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Transfer-on-Death Deeds: An Update
By Barbara Pronin
A transfer-on-death (TOD) deed is one way to ensure that the family home stays out of the probate process when you die.
 
The law that permitted TOD deeds in California was set to expire in January 2022. But Senate Bill 315 extends the deadline until Jan. 1, 2032, and those in place before the law expires will remain valid.
 
For some homeowners with an existing TOD deed in place, however, this may be a good time to consider other options.
   
To begin with, you can only use a TOD deed to pass real estate to your children without going through probate if:
  • The property being transferred is worth less than $1 million dollars
  • The beneficiary intends to make the property their primary residence
     
Given the price of California real estate, these conditions may make a TOD less than useful.
 
Additionally, title insurers are leery of a TOD deed because they need to be sure it was executed while the transferor was of sound mind and not under duress - and because insurers want to see that the new owner has owned the home without issues for three years after the late homeowner’s death, the beneficiary could have difficulty when selling or taking out a loan.
 
In an attempt to make the TOD more trustworthy, S.B. 315 redefines some terminology and inserts safeguards to support older or vulnerable homeowners. Specifically:
  • Notarizing the TOD will require two witnesses (not including the beneficiary) to sign the new notice form
  • Revoking the TOD will involve signing a new document with a notary.
  • When the homeowner passes, the beneficiary will need to notify the homeowner’s heirs.
In short, California homeowners who are considering a TOD should know that S.B. 315 will change the rules, starting in 2022. It will complicate the process a bit - the cost of making it less vulnerable to fraud. TOD deeds will still be relatively simple and inexpensive, but because there could be ramifications if the beneficiary is a minor, and because no law can make a TOD totally fraud-proof, it may be wise to consult with an estate planning attorney about the best way to meet your objectives in passing your home to beneficiaries.
 
Barbara Pronin is an award-winning writer based in Orange County, Calif. A former news editor with more than 30 years of experience in journalism and corporate communications, she has specialized in real estate topics for over a decade. 

This material is not intended to be relied upon as a statement of the law, and is not to be construed as legal, tax or investment advice.  You are encouraged to consult your legal, tax or investment professional for specific advice.  The material is meant for general illustration and/or informational purposes only.  Although the information has been gathered from sources believed to be reliable, no representation is made as to its accuracy. 

 

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