Friday, February 17, 2017

California Transfer On Death (TOD) Deed -- avoids probate, less expensive, faster...

Thanks to California Assembly Bill 139 that passed in 2015, as of January 1, 2016 a real property owner has a new way to avoid the Probate process. AB 139 created the "Transfer On Death" Deed. Why is this significant? Let me explain...

Generally, if a property owner dies and does not have a Living Trust, any real estate owned must go through the Probate process in order to be sold. This applies even if the property owner has a don't be fooled into thinking that property named in a Will avoids the Probate process. IT DOES NOT. The Will only serves to specify who the deceased person wants to pass the property along to. Probate is a court process to actually transfer ownership of the property. Probate is expensive, extremely time consuming, and can be highly emotionally me, I have helped several clients through the process in order to sell homes of deceased loved ones, and it is not a process I would wish on anyone.

So I am frequently asked -- how can we avoid Probate? Up until this last year, my answer was -- talk to an attorney, form a Living Trust, and do not forget to deed your real estate into the trust. Creating a Living Trust sets up a mechanism that transfers responsibility for real estate to a Successor Trustee, which makes selling a home after death pretty simple. There are two downsides to setting up a Trust though. The first is that forming a Trust is pretty expensive -- an attorney will charge $2,500 - $10,000 depending on how complicated your estate is. The second is that Trusts take time to plan properly -- so it could take a few weeks to a few months to form your Trust and deed your real property into it.

With the passage of AB 139, there is now an inexpensive and faster option -- deed your property into a "Transfer On Death" Deed -- aka, a TOD Deed.

One of my past clients called me in September when her mom was diagnosed with an aggressive form of cancer.  Her mom had just weeks to live, had no trust and no will, and owned a home in Carmichael. I immediately thought of the TOD Deed. With a TOD Deed, the owner remains the owner while that person is alive, and it names a beneficiary that the property is transferred to upon the death of the owner. She called an attorney who prepared a TOD Deed for her mom, had it signed and  notarized and recorded with Sacramento County. She passed away just days later.

The entire process to prepare, execute, and record a TOD Deed was just days and a few hundred dollars. Once her mom's death certificate was available, an "Affidavit Death of Transferor" had to be prepared and filed with Sacramento County. So within a short period of time, and for a few hundred dollars, daughter had full authority to sell the property. No Probate. No excessive costs. Way less stress.

I always suggest getting tax and legal advice before doing something like this, but what I can tell you is that this is a streamlined way to take the expense, time, and stress out of what is already an emotional time. And as a side note, an owner can file a TOD Deed, make changes to the beneficiary during his/her lifetime, sell the property, or deed the property into a trust later. No need to wait until a fatal illness to get one done. In fact I would recommend being proactive.

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