TOD DEEDS CHANGES IN THE LAW 2022: FROM THE TRENCHES OF AGENTQ

As you may know, Probate is one of my specialties, so I write about my experiences and what I discover in the trenches while selling real estate. I love all things legal and escrow in real estate. I believe knowledge is power. I am a Certified Probate Real Estate Specialist “CPRES” through MTI Education, Certified Bankruptcy Real Estate Specialist through BK Global?, a paralegal, and have a B.S. in Business Management. I specialize in listing and selling probate properties, probate properties in foreclosures, probate properties in bankruptcy, inherited homes, inherited homes with reverse mortgages and/or encumbered somehow, and properties held in a trust. I service sellers and buyers throughout Northern California and some areas in Southern California. I cordially work with attorneys, personal representatives, executors, administrators, special administrators, escrow officers, educators, inheritance skiptracing companies, and trustees. I also accept referrals from out-of-state attorneys and real estate professionals who have regular listings and probate sells. Need a CPRES contact Quintella Griffin of eXp Realty, DRE# 01779479 at (510) 295-9298 or [email protected].

A. INTRODUCTION TO CHANGES IN THE LAW 2022

This article has been a long time coming. I wanted to provide an update just in case you missed the changes in the law as it applies to TOD Deeds which became effective January 1, 2022. The California State Legislature enacted changes to the state’s laws governing transfer-on-death deeds—also called TOD deeds. A California TOD deed is a legal document that conveys real estate to a designated beneficiary when the current owner dies. See Cal. Prob. Code §5614(a). TOD deeds have become a popular tool in California estate planning which allows property owners to transfer real estate outside of probate.

Witnesses Now Required

The recent legislative amendment’s principal objective is to mitigate the risk of improperly procured TOD deeds by heightening execution requirements and requiring notice to heirs. The most immediately significant change is that two witnesses must now sign a California TOD deed. See Cal. Prob. Code §5624(b). Both witnesses must be present at the same time and must either see the property owner sign the TOD deed or hear the owner acknowledge the signature. New TOD Deed Form For 2022

Anyone generally competent to act as a witness can witness a California TOD deed. See Cal. Prob. Code §5625(a). A TOD deed’s beneficiary, though, should not also be a witness, as California’s statute presumes that an interested witness improperly influenced the property owner to sign the deed. See Cal. Prob. Code §5625(c).

California’s newly enacted witness requirement complements the existing rule requiring TOD deeds to be signed, notarized, and dated. See Cal. Prob. Code §5624(a) and (c). Only the property owner’s signature must be notarized. Notarization of witness signatures is unnecessary.

A California TOD deed must also be recorded with the county recorder of the county where the property is located. See Cal. Prob. Code §5626. The amended statute requires recording within 60 days of a TOD deed’s notarization date—a minor change from the prior version’s recording deadline of 60 days after execution. New TOD Deed Form For 2022 . This link will take you to ALL of the county recorders’ offices in California. List of California Recorders' Offices

Beneficiary Now Has A Duty To Provide Notice of TOD Deed

A major change to the TOD law is that a beneficiary now has a duty to provide notice of the TOD deed to the owner’s heirs upon the owner’s death. See Cal. Prob. Code §5681(a). The beneficiary serves the notice with copies of the TOD deed and owner’s death certificate which briefly explains the TOD deed’s effects and informs heirs of their right to contest the transfer. Here is a NOTICE that you can use Notice To Heirs For TOD Form .

Essentially, the TOD Deed can now be contested. See Cal. Prob. Code §5681(b). Notice to heirs must be served by mail in a form substantially similar to the model outlined in Cal. Probate Code §5681(b). I recommend that it be served by certified mail return receipt requested so the beneficiary has an actual record of service. The beneficiary then records [meaning record with the county recorder’s office] an affidavit verifying service of notice to the owner’s heirs. This link will take you to ALL of the county recorders’ offices in California. List of California Recorders' Offices

B. MORE CHANGES IN THE LAW IN 2022

The legislative overhaul of California’s TOD deed law includes several more notable changes with potentially significant consequences.

