On January 1, 2016 the State of California added a new way in which real estate is transferred after the owner dies. The revocable transfer on death deed (“TOD deed”) allows owners of real estate to transfer real estate to a named beneﬁciary and, after the owner’s death, the beneﬁciary owns the property. At the present time one can use a grant deed or joint tenancy deed to add someone’s name to his or her real estate. The major difference between the TOD deed and the other deeds is this: the TOD deed does not give the transferee any rights of ownership until the death of the transferor. Other types of deeds give all owners immediate rights of ownership so that in order to sell or mortgage the property, all owners must participate. Also, all owners are responsible for liabilities associated with the property. Rights of ownership do not arise under the TOD until the transferor dies.
I think the TOD deed might be useful if someone is on his or her deathbed and time is of the essence to do something to avoid probate of real estate. However, a revocable living trust is usually the best estate planning option because of these facts: (1) a trust can have as beneﬁciaries “all my children” but the beneﬁciaries of the TOD deed must be individually named; (2) a trust can give unequal portions to the beneﬁciaries but in a TOD all beneﬁciaries must have equal shares; (3) if one beneﬁciary dies before the grantor of a trust, the grantor can state that the beneﬁciary’s children will take his or her share but with a TOD if a beneﬁciary dies his or her share goes to the remaining TOD deed beneﬁciaries (not to the deceased beneﬁciary’s children); (4) a trust can make provisions for management of trust property if the creator becomes disabled but the TOD deed does not cover the transferor’s incapacity because it only takes effect upon death; and (5) a person creating a trust can designate a contingent beneﬁciary to receive the estate if the sole beneﬁciary dies before the grantor but if there is only one TOD deed beneﬁciary and that person dies before the transferor, the TOD deed is void and the real estate must go through probate. The use of the TOD must be tailored to the circumstances and there are many formal requirements to create a valid TOD. There is insufﬁcient space here to state all of the variables and technical requirements.
As with most new laws, there will be a trial and error period where changes to the TOD law will be made to make the TOD deed work more effectively, iron out misuse and misunderstanding. In the meantime, those using it should be informed and careful.
© 2018 by Marlene S. Cooper. All rights reserved.
(Marlene S. Cooper, a graduate of UCLA, has been an attorney for over 35 years. Her practice is focused entirely on estate planning, estate administration and probate. You may obtain further information at www.marlenecooperlaw. com, by e-mail at Marlene@ MarleneCooperLaw.com, by phone at (626) 791-7530 or toll free at (866) 702-7600. The information in this article is of a general nature and not intended as legal advice. Seek the advice of an attorney before acting or relying upon any information in this article).