Last year, Governor Jerry Brown signed AB 139, which allows California homeowners an opportunity to leave property to their heirs without going through probate or establishing a trust. In the past, homeowners could transfer real property after death by designating a beneficiary in their Will, transferring the property to a trust, or using a joint tenancy designation on the title. As of January 1, 2016, California residents can use the revocable transfer on death (TOD) deed to transfer title. The TOD deed, unlike other deeds, does not become a completed transfer until the transferor dies.
Using the TOD deed, homeowners can transfer one to four residential unit dwellings, condominium units or agricultural land up to 40 acres with a single-family residence. In order for the TOD deed to be valid it must be dated, signed, notarized by the transferor and recorded with the county where the property is located within 60 days of execution. The TOD deed may be revoked by the transferor at any time by submitting a revocation form to be recorded, recording a new TOD deed, or selling the property.
The TOD deed – although potentially useful in some situations – is not a substitution for proper estate planning; in most situations, the TOD option will be a poor alternative to a properly drafted trust. Of course, as with all estate planning documents, the TOD deed should only be used in conjunction with a carefully considered overall estate plan.
Currently, the TOD deed system is still on probation, so to speak. AB 139 expires January 1, 2021, to allow time to study its effects. TOD deeds that are executed between now and then will not be impacted – they would still be in effect and could be revoked at any time – but no new ones can be executed after that date unless the law is extended. The law requires the California Law Revision Commission to study and make recommendations regarding the new deed to the Legislature by January 1, 2020.
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