On January 1, 2016, a new California law became effective which creates a Revocable Transfer on Death Deed. (“TOD Deed”). The deed is designed to transfer residential property to named beneficiaries upon the death of the grantor. There is no transfer of title during the life of the grantor. The legislative purpose of the TOD Deed was to hopefully create an inexpensive way to transfer property, without the use of revocable living trusts, and without subjecting the title to probate.
Please be sure to contact your attorney before you use such a deed, as there are definite downsides to the use of the TOD. One big downside is that there is a three year statute of limitations which allows secured and unsecured liens to attach to the title of the home after the death of the grantor. As a result, the title will become uninsurable by title insurance companies for three years from the date of death of the grantor. So for instance, if the home passes from mother to son on July 1, 2016, a transfer of the home or a loan on the home from the son will be uninsurable until July 1, 2019. In California, lenders and purchasers almost always require title insurance to insure a title transfer and to insure a loan. The practical result may be that the son will not be able to sell the home or put a loan on it for the three year statutory period.
We do Medi-Cal and asset protection planning in our firm. If the home is in the estate of the Medi-Cal applicant at the time of his or her death, the State will pursue a lien against the property for the amount they have paid to the nursing home for the Medi-Cal applicant. By using the TOD deed, Medi-Cal will be able to attach a lien to the subject real property, because it was in the estate of Medi-Cal applicant upon death. As a result, the use of the TOD is inappropriate for long term care and asset protection planning. Your elder law attorney will advise you of the available techniques under the regulations to properly protect the home from a Medi-Cal lien.
If your grantee does not intend to sell the property or take a loan out on the property for three years from your death, and if you as the grantor are not concerned about Medi-Cal recovery against the home, then the TOD deed may be appropriate. Please be aware also that a class description of beneficiaries such as “children” cannot be created on the TOD deed. If a named beneficiary predeceases the grantor, and there are no other specifically named beneficiaries who take title immediately and jointly, a probate of the home will be required.
As a result of all of the above, it would appear to this elder law attorney with some 39 years of experience, that the use of TOD deed may very well be “penny wide and pound foolish.”
This information is not to be taken as legal advice, and you are encouraged to see your elder law attorney. At the Law Offices of Michael J. Young, at 1931 San Miguel Dr., Ste. 220, Walnut Creek, CA www.WalnutCreekElderLaw, 925-256-0298, lawyoung1@gmail.com we practice Elder Law and we help Baby Boomers, Seniors and families through their Elder Care Journey. We help families with long-term care planning, asset-protection plans, comprehensive estate planning, wills, trusts and powers of attorney. We also help Baby Boomers and families get their “Ducks in a Row” in order help them qualify for Medi-Cal and the VA Aid & Attendance Improved Pension benefit.