Roseville, CA (Law Firm Newswire) May 9, 2016 – There are many risks and disadvantages for the grantor and beneficiaries of the California Revocable Transfer on Death Deed (“TOD” deed), which became effective on January 1, 2016.
In the event the decedent is indebted to anyone, the TOD deed creates a liability for the beneficiaries. In an effort to satisfy the decedent’s debts, the personal representative who is handling the probate of the decedent’s estate may require payment from any of the beneficiaries of the TOD deed up to three years following the death of the transferor.
The TOD deed is a revocable beneficiary deed that enables the grantor to transfer real property to a beneficiary without having to use a revocable trust or go through the probate court. The decedent’s residence is limited to multi-unit properties containing fewer than four dwelling units, condos and single-family homes with fewer than 40 acres of agricultural land. The transfer is complete upon the death of the grantor.
“The TOD deed is a useful and cost-effective way of transferring property to a beneficiary,” said prominent Roseville, California, estate planning attorney David Wade. “However, a trust is far more effective because it can provide protection to parents with minor children and to individuals with assets that would be administered more efficiently through a trust.”
It is similar to a joint tenancy or community property with rights of survivorship in that it transfers property upon the death of the grantor. The transferor is the sole owner of the property during the owner’s lifetime, and can revoke the TOD. Although the TOD deed is a simpler and less costly option than the use of a revocable trust to transfer property, it has its disadvantages.
In addition to inheriting the real property, the beneficiary inherits the decedent’s personal liability to satisfy the decedent’s debts, including those that are unsecured, such as credit card debts and those that are irrelevant to the real property that was transferred to the beneficiary. The decedent’s creditors can start a probate proceeding within one year of the date on which the decedent died, with the objective of filing their creditor claims in a timely fashion.
Under the law of restitution, the beneficiary must return the real property along with any net income, including rents minus expenses that the beneficiary received after obtaining ownership rights to the property. Restitution can be more onerous for the beneficiary if, after the beneficiary transfers title into the beneficiary’s name, the beneficiary encumbers the property with a loan, makes improvements on the property or sells the property. In addition, if the beneficiary takes out a loan that is secured against the property, the beneficiary must transfer both the title to the property and adequate funds to pay off the debt.
Learn more at http://wadelawcorp.com/.
Wade Law Offices
2400 Professional Drive
Roseville, CA 95661
Phone: (800) 835-2634
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