Revocable Transfer upon Death Deed

Back on June 21, 2011, I penned a post about proposed bill AB-699 which would have authorized a homeowner to designate a beneficiary for their property upon their death. The bill ultimately failed in the Senate Judiciary committee and thus the revocable transfer on death deed  never came into fruition.

Now a similar bill has been introduced as AB-139 which is modeled after AB-699. 

According to the Legislative Counsel's Digest:

"This bill would, until January 1, 2021, create the revocable transfer on death deed (revocable TOD deed), as defined, which would transfer real property on the death of its owner without a probate proceeding. The bill would require that a person have testamentary capacity to make or revoke the deed and would require that the deed be in a statutory form provided for this purpose. The revocable TOD deed must be signed, dated, acknowledged, and recorded, as specified, to be effective. The bill would provide, among other things, that the deed, during the owner’s life, does not affect his or her ownership rights and, specifically, is part of the owner’s estate for the purpose of Medi-Cal eligibility and reimbursement. The bill would void a revocable TOD deed if, at the time of the owner’s death, the property is titled in joint tenancy or as community property with right of survivorship. The bill would establish priorities for creditor claims against the owner and the beneficiary of the deed in connection with the property transferred and limits on the liability of the beneficiary. The bill would establish a process for contesting the transfer of real property by a revocable TOD deed. The bill would also make conforming and technical changes. The bill would require the California Law Revision Commission to study and make recommendations regarding the revocable TOD deed to the Legislature by January 1, 2020."

Currently, the common methods in which a person can transfer real property on their death include (1) a trust, (2) a will, (3) intestate succession and (4) joint tenancy. This proposed bill would provide a 5th method in which to transfer property on death.

To be clear, this is a proposed bill. It is not yet California law. Any attempt to transfer property this way is a nullity as of this writing.

The bill can be tracked here:
http://leginfo.legislature.ca.gov/faces/billSearchClient.xhtml

For the time being, a trust is generally the recommended method of transfer for California real property upon one's death. The reason being is that a trust avoids probate, a costly and lengthy court proceeding.

Revocable Transfer upon Death Deed

If you own a home in California there are a limited number of ways in which you can transfer ownership upon death to a beneficiary. For instance, if you own a home in joint tenancy, your interest in the home automatically transfers to the surviving joint tenant upon death by operation of law. If you own a home through the medium of a trust, then upon your death the successor trustee automatically assumes legal ownership of the home. If you are so charitable, you may gift your home to a very lucky individual although there are wide-ranging tax implications, namely gift and property taxes. Finally, if you exclusively own your home in an individual capacity, then home ownership transfer will be accomplished through probate or an abridged probate type procedure.

A recently proposed law would add another method for transferring ownership of a home upon death, the revocable transfer upon death deed (“RTDD”). This bill, AB 699, introduced by Assemblyman Wagner, would allow owners of real property to record a deed that would allow them to designate a beneficiary of such property upon their death. For example, if Lionel Flanders owned Greenacre and wanted to bequeath the property to his favorite neighbor, Ned Hutz, then Flanders could record a deed naming Hutz as the beneficiary of Greenacre. Upon Flander’s passing, Hutz would just need to record an instrument indicating that Flanders had passed away and affix a certified death certificate to it in order to transfer ownership of Greenacre from Flanders to himself.

Just as in other nonprobate transfers, minimal paperwork and expense would be required in order to effect the transfer. Yet currently, the expense of a probate or trust administration for transferring a home, common transfer arrangements, typically cost thousands of dollars in attorney fees and consumes months of time. Hence, the expense of transferring real property from the decedent to the beneficiary would be, ostensibly, greatly reduced.

However, there are drawbacks to this bill as elucidated by opponents of the bill, the California Land Title Association and the California Escrow Association. These groups believe that a RTDD would provide another opportunity to exploit the elderly because a home could be fraudulently conveyed simply through a basic document. The elderly are particularly vulnerable to estate planning scams as they often fall prey to unscrupulous insurance agents who sell them annuities for exorbitant fees. This RTDD could provide another avenue to exploit the elderly, and would focus upon the likely most valuable asset of the elderly, their home.

A similar bill introduced by Assemblyman DeVore passed the California State Assembly in 2007 but did not receive enough votes in the Senate Judiciary Committee. Coincidentally, AB 699 is currently awaiting a committee vote before the Senate Judiciary Committee. DeVore’s bill come on the heels of a California Law Revision Commission study which suggested that California “adopt a revocable transfer on death deed, noting that while the deed has advantages and disadvantages, creation of such a deed would, on the whole, be beneficial in California.”

It should be noted that this is a proposed bill and the earliest effective date for it would be January 1, 2012. This assumes that it passes the Senate Judiciary Committee, a Senate vote and is signed by Governor Brown.