Perhaps you’ve heard from a well-meaning friend or advisor that you can use an inexpensive Transfer on Death Deed to keep your property out of court without going to the trouble of creating a Living Trust. If so, read this before you rely on a Transfer on Death Deed to ensure that you aren’t creating more trouble for the people you love.
On January 1, 2016, Assembly Bill 139 went into effect, providing California residents with a new way to transfer residential property to their heirs. Specifically, the law creates a Revocable Transfer on Death Deed (TOD Deed), intended to be a simple tool for transferring ownership of real property to beneficiaries upon the property owner’s death.
The law was initially heralded as a welcome alternative to Revocable Living Trusts, which some believe to be costly, time consuming, and complex. A TOD Deed allows named beneficiaries to assume ownership of your residential property without undergoing probate or trust administration.
However, before you rely on a TOD Deed as a cheaper alternative to full-on Revocable Living Trust planning, consider these factors …
First, the TOD Deed only applies to certain types of real property:
Moreover, a TOD Deed has several other restrictions and requirements.
Finally, and most importantly BEWARE of these major risks:
The TOD Deed offers no protection from your creditors.
Unless extended, the new law will sunset on January 1, 2021, but TOD Deeds executed before that date will remain valid.
Warning: Since its inception, significant flaws have been found within the statute, and some advocates believe it will lead to increased elder abuse. For more on this, read a letter from the Executive Committee of the Trusts & Estates Section of the California Bar, appended as an exhibit to the California Law Revision Commission’s Memorandum # 2017-35.
Given these concerns, we recommend against the use of the TOD Deed and advise those seeking to transfer their real estate in a manner that is best for you, and the people you love to schedule a Family Wealth Planning Session™ with us to choose an option that will best meet your needs. Schedule online.
My goal is to be your trusted advisor who helps you make the very best personal, financial, and legal decisions for your family throughout your lifetime. I want to help you not just now, but also when you can’t be there so that I can help guide your loved ones through a difficult process.