As of January 1, 2016, owners of residential real property in California have access to a new estate planning tool: the Simple Revocable Transfer on Death Deed (TODD). Find the law in the California Probate Code, starting at section 5600.
These instruments allow individual landowners to transfer their real estate when they die, but outside of a will and without the need for probate distribution. The transferor simply executes a TODD form, then records it during the course of his/her natural life, and within 60 days of the signing date (5626(a)). Note that unlike grant deeds or quitclaim deeds, there is no change in ownership when a transfer on death deed is recorded (5650). As such, they are exempt from transfer taxes and the Preliminary Change of Ownership Report (PCOR).
Section 5650 explains that while transferors are alive, they retain absolute ownership of and control over their property. They may sell, mortgage, rent, or otherwise use their real estate without concern for or permission from the beneficiaries. The owners may also modify or revoke the future transfer at will. So, the beneficiaries named in the document do not gain any present rights in the property until the transferor dies—until that point they only have a potential future interest.
Revocability is one of the unique features of transfer on death deeds. By retaining title to the property, the transferor can easily adapt to changes in circumstances or intentions. There are three ways to revoke a recorded TODD: transfer the real estate outright (in other words, use a standard deed, such as a grant or quitclaim deed, to convey the title away from the transferor); execute and record a new TODD, which automatically supersedes the previous document; or execute and record an instrument of revocation (5628-5632, 5660(c)).
Be aware, too, that the TODD is NOT affected by provisions in the owner’s will (5642(b)). Best practices dictate that any change to an estate plan initiates a review of the whole thing, so to reduce the chance for conflict, make sure that the transfer on death deed reinforces the will and other related documents.
Beneficiaries take title to the property under the rules set out at section 5652. Note especially that any associated debts, obligations, or agreements in place when the owner died follow the real estate to the beneficiaries. In addition, the title transfers without warranty, so the beneficiaries might find themselves liable for future claims against the property. For these reasons, among others, beneficiaries might wish to disclaim the gift (5652(a)(1)).
As it stands, the transfer on death deed is not valid for real estate held in joint tenancy or as community property with right of survivorship (5664).
Available California Transfer on Death Deeds:
- California Transfer on Death Deed Form
- California Transfer on Death Revocation Form
- California Transfer on Death Affidavit Form
Overall, the Simple Revocable Transfer on Death Deed offers a convenient, flexible option to consider as part of an overall estate plan. Even so, they may not be appropriate in all cases. Contact an attorney for complex situations or with any questions.