Real Estate Transfers
Effective January 1, 2016, Californians may avail themselves of a new method for transferring real property assets upon death. Under a new law adopted in 2015, owners of California real estate may hold title to their property under a revocable transfer on death deed (“revocable TOD deed”), which allows the property to pass to designated recipients on the owner’s death without the need for a trust or a probate proceeding.
This new law (AB 139), which will remain in effect until January 1, 2021, includes the following provisions, among others:
- The use of the revocable TOD deed would transfer real property upon the owner’s death without a probate, pursuant to rules and procedures specified in the law.
- In order to make or revoke a TOD deed, a person must have the capacity to enter into contracts.
- The TOD deed must follow the form specified in the new law, and must be signed, dated, acknowledged and recorded to be effective.
- The TOD deed will have no effect on the owner’s rights to the property during his or her lifetime, and the property would specifically be counted as an asset of the owner for Medi-Cal eligibility and reimbursement purposes.
- If, at the time of the owner’s death, title to the property is held in joint tenancy or as community property with right of survivorship, a TOD deed would be void.
Middle-class Californians save money
According to Mike Gatto, the Southern California Assemblyman who introduced the legislation, this new law would help middle-class Californians save money, either by avoiding the probate process, which costs $26,000 on average, or by not having to hire an attorney to draft a trust in order to avoid probate, which costs between $2,000 and $6,000. At least five prior attempts to pass this law, which has been enacted in more than half of the states, had failed. Some critics have expressed the concern that the TOD deed could end up turning more elderly people into targets of financial predation, but supporters of the law contend that the new legislation provides adequate remedies for such wrongdoing. Ultimately, the most likely beneficiaries of this new method of transferring property on death would be unmarried persons, as married people already have other ways of providing for such transfers (e.g., joint tenancy or community property with right of survivorship).