This year updates a 2016 state law that created a method for beneficiaries to limit the probate process by creating a trust involving property. A transfer on death (TOD) deed would transfer ownership of it on the owner’s death to the trust’s beneficiary. Changes are meant to address past issues that arose from the legal document’s use.
When everything’s done right, a TOD deed allows your beneficiary to obtain your property with less probate involvement, and you would maintain control of it during your life. Practical issues that have cropped up since 2016 led to changes that went into effect this year.
Why Was the Law Changed?
TOD’s use resulted in complications the legislature means to address:
- Probate’s a legal process involving paying the deceased’s bills and obligations and then transferring what’s left to beneficiaries of a trust, a will, or next of kin if neither were created.
- Safeguards allow creditors and potential heirs to challenge these future transfers
- These efforts created risk for future title insurers, so getting title insurance became much more difficult than a traditional deed, probate, or trust. Title insurance covers the insured from a loss related to the property’s ownership
- Though meant to be a simple document that could be created without an attorney, the document is complicated and defective if not fully and accurately completed. To satisfy a title company after your death, many documents require court involvement to become valid, so your beneficiary isn’t completely avoiding probate
- There could be concerns about your decision being the result of fraud, undue influence, or you may have lacked capacity when signing the document. A title company may mitigate this risk by obtaining from you an affidavit to confirm your intent to transfer. But you can’t provide one if you’re dead
The legislature acted as it should. The prior law didn’t prevent some problems, so they made changes to avoid them.
What are the New Requirements?
California’s TOD deed law was updated last year and went into effect this year. The new rules are:
- The beneficiary can be a natural person, a trust, or a legal entity
- Transferrable real estate can be most condominium interests, residential properties with four or fewer units but not interests in stock cooperatives, or agricultural land larger than 40 acres
- The TOD’s execution must have two adult witnesses who attest to the execution and sign it themselves. Both must be present at the same time and either see the property owner sign the TOD deed or hear the property owner acknowledge their signature
- Witnesses can’t be beneficiaries of the deed. If they do, state law creates a presumption they used unduly influenced the grantor
- The beneficiary must give notice of the TOD deed on the grantor’s death to the grantor’s next of kin (who could challenge the document’s validity), along with copies of the TOD deed and the owner’s death certificate. The beneficiary must file an affidavit verifying service was done
- An affidavit must be recorded attesting this notification was given
Thanks to the new law, a state court could change a TOD deed to prevent its failure due to ambiguity or if the beneficiary is a charity that declines the property or cannot accept it. Prior and still applicable law requires the TOD deed to be signed, notarized, and dated. It must be filed with the county recorder where the property is located.
We’re Here to Help
Are you interested in having a TOD deed created, you’re a beneficiary of one or a family member of someone who executed a TOD deed? If so, and you have questions about it, or you’ll need legal help because of it, call Anthony Burton at (949) 244-4207 or fill out our online contact form today. We can discuss your situation, how the law may apply, and how best to proceed.
