PME Estate Planning, Trust, and Probate Blog

Welcome to the PME LAW Blogs. In this blog, we will focus on PME Estate Planning, Trust, and Probate Blog developments, particularly within the state of California. Nothing in this blog should be construed as legal advice. PMELAW.com is a public website, so communications are not privileged. Copyright Perkins, Mann & Everett (PME LAW) © 2015. All rights reserved.

California’s New “Revocable Transfer on Death Deed”

Written by: Curtis D. Rindlisbacher, Esq.

Beginning January 1, 2016 California law authorizes the use of a revocable transfer on death deed. (California Probate Code Section 5600 et. seq.)

This type of deed is only effective for property that is improved with at least one and not more than four dwelling units or a tract of agricultural property of 40 acres or less with a single-family residence.

The donative transfer (i.e., gift transfer) from the person signing the deed to the named beneficiary is operative when the owner dies. The owner can revoke the deed any time prior to the owner’s death.

The new law requires the owner to have the capacity to enter into contracts. This means the owner must be at least 18 years of age and have sufficient mental capacity to understand the nature, purpose, and effect of signing the revocable transfer on death deed.

The revocable transfer on death deed must be substantially in the form required by the new law. The deed must identify the beneficiary by name. A class designation will not be effective. If more than one beneficiary is named in the deed, each beneficiary will become a tenant in common in equal shares on the death of the owner. The deed must be dated and signed by the owner. The deed must also be acknowledged before a notary public. To be effective the deed must be recorded within sixty days after it was signed. A revocable transfer on death deed will not be effective if title to the property described in the deed on the death of the owner is held in joint tenancy or as community property with right of survivorship.

The owner can revoke the transfer by recording a new revocable transfer on death deed or by signing and recording an instrument revoking the deed.

The recording of a revocable transfer on death deed does not effect the ownership rights of the owner. The owner, or the owner’s agent, may convey, assign, contract, encumber or otherwise deal with the property. The beneficiary has no legal or equitable right to the property while the owner is living. The creditors of a beneficiary have no right to the property while the owner is living.

A named beneficiary will be personally liable for the unsecured debts of the deceased owner to the extent of the value of the property passing to the named beneficiary under the revocable transfer on death deed.

This new form of deed will provide an alternative to transferring property at death by will or revocable living trust. Although deceptively simple, this new form of deed has some potential risks that must be fully understood. If a named beneficiary dies before the owner, the transfer to that deceased beneficiary will lapse. If other beneficiaries are named in the revocable transfer on death deed, the property will be equally divided among the remaining beneficiaries in equal shares. The surviving issue of the deceased beneficiary will receive no part of the property.  Additionally, the law is unclear about whether a custodian for the benefit of a minor beneficiary can be named as a beneficiary under the California Uniform Transfers to Minors Act.