• Sunset Date Modified. California’s legislation that originally authorized TOD deeds in 2016 contained a sunset provision automatically repealing the TOD statute on January 1, 2022—unless extended before that date. The legislature’s recent revisions push back the statute’s sunset date ten years—or until January 1, 2032. California TOD deeds executed before January 1, 2032, will remain valid if the legislature allows the TOD statute to expire on January 1, 2032.
• Recording Deadline for Other Deeds and Liens. Other instruments affecting the real estate i.e., liens or deeds are only operative if recorded no later than 120 days after the beneficiary records the affidavit verifying notice to heirs. See Prob. Code §5652(b), §5660; see also Cal. Prob. Code 5682(c)(1). The owner’s date of death was the recording-date deadline under the prior version of the law. A lien not recorded in time does not survive the transfer, and an untimely recorded deed does not effectively convey the property.
• TOD Beneficiary Obligation for Estate Debts. Statutory amendments adjust the procedure and standards for determining a TOD beneficiary’s proportionate liability, if any, for debts owed by the owner’s estate. See Prob Code §5674, §5677, §5678.
• Judicial Modification of TOD Deeds and Court Can Step In Now. New code sections allow a California court to modify a TOD deed to prevent the deed’s failure due to ambiguity or because a charitable beneficiary declines or is unable to accept the property. See Prob. Code §5658, §5659.
• Updated Definitions for Real Property and Beneficiary. Revisions to the definitions of real property and beneficiary clarify what kind of real estate a California TOD deed can transfer and to whom it may be transferred. Transferrable real estate includes most condominium interests and residential properties with four or fewer dwelling units. Prob. Code §5610(a). The revised statute expressly excludes interests in stock cooperatives and agricultural parcels exceeding 40 acres. The updated definition of beneficiary makes explicit that natural persons, trusts, and legal entities may all be TOD beneficiaries. See Cal. Prob. Code §5608. The prior version of Cal. Prob. Code §5608 defined beneficiary as “a person named in a revocable transfer on death deed…” Trusts, corporations, LLCs, and other entities qualify as persons under the California Probate Code’s broader definition. See Cal. Prob. Code §56.
• TOD Deed Form and TOD’s Signed before January 1, 2022. Make sure when you are preparing this TOD Deed that you are using the current version. California transfer-on-death deeds signed before January 1, 2022, and validly executed and recorded under the prior version of the statute remain effective. See Cal. Prob. §5600(d) .

?C. THINGS YOU NEED TO KNOW ABOUT TOD DEEDS

These are the things that you need to know about a TOD Deed that could impact your estate planning method. Make sure you consult with an attorney if you have concerns regarding your rights as it applies to a TOD Deed.?

• The beneficiary's rights. The person you name in the deed to inherit the property doesn't have any legal right to it until your death. The beneficiary doesn't sign the deed, but it's a good idea to let the beneficiary know you've recorded it. Otherwise, he or she might not know about it, even after your death.
• Earlier wills or TOD deeds. If you have made a will or previous TOD deed that leaves the property to someone, your new TOD deed will override it.
• Your rights. You keep complete ownership of, and control over, the real estate while you're alive. You pay the taxes on it, and it's not protected from your creditors. You can sell it, give it away, or mortgage it. Because you're not making a gift of the property, there's no federal gift tax.
• ?Effect of divorce. If you named your spouse as a beneficiary of your TOD deed, and later get divorced, that beneficiary designation is automatically revoked.
• Revoking the deed. If you later change your mind about who you want to inherit the property, you are not locked in. You have two options: (1) complete, have witnessed and notarized, and record a revocation or (2) complete, have witnessed and notarized, and record another TOD deed, leaving the property to someone else. You cannot use your will to revoke or override a TOD deed. This form is for a TOD deed signed before 1/1/2022. See Revocation TOD Deed Form
• ?How ownership is transferred. To get title to the property after your death, the beneficiary must:

D. THE MEDI-CAL RECOVERY ACT AND A TOD DEED

As you should know, in probate or a trust, you are required to give notice to Department of Health Care Services "DHCS" if the decedent received Medi-Cal. Creating a TOD Deed does not exempt you from notice either. It also does not preclude you from receiving Medi-Cal benefits. This does not apply if the decedent received no Medi-Cal. However, even if the decedent used Medi-Cal, you may be exempt from the debt by numerous way which is further explained below.

