REVOCABLE TRANSFER ON DEATH DEED
AB 139 EFFECTIVE JANUARY 1, 2016
Assembly Bill 139 became effective on January 1, 2016. The Bill provides for the automatic transfer of residential real property upon the death of the Transferor named in a prior recorded “Revocable Transfer on Death Deed. The transfer would be effective upon the recording of an Affidavit of Death in the county where the real property is located, and where the RTDD was previously recorded. This process will eliminate the need for a Probate Proceeding. However, as with any legislation there are pros and cons. We have put together a basic outline to help you determine if the legislation can be a benefit to your particular situation. Before recording an RTDD, or recommending the recording of an RTDD to your clients, these are a few of the things that we thought that you should know. For a more in depth look at the law or answers to specific questions that are not addressed here. Please contact us, or consult with an Estate Planning Professional.
PROPERTY SUBJECT TO RTDD:
Residential Property is defined in the law as 1-4 residential Units, condominium unit or a single tract of agricultural land of 40 acres or less improved with a single family residence.
TITLE INSURANCE:
Title insurance Companies are not required by the law to recognize a recorded RTDD. Therefore, it will be necessary to contact your Title Insurer to determine their requirements for insuring a property that is the subject of an RTDD.
A Beneficiary under an RTDD is subject to claims against the deceased Transferor/Grantor for up to Three Years. Therefore, the Title Insurance Company will more than likely show an exception regarding these potential claims, if being asked to insure within the Three Year period. You will need to discuss the particulars of your transaction to see if this exception can be waived.
The law requires that any challenge to a recorded RTDD can only be filed after the death of the Transferor. For this reason, your Title Insurer may show an exception for any potential challenge or claim, within 120 days of the death of the Transferor.
COMMON QUESTIONS:
What if I share ownership of the property?
A. Only YOUR share of the property will be transferred by the RTDD.
If a Co-Owner wants to name an RTDD Beneficiary, they must complete and record a Separate form.
Can I revoke the RTDD if I change my mind?
A. Yes, you may revoke the RTDD at any time. No one, including the Beneficiary can prevent you from revoking the Deed. You must use the statutory revocation form. The RTDD can also be revoked by recording a new RTDD, transferring the property to a 3rd party purchaser, transfer the property by gift or, transfer the property to a Trust. These Deeds must be recorded in order to revoke the RTDD. In order to avoid any doubt, you may wish to record the statutory revocation document before creating and recording the new instrument. The RTDD cannot be revoked by a Will.
Can conditions be added to the RTDD?
A. No, you cannot add any conditions. If you do, your Beneficiary may need a Court Proceeding to clear the title.
Does the RTDD help me to avoid gift and estate taxes?
A. No, the property is still subject to State and Federal Gift and Estate Taxes.
Does the RTDD affect my eligibility for Medi-Cal?
A. No, your eligibility will not be affected by a recorded RTDD. After your death, your property may be liable for Medi-Cal Reimbursement. A consultation with an Attorney is recommended.
How does the RTDD affect Property Taxes?
A. The RTDD has no effect on Property Taxes until your death. At that time, property tax law applies as it would to any change of ownership.
KEY PROVISIONS OF THE LAW:
Federal and California Estate Taxes are not affected by this legislation. Existing guidelines with regard to State and Federal Estate Taxes should be followed.
1. The law applies to the death of a Transferor occurring on or after January 1, 2016, including Transferors named on RTDD executed and recorded before, on or after that date. The law is set to expire on January 1, 2021. Any RTDD executed or recorded after that day will not be considered a valid transfer.
2. The law provides a mandatory statutory form for both the RTDD and Revocation of an RTDD.
3. RTDD must be recorded within 60 days of execution
4. RTDD is revocable at any time
A. If an RTDD and another revocable Instrument have both been recorded and both purport to dispose of the same property, the instrument that has een executed later prevails.
B. If two deeds-one revocable and one irrevocable- are both recorded. The irrevocable deed prevails, even if recorded earlier.
5. A recorded RTDD does not affect any ownership rights during the transferor’s lifetime.
6. An RTDD can have multiple Beneficiaries, taking equal shares as Tenants in Common.
7. Requires the transfer to be effectuated by recorded Affidavit of Transferor’s death.
8. An RTDD must transfer the entire interest held by the Transferor.
9. The property transferred by the RTDD is subject to claims by the Transferor’s Secured and Unsecured Creditors.
10. Property held in joint tenancy or as community property with right of survivorship when the transferor dies cannot be subject to a recorded RTDD. Any transfer by an RTDD would be void and the property passes pursuant to the right of survivorship.
We do not provide legal services or legal advice. Contact an attorney or tax advisor for any related legal services or legal advice.