How Will California SB 315 Affect Revocable Transfer on Death Deeds?

In January 2016, Revocable Transfer on Death Deeds, or RTODDs, became available in California as a way for individuals to leave a piece of real property to a loved one simply and cost-effectively. Using an RTODD, a property can automatically pass on to beneficiaries upon an individual’s death without going through the costly and time-consuming probate process.

Until RTODDs, Californians had three options to leave real property to loved ones:

• Maintaining ownership with the right of survivorship or joint tenancy
• Leaving the property in a will
• Leaving it through a trust

In comparison, a Revocable Transfer on Death Deed offers a no-muss, no-fuss alternative way for an individual’s home to be passed to loved ones upon their death without time-consuming probate or the cost of creating a trust.

How an RTODD Works

Only specific properties are eligible for transference by an RTODD:

• Residential dwellings with one to four units
• Condominiums
• Single-tract agricultural properties up to 40 acres with a single-family dwelling

For a Revocable Transfer on Death Deed to be valid, it must be executed before a notary public and recorded within 60 days of execution.

When an RTODD is implemented, the transferor retains all rights and financial responsibilities for the property until death. Upon death, all rights and obligations are transferred to the beneficiaries automatically. Because of their revocability, a transferor can change or revoke the terms of the deed at any time before their death.

Disadvantages of a Revocable Transfer on Death Deed

Unfortunately, despite their advantages, RTODDs have had their own inherent flaws.

Currently, under Probate Code section 5652, an RTODD does not permit any contingencies, alternative beneficiaries, or unequal shares in the transfer of property. If the transferor made any errors or omissions in the drafting or execution of the document, it could void it entirely if not corrected within the transferor’s lifetime. In addition, RTODDs have been used by those perpetrating elder fraud to gain access to vulnerable individual’s real estate holdings.

There have been few protections, up until now, for transferors or beneficiaries in the case of errors, contingencies, or fraud, and the law remained unclear how these matters could be resolved.

What California SB315 Seeks to Do

A new bill, CA SB315, still in assembly, attempts to work out some of the hiccups of current codes and make RTODDs safer for all involved. Senate Bill 315, now in the California Assembly, is seeking to modify the current provisions, consequently offering more protection for transferors and their beneficiaries.

The bill attempts to clarify and establish processes for enforceability, beneficiary share and liability, contesting, and returning the property to the estate, if necessary. If enacted, it will provide guidance for the court in how it may resolve many of the current issues surrounding the use of Revocable Transfer on Death Deeds. But will this be enough protection for all involved?

Getting Legal Guidance Before Using an RTODD

Avoiding probate and preserving assets are important considerations when developing a comprehensive estate plan. But because Revocable Transfer on Death Deeds are still relatively new in the state of California, and legislation is still in a state of flux, it is critical for individuals who are considering using them as part of their estate planning efforts to understand their benefits and disadvantages and ensure that they are drafted and executed properly.

Every family is unique, and estate planning can be highly nuanced. At the Law Offices of Roshni T. Desai, our experienced Orange County, California estate planning legal team would be happy to answer your questions and assist you with your estate planning needs. Contact us or call us at 714.694.1200 to schedule a complimentary consultation.