Effective January 1, 2016, but only effective until January 1, 2021, there will be a new option for the transfer of real property without a probate proceeding in California. A Revocable Transfer on Death Deed (RTODD) will now be authorized. A transferor, who has the capacity to contract, may deed property to a clearly identified beneficiary. The RTODD must be signed, dated, notarized and recorded within sixty (60) days of signing to be valid. If recorded, and not revoked, the deed will be effective upon death to transfer the property to the named beneficiary. As this is a revocable transfer, the transferor can always change his or her mind and either name new beneficiaries or simple revoke the prior transfer. The property transferred via the RTODD would remain includable in the transferor’s estate, including for Medi-Cal eligibility and recovery purposes and for the transferor’s creditors.
Although this law is touted as a simple way for a non-probate transfer of a residence, which is used in many other states, there are concerns this law will encourage elder abuse and fraud. As this is a revocable transfer, it is easy to see how lawsuits could emerge if multiple deeds were recorded, or if the transfer conflicted with set estate planning documents. In addition, it would seemingly be very easy for an abuser to have an elder sign such a document.
Consider the following fact pattern. A single widowed gentleman consults his attorney and sets up a general estate plan, including a trust, which leaves all assets equally between the transferor’s son and daughter. He later decides he wants his son to receive the house, so without consulting his attorney, he executes and records a RTODD. After he passes, while the RTODD will now give the house to the son, the trust indicates that all property should be divided 50/50. The son would thus receive 50% of the assets in the trust as well, giving him a windfall, and not giving the daughter an overall equal share of all of the assets. Unless this was the goal, that the son should receive the house in addition to his 50% share, the RTODD has created a potential estate distribution issue that may push the estate into litigation.
Thus, while we do feel that the RTODD is a good option to utilize along with other estate planning options, there can easily be abuses of this new deed option. In order to ensure that the RTODD is utilized properly, and that all requirements are met, a consultation with an attorney is still in order. Please contact our office if you have questions about this deed and whether it is appropriate to utilize it in your planning.
* The information contained in this Blog is intended for general information and educational purposes only and does not constitute legal advice or an opinion of counsel.