate, a Trust is likely more appropriate.

If you own the property as a tenant in common, the Transfer on Death Deed only transfers your interest in the property. If you own property as joint tenants or as community property with right of survivorship and you die first, the Transfer on Death Deed does nothing, it is void; the original right of survivorship will supercede. If, however, you are the sole remaining owner of property once held as joint tenants or as community property with right of survivorship, the Transfer on Death Deed will be effective.

The Transfer on Death Deed does nothing to the property during your life; it only takes effect after death. Any existing liens, mortgages, etc., will remain. Creditors may still pursue the asset. This document merely transfers your interest (if any) in the property to your named beneficiary(ies).

The named beneficiary(ies) must be alive when you die; if the beneficiary(ies) dies before you do, the Transfer on Death Deed is void as to that beneficiary(ies). For example, if you leave the property to Bob and Jane, but Bob passes away before you do, then Jane will get 100 percent of the property (regardless if Bob has any living heirs). Another example, if you leave the property to just Bob, but Bob passes away before you do, then the entire deed is void.

The Transfer on Death Deed is not a change in ownership of the property and does not require payment of a transfer tax or filing of a preliminary change of ownership report at the time of its filing (the later beneficiary(ies) will officially change ownership after your death).

If you execute and record a Transfer on Death Deed naming one beneficiary, but have an earlier Will or Trust that names a different beneficiary, Probate Code § 5660 should apply which essentially looks to the recorded documents: a valid Transfer on Death Deed will be operative unless another document was recorded (i.e. filed in the county recorder’s office) before your death and signed after the Transfer on Death Deed, or, another document was recorded before the Transfer on Death Deed and made an irrevocable disposition of the property. If you file a new Transfer on Death Deed, the last recorded document should control. In other words, a recorded Transfer on Death Deed will supersede most other estate planning instruments, including any earlier Transfer on Death Deed(s) – so use caution and perhaps update existing estate planning documents if there is a conflict.

For Beneficiaries:

While not technically required, it is good practice to ensure your beneficiary(ies) knows of the Transfer on Death Deed; your beneficiary(ies)’s knowledge of the document and the process will help ensure the intended smooth transfer.

Your beneficiary must record evidence of your death (Prob. Code § 210), and file a change in ownership notice (Rev. & Tax. Code § 480). If you received Medi-Cal benefits, your beneficiary must notify the State Department of Health Care Services of your death and provide a copy of your death certificate (Prob. Code § 215).

If there is a loan on the property, the beneficiary(ies) should contact the lender(s) and determine what options the lender may propose such as assumption of the loan, continuation of payments, or other alternatives. Otherwise, the beneficiary(ies) may seek other arrangements such as a new loan (refinancing) or sale of the property.

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Sources / References:
– California Probate Code § 5600 et. seq.
– Statutory Forms, at California Probate Code § 5642(a)
– Statutory “Common Questions About the Use of This Form”, at California Probate Code § 5642(b)

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-Devin Lucas

Author Devin R. Lucas is a Real Estate Attorney, Broker and REALTOR®, specializing in Newport Beach, Costa Mesa and Orange County, serving individual, investor and small business interests in real estate. Active with the Newport Beach Association of REALTORS® and Costa Mesa Chamber of Commerce, Devin R. Lucas Real Estate is an independent real estate brokerage and law practice located in Newport Beach, California.

Devin R. Lucas Real Estate
Real Estate Attorney | Real Estate Broker | REALTOR®
devinrlucas.com | devin@devinrlucas.com | BRE No. 01912302
949.478.1623 office | 888.667.6038 fax

2901 West Coast Highway Suite 200
Newport Beach | California | 92663-4023

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