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Thursday, December 01, 2022
Beginning Jan. 1, 2016, California homeowners can fill out a ‘Revocable Transfer on Death’ deed and without a will or trust, the home will be passed on to the homeowner’s designated beneficiary upon their death. Some are calling this deed a ‘poor man’s trust’ since it operates like a Payable Upon Death (POD) or Transfer on Death (TOD) account which most banks and financial institutions allow. The Department of Motor Vehicles also has a transfer on death form for cars that one can fill out.

For homeowners who want to take advantage of this new law, they would fill out a form called a ‘Simple Revocable Transfer on Death Deed’ indicating who will receive the property after they pass away. The document must be signed, notarized and recorded in the county in which they live. Since it is revocable, a homeowner can change his or her mind and record a new deed.

Up until now, if a homeowner died without any estate documents such as a trust, the estate, including the house, would likely be probated. The general rule in California is that any estate worth over $150,000 is subject to probate. Most homeowners in California are easily above that monetary threshold. Of course, if a homeowner has a trust, then the house is typically placed or ‘funded’ in the trust and the real estate would be passed on to designated beneficiaries according to the distribution plan in the trust.

Lawmakers say this new law will be a handy tool, particularly for single people, older people, widows and widowers. Most married couples hold title to their home as joint tenants or community property with right of survivorship, which means that if one spouse dies, the other automatically inherits the house as a matter of law with no probate procedure.

Some people see this new law – AB139 – as a way to avoid setting up a trust and/or other estate documents with an attorney which can cost in the $2,500 to $7,500 range depending on the legal services required. The average cost of probate in California is said to be $26,000, payable primarily out of the estate.

While the new law may seem attractive on the surface, remember, as with many estate planning considerations, one size does not fit all. There can be many other assets in addition to a home, for example, which should be placed into a trust depending on the circumstances of the estate, such as multiple properties, size of the estate, young heirs, taxes, special needs heirs, etc.

The law is set to expire on Jan. 1, 2021 so its effects can be studied. All deeds recorded up until that time will be valid. Regardless of what you think your situation is, it is always wise to consult an estate planning attorney to discuss all of your personal and property options.

- Posted by Ivy Altman
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