Understanding the new California Revocable Transfer on Death Deed

Understanding the new California Revocable Transfer on Death Deed

By Steve Beede

For many if not most people, their home is the single biggest asset they own.  But what happens to that home when they die?  If they had the foresight to create a Trust, then the home could be transferred to their beneficiaries without substantial further cost.  But many people lack the financial means to pay the $2,000-$6,000 it costs to create a Trust. If they do nothing, then their estate and their beneficiaries will have to go through a much more costly, public, and lengthy process in the Probate Court.  For the most part, there have not been any good alternatives… that is until now.

Effective January 1st, California has created a new means of transferring title to real property on death. It’s called the “Revocable Transfer on Death Deed” and it promises to be the most simple and inexpensive transfer mechanism available for people whose only substantial asset is their home.

This new law is limited to use on 1-4 unit residential dwellings (personal residence); condos, and land up to 40 acres with a single family residence. A special form of Deed has been created and must be used and recorded within 60 days of being signed by the grantor.  Most importantly, the title to the real property only transfers upon the grantor’s death.  Until then, the Deed remains fully revocable by the grantor.

This new Deed is very similar to the “pay-on-death” beneficiary designations available for bank accounts which let the funds pass directly to the beneficiary without the need for a Trust or Probate. Until now, this was not available for real estate.

Like any other the title transfer, the beneficiaries receive the real property subject to the liens of existing creditors.  However, as with other pay-on-death designations, those assets may be subject to claims that other creditors may have against the grantor’s estate including claims for MediCal and unpaid taxes. Further, if the grantor does have other assets valued in excess of $150,000, Probate would still be required unless a Trust is created.  So it’s not for everyone but for those people it fits, maybe the majority of people, it offers a tremendous new opportunity for them and their heirs to save time, trouble, and money when their only substantial asset is their home.

As with any new law, there are many questions left to be answered. For example although safeguards have been built into the law, there are concerns about predators defrauding elderly people. For this reason and others, this law provides a 5 year window for the effects to be studied and recommendations for improvements to be made. Unless the Legislature changes or ratifies it by January 1, 2021, the new law will expire.  However, any such Deeds created before that date will remain valid and enforceable.

The attorneys of BPE Law Group, P.C. have been advising and assisting our clients and their families with Estate Planning services for as long as we’ve been in business. We handle everything from property transfers, Trusts, Powers of Attorney, Health Care Directives, Probate, Conservatorships, and when required, any enforcement litigation. If you would like a consultation with us, please call our office at (916) 966-2260 or e-mail me at sjbeede@bpelaw.com.

This article is not intended to be legal advice, and should not be taken as legal advice.  Every case requires review of specific facts and history, and a formal agreement for service.  Please feel free to contact us if you need legal advice and are interested in seeing if we can help you.