Staying Informed About California Transfer on Death Deeds

This year has been an interesting one for California’s revocable transfer on death deed. Beginning in 2022, California homeowners using TOD deeds (sometimes just called TODDs) must have two adult witnesses sign the document. So, for a valid TOD deed, you must sign the document, have your signature notarized, have two witnesses, and file the deed for public recording with the county within 60 days once it’s notarized.

First, no need to panic. If your California TOD was properly recorded before Jan. 1, 2022, it will still be a valid document.

Now, let’s look at the California TOD deed in its updated form.

The Reason for a TOD Deed

The transfer on death deed, in California and other states that allow it, easily lets someone have a home after the homeowner dies. It can apply to a fixed-in-place mobile home, or a standard home or condo property (a property with one to four residential units), or a rural home with no more than 40 acres of farmland.  

People like the TOD deed because, if all goes to plan, it’ll avoid placing a home in probate court when the owner dies. The TOD deed will effect the change in ownership itself.

It’s relatively cheap and easy, compared to a revocable living trust. And it brings similar tax advantages as a trust or will.

If you transfer your home this way, you are called the transferor. The party who gets your home upon your death is called the beneficiary. People, trusts, and legal entities can be beneficiaries. (If the TOD deed names more than one beneficiary, all recipients will receive the home in equal shares.)

And the homeowner can change the TOD deed by revoking it and creating a new one.

Also, the homeowner can still refinance or sell a property with a TOD deed. Not until the homeowner’s death do the beneficiaries assume control over the property.

Of course, the beneficiary has to actually outlive the transferor for this to work. The beneficiary will also have to satisfy any debt secured by the home.  

Can co-owners create TOD deeds? Yes. If co-owners want to use a TOD deed, they must each sign a separate one.  

☛ For information on joint ownership, see How’s Your Property Vested? It Matters as Much as Your Will or Trust.

Note that a TOD deed will never cancel out a joint owner’s right of survivorship. This is because the house is vested in a way that gives the joint tenant automatic ownership. In other words: The TOD deed is NO GOOD if the co-owner on your current deed has survivorship rights.

Getting It Done

Considering a transfer on death deed? California has updated the rules, as we’ve previously noted it would.

The Sacramento County Public Law Library offers full information on filling out the TOD deed. Reminder: Always check your new document for any mistakes or typos.

Counties have slightly different requirements for deed filings. For instance, in some counties you will need an instrument number given a deed by the county recorder’s computer system.

At Deeds.com, we offer state-specific Transfer on Death Deed Forms for downloading.

What Are the Updates in California?

The law has been adjusted in several ways. And the homeowner must be sure to use California’s updated deed form for TOD deeds created from 2022 onward.

Some of the legal updates make things easier on the homeowner. For instance, new language in the California Probate Code enables the courts to modify an ambiguous TOD deed so that it holds up legally, as long as the owner’s intentions are clear.

There are two especially notable changes that make the California TOD deed more secure:

• The law now requires the home’s recipient (beneficiary) to mail notification to the deceased owner’s heirs, sending them copies of both the death certificate and the TOD deed. This way, the traditional heirs will have a chance to contest the TOD deed. Notification must be done this way. Otherwise, the beneficiary could have to pay damages to the heir. The recipient of the home must record an affidavit stating the heirs were properly notified.

• There must be two witnesses. Both must be present together to: (a) see the property owner sign the TOD deed OR (b) witness the homeowner’s acknowledgement of the earlier signature on the deed. Witnesses must understand what they are signing. Any competent adult can be a witness. The TOD deed may by witnessed by an interested person (like one named on the TOD deed as the party who’ll be receiving the home). But asking that person to witness is unwise, because there’s a presumption of undue influence if a required witness is getting the house.

There’s typically a notary fee (but sometimes banks’ notaries don’t charge their own customers). Expect to pay the standard recording fees, too. You’ll be filing your document with the county recorder’s office, in the home’s county, within 60 days of notarizing it — or the TOD deed is no good. The homeowner has to know about these rules and updates to create a valid deed.

Important note: Under the updated law, revoking the TOD deed means signing a new document with a notary. To revoke it without selling it, fill out and record a “Revocation of Revocable Transfer on Death (TOD) Deed” Form.

A Few Points to Keep in Mind

As you can see, California is tightening up the rules for the TOD deed. It is still relatively simple and inexpensive, and it’s a viable way for the owner to stay in charge of their real estate through life, yet pass it on after death, probate-free. While alive, the homeowner carries on paying the mortgage, taxes, and all the normal costs of owning real estate. After death, the named beneficiary takes over all these responsibilities. Fairly simple, right?

Still, the homeowner has some important points to consider:

• If the recipient of the home doesn’t reach adulthood by the time the owner dies, a court has to step in and appoint the minor’s legal representative.

• If the homeowner becomes incapacitated, the TOD does not help manage the property. A revocable living trust, on the other hand, would empower a trustee to act for the homeowner.

• Title insurers are cautious with TOD deeds, because TODs make passing a house to another person relatively simple. After all, the TOD for real estate has only been legal in California since 2016, and it’s clearly still in its development stages. Some beneficiaries have had difficulties refinancing during their first three years of ownership.

For the above reasons, a TOD deed can be especially helpful if the beneficiaries are adults, and know they want to keep the home, not sell it. But every homeowner’s situation is different, and every deed has consequences! So treat this article as general information only, not as legal advice. Speak with an estate planning attorney to understand taxation, state benefits, home financing impacts, and other consequences of legal decisions about passing real estate on.