REVOCABLE TRANSFER ON DEATH DEEDS: CALIFORNIA’S EXPERIMENT WITH A NEW METHOD OF NONPROBATE TRANSFER

By Mark S. Poochigian, Esq.^*and Erin L. Prouty, Esq.^**

Beginning January 1, 2016, California law authorizes the use of a revocable transfer on death deed¹ to allow owners of certain California real property to make a revocable transfer of that real property to a named beneficiary, with the beneficiary’s rights of ownership delayed until the death of the property owner. California property owners are sure to use revocable transfer on death deeds as part of their homemade estate plans, fulfilling the proponents’ desire to provide a low-cost alternative to attorney-drafted estate plans. However, for estate planning attorneys, the new revocable transfer on death deed law is beset by shortcomings that make the newly established option unattractive. In light of those shortcomings, the revocable trust remains the preferred vehicle for attorneys to recommend to clients who wish to retain ownership of their assets until death, and then pass the assets to their chosen beneficiaries while avoiding probate administration.

I. HISTORY OF ATTEMPTS TO ENACT BENEFICIARY DEEDS IN CALIFORNIA

Legislative attempts to adopt a beneficiary deed (now referred to as a revocable transfer on death deed or TOD deed) in California began in 2005, when Assembly Bill 12 was introduced.² That Assembly Bill was enacted, but it did not authorize a statutory beneficiary deed; instead, it directed the California Law Revision Commission (the "Commission") to study the beneficiary deed and make recommendations regarding whether California should adopt it as a new method of making a nonprobate transfer.³ In 2006, after considering California’s nonprobate transfer laws and the absence of a mechanism for making a nonprobate transfer of real property, the Commission recommended the enactment of legislation to adopt a form of revocable transfer on death deed.⁴ Proponents of the revocable transfer on death deed legislation hailed it as offering seniors a simple, no-cost method of transferring property to their beneficiaries.⁵ Opponents of TOD deed legislation cautioned that TOD deed legislation would open the door to elder abuse by encouraging seniors to execute a TOD deed without the advice of legal counsel. Opponents also warned that TOD deed legislation could create confusion and ambiguity, clouding the title to real property for which a TOD deed is used.⁶ At least four⁷ prior legislative efforts to enact beneficiary deeds in California were unsuccessful before Assembly Bill 139 authorizing the TOD deed in California was finally enacted in 2015.⁸