NEW 2022 Rules for Transfer on Death Deeds - Everything You Need to Know!

Revocable transfer on death deeds have only been around in California since 2016 and are already subject to a lot of bureaucratic minutiae. Originally set to sunset in 2021, they were instead extended to at least 2032 meaning absent some crazy litigation sending shockwaves through the estate planning or real estate legal worlds – don’t hold your breath – then these deeds are likely here to stay for the long run. One would think the process would be simple. You sign a deed transferring your property to someone else at your death. However, there are a lot of rules to be aware of, including those that went into effect just this year.

For full disclosure, we've talked about revocable transfer on death deeds on our YouTube channel before and we are not a fan. Setting aside the fact that we are estate planning attorneys and always recommend setting up a living trust instead, these deeds tie a hand around your back and add too much to keep track of all for the price of maybe saving a few dollars.

However, in case you haven't seen our last video, here's a brief rundown on what a revocable transfer on death deed is: It's a deed that allows for the mostly automatic transfer of one's real property to another right at their moment of passing. They are freely revocable, hence the name, and they are a deed meaning they need to follow all normal deed requirements. This includes having it notarized and recorded with the county recorder; paying the fees associated with the notarization and recording; and, due to this recording, that deed will become a part of the public record and accessible to those who know how to look or pay someone to do a title search. When naming beneficiaries, you must include their name, meaning you cannot simply pick a class of people like "my grandchild" or "my then living children." You must specifically name the beneficiaries. Finally and frustratingly, even though the text of the law doesn't require it, we have had deeds rejected from the county recorder due to a failure to identify the relationship of the beneficiary to the person granting the property. My friend, my son, my grandchild, etc.

Keep in mind, all this has to be done every time you wish to or need to make a change to your beneficiary designation. If you have two beneficiaries and one dies before you, the surviving beneficiary inherits the whole of the property. It doesn't go into the estate of the deceased beneficiary. If no beneficiaries survive you, then there is nobody to give the property to - it goes to probate.

Transfer on death deeds are restricted to only residential property with no more than four single family dwellings on it; a condo; and some agricultural land so long as it is no more than 4 acres and has a single family dwelling on it.

Beginning in 2022, the legislature added more requirements to transfer on death deeds in an attempt to real estate fraud. A relatively significant change is that revocable transfer on death deeds now also require two witnesses to sign said deed. Both witnesses must have either been present when the property owner signed or hear the property owner acknowledge the signature is their own. The property owner's signature must still be notarized, but the witness signatures do not. This is now a stronger execution requirement than trusts, wills, and powers of attorney.

Transfer on death deeds must now be recorded within sixty days of said deed's notarization date, as opposed to sixty days from date of property owner's signing.

Next, a more interesting note, the definition of beneficiary was made more explicitly clear that "beneficiary" includes natural persons (I.e., a live person), trusts, and legal entities. For example, my parents can execute a transfer on death deed wherein their house goes to my trust rather than me, or to an LLC we may own together.

Finally, the most significant change is that a beneficiary under a transfer on death deed, now has a legal duty (meaning they must) provide notice of the transfer on death deed to the property owner's heirs upon the owner's death. This notice must abide by the probate code and explain the transfer on death deed's effects and inform those heirs of their right to contest to contest that transfer. Essentially, "Mom left me the house and not you. Oh, and by the way, you also have the right to challenge that transfer."

Then, in addition to recording an affidavit putting the property into the beneficiary's name, they must also record another affidavit attesting to the fact that notice was provided. Again, as this is all public records, this is all happening out in the open, essentially.

You still cannot set how your beneficiaries are to receive title if you pick more than one beneficiary - for instance joint tenancy or tenants in common. You cannot set any ownership shares besides equal among everyone as opposed to something like ten percent for person A, fifty percent for person B and forty percent for person C. And, most importantly, there are no safety nets built in – no contingent beneficiaries. If you had two or more beneficiaries and one of them predeceases you, their interest goes to the remaining beneficiaries instead of to their estate. You can do this type of distribution in a will or trust, but there you have an election to do so. A transfer on death deed chooses for you. Going further, this means that if all your beneficiaries pass away, then there is nowhere for your property to go other than your estate meaning you now have a probate issue. You have to go back to the county recorder every time there is a problem to solve.

With so many restrictions on choice and general limitations to do something that can still easily result in a probate, thereby erasing any savings you made on not doing a living trust from the start, we always recommend our clients create a revocable living trust rather than a revocable transfer on death deed. Trusts are exceedingly flexible, private, and have multiple safety nets all while you retain the power to change or revoke the trust entirely.

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