In 2015, California passed a law allowing Revocable Transfer on Death Deeds. This law allows an individual during his/her lifetime to record a TOD deed which will then transfer real property to a named beneficiary upon the death of the transferor. On its face, this type of deed appears to be an easy method to avoid probate of interests in real property.
However, many issues arise with TOD deeds. For instance, this type of transfer will not be valid if only a single spouse of community property or one tenant of a joint tenancy transfers real property to a beneficiary. In addition, a TOD deed can potentially cloud title to real property causing the transferor problems if he or she intends to refinance or sell the property. Furthermore, the transferee of a TOD deed receives all debts and liabilities associated with the property and creditors can arguably seek other assets of the transferee to pay off any debts and/or liabilities of the transferor. If the transferee is deceased at the time of the transfer, then any interest in the real property reverts back to the original transferor and becomes subject to probate.
A TOD deed although useful in certain situations, is not a substitution for proper estate planning. Proper estate planning means having a living trust to cover all your assets, a Will, and Powers of Attorney for property and health care.
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