A California Transfer on Death Deed (“TOD”) is an alternative to avoid probate court and costly attorney fees. This instrument has been developed to provide property owners with an efficient way to name inheritors to their property without worrying about the costly probate process.
The TOD is revocable, meaning that an owner reserves the right to revoke their property from being inherited only if they can still agree to do so contractually (i.e., has the capacity to enter a contract). The beneficiaries entitled to the property are liable for the debts as well as the tax benefits, but there is a degree of vagueness as to whether the liabilities are restricted only to property titles. This could mean that the beneficiary has the potential to be liable for other debts such as credit cards, child support, or judgments on the property. Furthermore, there are uncertainties as to how a TOD will affect reverse mortgages which is an extremely valuable financial instrument for aging homeowners.
While the details pertaining to TOD's may sound simple enough for anyone just learning about them, there is one major red flag to be wary of, fraud. The potential for fraud is high given the simplicity of the deal, wherein parties will tend to be amongst the older population, and those wishing to take advantage face limited regulation. This also serves to highlight the benefits of say something like a Revocable Living Trust, where the entire process is overseen and executed by a legal professional. If you have the financial circumstances to record a Revocable Living Trust instead of relying solely on a TOD, then it is advisable to do so.
If you have any questions regarding estate planning, please don't hesitate to contact the Law Offices of Edward C. Ip & Associates, APC at (626) 228-0638, where our estate planning experts are ready to take your call.
**The information provided on this post does not, and is not intended to, constitute legal advice; rather, all information, content, and material on this post are for informational purposes only.**