Effective January 1, 2016, California property owners may now use Revocable Transfer-On-Death Deeds to avoid probate of real estate in California. This relatively new deed form provides a simple way to transfer California real estate at death without having to go through California probate. It also avoids the expense and complication of a living trust for simple estates.
With this new law, California joins a growing number of U.S. states that allow property to be transferred by TOD deed at death. The Uniform Law Commission completed the Real Property Transfer on Death Act in 2009, which has now been adopted in fourteen states (including Texas). California followed a different route by adopting its own legislation that is not based on the Real Property Transfer on Death Act.
See our full analysis of the California Revocable Transfer-On-Death Deed Form for more information.
How California Transfer-On-Death Deeds Work
A California Revocable Transfer-On-Death Deed does not take effect until the property owner dies. When the property owner dies, the property is automatically transferred to the beneficiaries designated on the Transfer-On-Death Deed form. The transfer happens automatically and without the need for California probate.
Although other deed forms allow property to be transferred at death, Transfer-On-Death Deeds offer the added benefit of retained control. As long as the original owner is alive, he can revoke the transfer, sell the property, add or remove beneficiaries, and otherwise maintain complete control over the property. The TOD deed has no effect until the owner dies.
Comparison to Life Estate Deeds and Living Trusts
A Transfer-On-Death Deed is the newest form of deed for transferring property at death. They represent an evolution of the long-standing life estate technique. Life Estate Deeds allow a property owner to transfer property to “remainder beneficiaries” that inherit the property at the owner’s death.
Life Estate Deeds avoid probate, but can also create a significant problem: Loss of control. Once a life estate deed is signed, the remainder beneficiaries become actual owners of the property. Although the remainder beneficiaries’ right to possess the property doesn’t happen until death, each remainder beneficiary has a present interest in the property. If the original owner wants to sell the property or changes his or her mind, each remainder beneficiary must consent to the sale or change.
Because most owners are not comfortable giving up complete control of their property during their lifetime, Life Estate Deeds were traditionally viewed as a second-best alternative to a living trust. A California property owner that creates a revocable living trust can avoid probate and keep full control of the property during his her or lifetime. But living trusts are significantly more expensive than deeds.
Since 2006, the California Law Revision Commission has recommended that the California legislature authorize the use of a California Revocable Transfer-On-Death Deed to allow California owners to transfer property at death without losing control associated with Life Estate Deeds or the expense of living trusts. This new Transfer-On-Death Deed should do just that.