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Information on the New Revocable Transfer on Death Deeds in California

Jennifer Sawday is speaking to many groups in Southern California about the new law that was enacted on January 1, 2016. This law is generally a bad idea and here is why:

To begin, California enacted a new revocable transfer on death deed, which became effective this year on Jan. 1, 2016.

Upon the homeowner’s death, this deed allows for the transfer of title of residential real property to another person as desired without probate or trust administration. For those who google, this section has been codified in California Probate Code Section 5600, et seq. It is similar to payable on death accounts offered by banks and other financial companies and creates, at first glance, a relatively inexpensive way for Californians to transfer their real property after death without administration to the intended beneficiary.  To be valid, however, the deed must be prepared, notarized, and recorded within 60 days of its execution. The person who is intended to receive the property must also survive the homeowner! You cannot designate a second or contingent beneficiary. The deed doesn’t allow for this. Scary!

Approximately half of the states already have laws on their books providing some kind of revocable transfer death deed. This legislation was intended to follow that trend.

These deeds may be used for residential properties that have up to four units or a single tract of agricultural land that is 40 acres or less that has been improved with a single-family residence. The statute is set to expire/sunset on Jan. 1, 2021, unless the Legislature acts otherwise. Any properly prepared and recorded deed under this law will remain valid, in spite of the sunset clause.

Despite the presumed benefits of avoiding death administration of real property with such deeds, the need for proper estate planning is as crucial as ever.

First, a recipient under this type of deed will be liable for the debts (Medical payback, credit cards, and any other secured and unsecured debts) of the now deceased homeowner, which may cause unintended consequences that could have been avoided with proper planning.

Second, the deed does not provide any means for someone to handle personal, financial, or other affairs of the existing homeowner who may be alive but not well.

Third, it does not meet the requirement to handle the disposition of remains.

Think: Great, I get the house, but who is going to handle the mail, burial of the body, and all the other things that come with a life coming to an end?

If you want more information or wish to discuss this new law further, send me an email. I am always happy to have a conversation: jsawday@tldlaw.com.

 

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