There is a new way to hold title to real property in California, effective January 1, 2016. A "Revocable Transfer On Death Deed" is just what it sounds like. It is a deed recorded in the official county real estate records, which says who is going to be the owner after the current owner dies. It is revocable. The current owner can still sell the property, record a substitute TOD deed designating someone else as the successor owner, or record a Revocation Deed canceling the TOD deed. It is a way to avoid probate when the property owner dies that is less expensive than hiring an attorney to write a revocable living trust and unlike a joint tenancy deed (which also avoids probate) still allows the property owner to change his or her mind.
The revocable living trust is still better. Getting a substitute TOD Deed or Revocation Deed written, notarized and recorded takes some time. The trust can be amended or terminated by just writing it down, signing it, and making sure someone has it or finds it after the owner passes away. The trust can cover all the trustor's property, not just the person's home. It can also provide for selling property and dividing the proceeds among multiple persons, and establish continuing trusts for minors.
We set up such trusts, also provide a back-up will to cover any property which doesn't make it into the trust, transfer one piece of property to the trust, usually the family home, and provide the forms for powers of attorney for health care decisions and financial decisions when the person is alive but unable to make such decisions, for just $1500.00.
The TOD Deed must be recorded in the official county real estate records within 60 days after it is signed and notarized. This is mandatory. A regular grant deed or quitclaim deed is valid as soon as it is either recorded or even just delivered to the grantee. The grantee can record it after the grantor passes away. In theory, it is valid even if it is never recorded, but it will be difficult to get title insurance to sell or refinance the property without allowing the title company to record the deed. If you fail to record a TOD Deed within 60 days after it is notarized, it is void.
The usual recording fee will be charged by the County Recorder, just like any other deed, but no transfer tax will be charged. A Preliminary Change of Ownership Report (PCOR) for reassessing the assessed value for real property taxes is not required, and the real property will not be reassessed.
Probate is unnecessarily expensive, takes too long and too much effort, and is annoying. The fees paid to the person appointed to close the estate and to that person's attorney are set by statute. However, if the deceased's main asset is the home and it is held in joint tenancy or in a trust, there will be no probate, unless there are a lot of other assets, and therefore no such fees.
One problem with joint tenancy is that it is irrevocable. After the donor has given away a half-interest in the home with the right of survivorship (the survivor receives title to the entire property), the donor cannot take that half-interest back or give it to someone else, unless the done gives it back or gives it to someone the donor chooses. Why should the donor do that?
Another problem is that joint tenancy is supposed to be equal shares. If there are two joint tenants, they each own half. If there are three, then they each own one-third. There's no such thing as a 75%-25% split. Also, each joint tenant has the right to live there. The donor can't live there and prevent the other joint tenant from moving in, too.
A TOD Deed or a trust solves both the irrevocable problem and the joint occupancy problem.
A revocable trust provides much more flexibility. The trustor can add property to it, take property out of it, change the gifts on death, amend any of its terms, replace the whole thing, or terminate it and any time. Unlike a recorded deed, whether a Transfer On Death deed or a joint tenancy deed, who gets the owner's home on death remains completely private. No one is entitled to see the trust document, except the trustor and the trustee, until the trustor passes away, and until then, the trustee is the trustor/homeowner. So no one has to know.
And the trustor remains the only owner of the home, through the trust. No one else is entitled to live there or tell the trustor what to do about repairs, furniture or whom the trustor lets live there, too.
The TOD Deed is an interesting option. It has no effect until the owner passes away, and the owner always can revoke it or replace it. A trust has all those benefits and many others. It costs a little more, but not that much, and offers all kinds of additional choices. We recommend that everyone have a revocable living trust for all their property.