San Diego Estate Planning Lawyer Blog
On September 21, 2015, California Gov. Jerry Brown signed legislation authorizing the use of “Revocable Transfer on Death Deeds” as an estate planning option for residential property owners. As of this year, owners may use these instruments to bypass the normal probate process when disposing of their homes after death. Several states already permit these types of deeds, although there are concerns about the potential for abuse.
What is a Transfer-on-Death Deed?
Under the new California law, a homeowner may file a deed naming a beneficiary who will automatically inherit the property upon the owner’s death. (The deed may also name multiple beneficiaries.) This means the property will not pass through the deceased owner’s probate estate. A transfer-on-death deed may only be used for residential properties, including condominiums, parcels with four or fewer dwellings, or farms containing 40 acres or less and a single-family home.
The deed itself is revocable, meaning the homeowner can name a new beneficiary or revoke the transfer outright at any time before death. The beneficiary cannot challenge such a revocation, as he or she has no legal interest in the property until the owner dies. Nor does a transfer-on-death deed restrict your right to sell or otherwise dispose of the property. And if you co-own the property, the deed will only transfer your interest or share without affecting the rights of any other co-owner.
Concerns About Elder Abuse
The legislation signed by Gov. Brown establishes a five-year trial period for transfer-on-death deeds, which will expire in 2021 unless the California legislature votes to extend the law’s provisions. This is in large part a response to concerns these deeds may be “used to perpetuate financial abuse on property owners,” especially the elderly. The California Law Revision Commission will study the use of transfer-on-death deeds over the next five years and report to the legislature on whether the law should be continued, revised, or allowed to terminate.
How Does a Transfer-on-Death Deed Affect My Estate Plan?
As noted above, a transfer-on-death deed means the subject property will not pass under your will as part of your probate estate. Nor can you revoke or amend a transfer-on-death deed through your will. You could, however, revoke the deed by transferring the property into a trust, which requires filing a new deed in any event.
It is also important to file a transfer-on-death deed before your death. If you die before it is filed, the deed has no effect and your property will pass according to the terms of your will. If you do not have a will, the property will go to your next-of-kin under California intestacy law.
While a transfer-on-death deed may be a useful tool for reducing the time and expense of probate, it is still a new legal concept which may not be appropriate for every situation. That is why you should always consult with an experienced California estate planning attorney before making any decisions regarding the disposition of your property. Contact the Law Office of Scott C. Soady today if you would like to speak to someone today.