• Medi-Cal. In California, creating a TOD deed won't affect whether or not you are eligible for Medi-Cal. Because you own the property and are not actually giving it away during your lifetime, a TOD deed won't help you "spend down" your assets to help you qualify for Medi-Cal. Beware, though, that if you do end up receiving Medi-Cal benefits—for example, to pay for nursing home care—your home might be liable for reimbursement of Medi-Cal expenditures. See Medi-Cal_Recovery.pdf (canhr.org) If you have questions, you may want to consult a local attorney who specializes in probate and the handling of Medi-Cal Recovery Act. Make sure you find an attorney who specializes in this area only.
• ?Other creditor claims. Your TOD beneficiary may be liable for the claims of your creditors, up to the value of the property they receive from you. California Judicial Council Forms has a form you can use to send a creditor a claim form. See Creditor's Claim Form . You also have the right to allow or reject a creditor’s claim. See Allowance or Rejection of Creditor's Claim Form . Note To The Wise: Examine the Creditor’s Claim Form thoroughly. At the bottom, it states “Instructions To Claimant”, this portion of the form will allow the attorney and/or beneficiary, to determine if the claimant meets the guidelines for filing a claim which may preclude them from filing a claim; thus, giving the beneficiary an opportunity to reject the claim. You have to be smart about this.

E. WHAT SHOULD I DO AFTER THE HOMEOWNER DIES

After the homeowner dies who made you a beneficiary on the TOD Deed, there are going to be numerous steps that you must take to transfer the title into your name. Please don't wait 5, 10, 15 years to get the documents recorded. You may end up in probate in a heated contested probate litigation with a heir, end up owing a large property tax debt, unable to obtain homeowner's insurance on the property. Make sure you handle your business. I have been seeing a lot of probate sells where the homeowner has been dead for 5, 10, 15, and even 20 years. It causes so many problems in the sell.

• Record a certified copy of the death certificate in the county clerk's office. This link will take you to ALL of the county recorders’ offices in California List of California
• File a Change in Ownership statement. Your beneficiary can obtain this form from the county assessor in the county where the real estate is located. You can obtain this form online at your local recorder’s office in California. List of California Recorders' Offices
• File a Preliminary Change Form. Your beneficiary can obtain this form from the county assessor in the county where the real estate is located. There are some counties that will NOT allow you to record a Deed without a Preliminary Change Form, in particular Alameda County. List of California Recorders' Offices

Send notice to your heirs, along with a copy of this deed and your death certificate. Sample language for this notice is set out in Prob. Code § 5681(b).

Record an affidavit stating that notice was sent to your heirs. This affidavit can simply state, "I, [name of beneficiary], served the notice required by Probate Code Section 5681." (Cal. Prob. Code § 5682 (c).)

If you ended up receiving Medi-Cal benefits, your beneficiary must also notify the State Department of Health Care Services and provide a copy of your death certificate. If you named multiple beneficiaries in your TOD deed, it's sufficient for just one beneficiary to complete the steps listed above. See my sample form. This link will take you directly to DHCS’s online forms, Medi-Cal Brochure, Yellow Notice info, Hardship Waiver Application, Disability Determination Form, Changes in the law, Special Needs Trust info, Personal Injury info, TPLRD Home and so much more information about this act. Remember nothing is definite. You must read and figure out if any of these things apply to you so you don’t have to pay this debt. You could possibly be EXEMPT.?Just remember the DHCS is not going to hold your hand and tell you if you are exempt. Understanding Medi-Cal Recovery Act and Forms

While the beneficiary must take these extra steps to get title to the property, the property will avoid probate, which is often time-consuming and costly.

