California's Transfer on Death Deed - Is it for you?by William J. Sweeney on 05/15/17
(Mr. Sweeney is an attorney licensed in California. The comments below are not intended as legal advice for any specific situation and may not accurately reflect the law in other jurisdictions. There may have been changes in the law since this was written. You should always consult an attorney in your own jurisdiction.)
On January 1, 2016, a new law went into effect in California relating to a way to transfer an interest in real property (for example, your home). The intent was to provide a way for someone with a limited estate to transfer their property without incurring the cost of having a Will or Trust prepared.
There are four requirements in order to take advantage of this law:
1) The property must be a single family residence, or condominium, or a multiple residence of not more than 4 dwelling units. You can also use it for a single family home located on not more than 40 acres;
2) The deed must be dated and signed before a Notary Public;
3) It must be recorded within sixty (60) days of the date it was signed; and,
4) It can be revoked by the person who is making the gift at anytime during their lifetime if they are mentally competent.
This law was enacted for a period of five (5) years and, unless extended by the legislature, will no longer be available after that time. Any deeds properly prepared and recorded within the five year period will remain in effect unless revoked. While the idea behind this mayt be a good idea, it is my opinion it was not well thought out before being placed into law.
One of the major problems I see is that the law assumes people die in a particular order. From more than 40 years in practice I can tell you the old doesn’t necessarily die before the young, and the sick don’t necessarily die before the healthy.
Let me give you an example of how this good idea can go haywire:
Martha has two sons, Pete and Mike. Pete is married with no children, lives near Martha and checks in on her regularly. For the past 30 years, as Martha ages, Pete and his wife, take Martha to doctor appointments, help her with her shopping, keep an eye on her finances and assist her in having any work done on her house, so she isn’t taken advantage of.
During that same 30 years Martha has heard nothing from Mike other than she knows he has been in and, occasionally for short periods, out of prison for a variety of criminal offenses including robbery, twice for vehicular homicide, elder abuse and numerous drug offenses.
Martha doesn’t have a lot, mostly just the home she raised her boys in after their father died but there is no question in her mind she wants Pete to get it when she dies.
Martha has been told if she just takes advantage of the new law that will let her transfer her home on her death without a probate, she will not be incurring needless expense. She is told by doing it this way, she doesn’t even need a Will since her intended beneficiary, Pete, will get it when she dies. Martha thinks this is a great idea. There is no way Martha wants Mike to get anything. She wants it to go to Pete.
At her request, Pete downloads a Transfer on Death Deed form from the web. Martha fills in the form, goes to a local Notary Public to get it signed, and from there directly to the county Recorder’s office to get it recorded. Everything was done properly, so it complies with the law.
Some more years go by and Martha is now in failing health and has the beginning of dementia. Quite unexpectedly, Pete is killed in an automobile accident. Shortly thereafter Martha dies.
Based on the deed Martha recorded years ago, her home was supposed to go to Pete. Unfortunately, Pete did not survive her so that transfer doesn’t occur and the property is still part of her estate. If Martha also had a Will prepared, she could have made provision for what happened to the property in the event Pete did not survive her. Since she saved money by not doing a Will or Trust if appropriate, the property now will be distributed as provided by California law. In this case, her remaining heir is Mike, and he gets the house. This is exactly the opposite of Martha wanted.
The moral of this story is that even if things seem really easy and straightforward, you should always consult an attorney with years of experience. There can be problems lurking you haven’t even thought about.
A knowledgeable attorney can help you with this.
William J. Sweeney
Attorney at Law
915 Highland Pointe Dr., Ste. 250
Roseville, CA 95678