Book A book icon Megaphone A megaphone icon Chat A chat bubble Calendar A calendar symbol Calendar alternative A calendar symbol Menu A menu symbol for navigation print A computer printer symbol Location A map location marker Location alternative A map location marker Phone A phone symbol User A human silhouette indicating login Document A document symbol Facebook Facebook social media icon Facebook Facebook social media icon Twitter Twitter social media icon Twitter circled Twitter social media icon YouTube YouTube social media icon YouTube YouTube social media icon YouTube Play icon YouTube social media icon Vimeo Vimeo social media icon Vimeo circled Vimeo social media icon LinkedIn LinkedIn social media icon LinkedIn circled LinkedIn social media icon Instagram Instagram social media icon Instagram circled Instagram social media icon Pinterest Pinterest social media icon Pinterest circled Pinterest social media icon Mobile A mobile phone Tablet A tablet symbol Laptop A laptop computer symbol Desktop A desktop computer display Pencil A pencil symbol Ok A checkmark symbol cancel-circle A X symbol Plus An addition symbol Minus A subtraction symbol Heart A heart symbol Star A star symbol Videocam A video camera symbol Caret A small triangle symbol Newspaper A newspaper symbol Cart A shopping cart Tools A hammer and a wrench symbol Flag A flag symbol home home-desc Photo A photograph symbol Audio A speaker with sound symbol Cog A group of cogs symbol RSS A RSS feed symbol Comment A speech bubble symbol Link A chain link symbol Export An export arrow symbol Envelope An envelope symbol Search A magnifying glass symbol Info An information symbol Info circled An information symbol Help circled A question mark symbol Clock A clock symbol Globe A globe symbol Globe alternative A globe symbol none none

California’s Newest Estate Planning Tool – the TOD Deed

As of January 1, 2016, there is a new estate planning tool available to residents in California.  It’s called a “transfer on death”, or TOD deed.  The TOD deed allows owners of certain residential real property to name one or more beneficiaries to receive title to the property upon death, thus avoiding the need to probate the estate.

Let’s take a look at the TOD deeds and identify some of its pros and cons. Before the TOD deed, the most common way to transfer real property in California upon death is by joint tenancy or through probating the owners will in court, a lengthy legal and expensive process.  Californians may also establish revocable trusts to avoid the probate process, but trusts can be too expensive for seniors and individuals whose estate consists primarily of the family home.  A TOD Deed is a fairly simple and inexpensive transfer mechanism to be used in certain simple, straightforward situations.

Limitations
TOD deeds are limited to one to four residential dwelling units, condominium units, or not more than 40 acres of agricultural land with a single-family residence.  A revocable TOD deed is not effective unless the owner signs and dates the deed before a notary public. The deed does not need to be delivered to the beneficiary.  The deed must be recorded 60 days or less from the time it is signed. Finally, the deed may be revoked by the transferor at any time.

Benefits
The benefits of TOD deeds include simplicity, low cost, passing property to the beneficiary(ies) at the fair market value (“stepped up basis”) upon the death of the owner.  It is revocable prior to the incapacity or death if the owner, and in many cases it is a better alternative to transferring title to beneficiaries and retaining a life estate in the home.

Drawbacks
Some drawbacks of TOD deeds include lack of contingency planning if beneficiary predeceases the property owner, and if the named beneficiary becomes incapacitated, the TOD gift may disqualify him/her for SSI/Medi-Cal benefits based on economic need.  TOD deeds are also very difficult to revoke if owner becomes incapacitated, and selling the house upon the death of the owner may take 120 days or more before title insurance can be issued.  Finally, if there is more than $150,000 in additional asset value beyond the house, the estate may still have to go through probate to transfer those assets.

When I think of suggesting a TOD to a client, it’s typically a single or surviving parent whose estate consists of a house and little else, and wants to leave his or her residence outright to one or more children whose circumstances do not necessitate the protection of a further trust. The TOD deed is intended for this simple situation and is a simple and inexpensive method of avoiding probate.
 
Comments
Blog post currently doesn't have any comments.