§?Liability for debts after your death. If, after your death, there isn't enough money in your estate to pay your debts, creditors have up to four months to bring a court proceeding to seek payment from any real estate transferred by a TOD deed. As a practical matter, that means the new owner may not be able to sell the property until the time for creditors' claims has passed.

F. PROPERTY YOU CAN TRANSFER WITH A TOD DEED

You may transfer any of the following types of California real estate with a TOD deed: property that contains one to four residential units

• ?a condominium unit, or
• a parcel of agricultural land of 40 or fewer acres that includes a single-family residence.

G. PROPERTY YOU CANNOT TRANSFER WITH A TOD DEED

You cannot transfer any of the following types of California real estate with a TOD deed.

• ?non-residential property [which most likely means you cannot transfer commercial property with a TOD Deed]
• a unit in a stock cooperative
• ?a parcel of agricultural land that is over 40 acres in size
• ?a mobile home, unless the mobile home is considered a "fixture" or improvement under Section 18551 of the Health and Safety Code.

H. SPECIAL RULES FOR CO-OWNED PROPERTY

In California, even if you co-own a property, you cannot create a TOD deed together with your co-owners. If more than one co-owner wants to name a TOD beneficiary, they must each complete and record a separate deed. Each co-owner's TOD deed will transfer only that co-owner's share of the property. You may ask yourself why? Because California is a community property state, which means each spouse ONLY OWNS 50% interest in the property. This is why you must record a separate TOD to grant your property to the beneficiary that you wish. Now if the property is real properties’ SOLE AND SEPARATE PROPERTY, a separate TOD may not be required. However, you should consult with an attorney to be sure. You may also be able to get this answer from a title company as long as you don’t pose it as a legal question.

Moreover, how the TOD deed works depends on how you and the other co-owners hold title to the property. If you don't know how you hold title, start by looking at the deed that transferred the property to you. It might say, for example, "to Joanne Hayden and Edward M. Hayden, as joint tenants OR Joanne Hayden, as a married woman as her sole and separate property."

There are a few common ways to co-own property in California:

?Joint tenancy (also called "joint tenancy with right of survivorship"). If you co-own real estate as joint tenants with right of survivorship, when one co-owner dies, that co-owner's share of the property will automatically go to the surviving co-owners. When you make a TOD deed on your own (as is required in California), without the other joint tenants, the deed will be effective only if you are the last surviving owner of the property. If you die first, the surviving co-owners will own the property, and the TOD deed won't have any effect.

Example: Claire and Kendra co-own their home as joint tenants. Claire makes a TOD deed for her share of the property and names Oscar as the beneficiary. However, Claire dies before Kendra. Kendra becomes the sole owner of the entire home, and she is free to sell the home or leave it to anyone she wishes.

Special Note: If you and your co-owner want the property to go to the same beneficiary after you both have died, you can make separate TOD deeds that name the same beneficiary.

?Example: Inez and Alex co-own their home as joint tenants and wish to leave the home to their son Benji after both of them have passed away. Inez makes a TOD deed for her share of the property and names Benji as the beneficiary. Alex makes a separate TOD deed for his share of the property and names Benji as the beneficiary as well. When either Inez or Alex dies, the other will become the sole owner of the entire home. After that surviving owner dies, the home goes to Benji under the last surviving owner's TOD deed.

Tenancy in common. If your deed doesn't state how you own the property, you and your co-owners are presumed to own it as tenants in common, unless you've agreed otherwise in writing. If you own your property as a tenant in common and create a TOD deed, that TOD deed will transfer your share of the property to the TOD beneficiary when you die. NOTE: Please consult with an attorney who specializes in Deeds, especially TODs because there could be a possibility if the spouse holds title as tenant in common and are married, the spouse may be able to use an Affidavit of Surviving Spouse/Domestic Partner. Just double-check on this matter.

