The California legislature enacted a law in 2016 that offered residents an alternative to keep their homes out of the costly and inefficient probate process. This alternative is known as a “revocable transfer on death deed.” This type of deed is sometimes referred to as the “poor man’s trust.” Why? Because it is a less costly way to transfer real property to a named beneficiary without having to create a full-fledged trust.
Limitations to a Revocable Transfer on Death Deed
There are some limitations associated with transferring real property through this type of deed. For example, the only forms of real property that qualify for a transfer through this deed are (i) a single-family home or condo unit, (ii) a single-family residence that sits on agricultural property of 40 acres or less, or (iii) the residence has no more than four residential dwelling units.
Advantages of a Transfer on Death Deed
There are many advantages associated with a revocable transfer on death deed. For example, the filing and recording of the transfer on death deed is fairly cost effective and straightforward. This deed will protect your property from probate court, as long as your chosen beneficiary does not predecease you. Another advantage is, as the name implies, the deed is fully revocable during your life time so you can maintain control and ensure the property is passed on to the beneficiary of your choosing.
Disadvantages of a Transfer on Death Deed
Despite the many advantages associated with a revocable transfer on death deed, there are some disadvantages to consider. For example, your property will be subject to probate court if your beneficiary predeceases you and you lack an alternate estate plan. Another disadvantage is if you co-own property under a joint tenancy. In this situation, your joint tenant becomes the sole owner of the property upon your passing and has full control of the property, even if you created a transfer on death deed. Yet another disadvantage is the fact that if you leave your property to a beneficiary who is still a minor when you pass on, the beneficiary will not automatically receive your property. Instead, a court-appointed custodian will be granted control and management of the property until your beneficiary reaches legal age. Another issue that your real property may still be subject to Medi-Cal estate recovery if you were a recipient of Medi-Cal benefits.
Talk to an Experienced Trust & Estate Planning Attorney in California
As you can see, there are many factors to weigh when deciding whether it makes sense to create a revocable transfer on death deed. To ensure you are making the best decision for your family, take the time to sit down with an experienced and knowledgeable trust & estate planning attorney who is familiar with California law.