Recently signed legislation allows for the transfer of real property upon death through what is touted to be, under certain circumstances, a more streamlined and simple process, without the typical probate proceedings. Historically, many assets, such as stocks or bank accounts and even possessions, could be passed on to an identified beneficiary through the completion of a ‘Payable on Death’ or ‘Transfer on Death’ form (POD or TOD, respectively). The new legislation, AB 139, permits a similar transfer of real property, such as a house, land or other type of building, upon the death of an owner through the same process. AB 139 is effective now through January 1, 2021 (there is a five year test period to gauge the law’s impact).
The revocable TOD deed law provides, 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 estate recovery;
- a revocable TOD deed is void if, at the time of the owner’s death, the property is titled in joint tenancy or as community property with right of survivorship;
- there are 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; and
- there is a process for contesting the transfer of real property by a revocable TOD deed.
Although it is intended to reduce the need for probate, AB 139 is a major change for real property transfers and there is some concern over the increases in estate plan litigation that may result. The intent of this bill is clearly admirable – to lessen the demands and paperwork for families and loved ones grieving their loss; however, it also opens the door for someone to take advantage of a more lenient process by unduly influencing an owner or through improperly executed revocations.
As the TOD deed will be printed exactly as required in the statute itself, individuals will have the ability to complete the form without consulting an advisor (e.g., an attorney, title company, or accountant) to help them understand the potential consequences of executing it. And because the form appears relatively straightforward, any would-be swindler would only need to convince their target to sign a “simple” beneficiary form to perpetrate their fraud.
Additionally, if the person signing the TOD deed wishes to change the beneficiary designation, there is a chance that the change will not be effective and their intended beneficiary may lose out.
California Advocates for Nursing Home Reform (CANHR), a strong advocate and vocal opponent of elder abuse, had the following to say regarding their objection to AB 139, “CANHR strongly opposed this bill – and similar bills over the years – as we believe it would make many elders even more susceptible to undue influence and elder abuse. These deeds are also subject to estate recovery, which means that those same low-income elders, who are likely to execute TODs will also be more likely to be on Medi-Cal and thus subject their estates to recovery. Proposed as a low cost alternative for those seniors who cannot afford attorneys for trusts or other alternatives, [the new law] will undoubtedly cause more harm than good. As one organization opposed to the bill noted, these deeds ’will become the new form of easy, convenient, and cheap elder abuse.”
But even with the potential for abuse, there may be some beneficial uses, such as the transfer of encumbered real estate on the death of the owner, presumably avoiding the lender from exercising a “due-on-sale” clause. The next five years should provide more than enough evidence to determine whether the rewards of AB 139 outweigh the risks.
If you have questions about these changes or whether the transfer on death deed is right for you and your family, please contact Dallas K. Mosier by calling (805) 546-8785 or emailing DMosier@carnaclaw.com.