Example: Raymond and Jack, who are brothers, own a house together as tenants in common. Raymond signs a TOD deed that leaves his half-interest to his daughter. At Raymond's death, his daughter will become a tenant in common with Jack.

Community property. California real estate acquired by a married person is generally the couple's community property. Community property can be owned with or without a "right of survivorship." Again, look at your deed to find out how you co-own the property. If it says "community property with right of survivorship," then your TOD deed will work the same way it does for a joint tenancy with right of survivorship (see above).

If you're not sure how you co-own the property or whether or not your spouse has any rights to it, consult a lawyer or you can obtain a copy of your Deed from the Recorders’ Office. This link will take you to ALL of the county recorders’ offices in California. List of California Recorders' Offices . While the guidance here fits most situations, if you have a complicated situation or more complex aims, you should turn to a lawyer for a more tailored solution.

Note on trust property. If you hold real estate in a trust, you probably won't need to use a TOD deed, because trust property doesn't need to go through probate anyway. If for some reason you want to use a TOD deed instead, talk to a lawyer about your estate plan first.

I. NAMING BENEFICIARIES IN A TOD DEED

You can name anyone you please to inherit your real estate—a person, more than one person, or an organization such as a favorite charity. But if you want to name more than one person, or a minor, there are some issues you should consider.

More than one beneficiary. Before you name multiple beneficiaries on your transfer on death deed, make sure you consider 1) how the co-beneficiaries will hold title to the property after you die, 2) what will happen if one of the co-beneficiaries dies before you do, and 3) how the beneficiaries will feel about co-owning the property.

Children under 18. Think twice about naming a child under age 18 as a beneficiary. A child can take title to the property, but an adult will need to manage it. This means you probably will need to legally appoint a guardian ad litem which is another process. Make sure you consult with an attorney. This could become complex. Here is a link that can self help you so you can determine if you need an attorney or if you can do it yourself. How To Become A Guardian Ad Litem

Sample Legal Descriptions. Several kinds of legal descriptions are used in California. Just copy what's on the previous deed that transferred the property to you. Here are two examples:

Lot 13, Block 24, as shown on that certain map entitled, "TRACT NO. 917 WESTBOROUGH UNIT NO. 8, SAN MATEO COUNTY, CALIFORNIA", which map was filed in the Office of the Recorder of the County of San Mateo, State of California, on November 24, 1963 in Book 54 of maps at pages 17 and 18.

Unit No. 2807, as shown on that certain plan entitled, "Condominium Plan, One Marina – Phase 20, Redwood City, San Mateo County, California," attached as of that "Declaration of Annexation for One Marina, a condominium project Phase 20 and condominium plan for One Marina – Phase 20," which was filed for record in the Office of the Recorder of the County of San Mateo, State of California, on April 22, 2015 under Serial No. 2015-040048, official records.

If the legal description is too long to safely type out (they can even run several pages long), simply photocopy or scan and print it, and attach it to the transfer on death deed as "Exhibit A."

J. RESOURCES AND HELPFUL VIDEOS

These are resources and information that I hope helps you if you have questions. Remember always to do your research and if necessary, consult with an attorney on these matters that you do not understand.

Introduction Naming Beneficiaries and Revoking TOD Deeds

Video Part 1: Overview of the purpose and use of the TOD deed

Video Part 2: Potential Pitfalls of TOD Deed

Video Part 3: Details of uses and requirements for the TOD Deed

Video Part 4: More details on the use and purpose of the TOD deed

Video Part 5: Complications of the TOD Deed

California Probate Judicial Council Forms

California Probate Codes

How To Become A Guardian Ad Litem and Forms

List of All California Recorders' Offices

Notice To Heirs For TOD Form

Disclaimer. This article should not be considered legal advice. I am not a licensed attorney. It is for informational purposes only. You should do your own research and/or consult with an attorney if you have questions concerning these matters in the article. The written content in this article was not made by eXp Realty, Inc. Quintella Griffin is an independent contractor.