In our last post we discussed the newly created Transfer-On-Death Deeds (“TOD Deeds”); now time for a few problems. There are two main problems created by California’s new TOD Deed rules. First, someone wanting to legitimately use such a deed has to understand all the technical rules that must be followed, and then follow them. This is no easy task because there are a number of areas where a TOD Deed can go wrong.
For example, a TOD Deed must be in writing, signed, notarized, and recorded within sixty days of being signed. If any subsequent deed is filed for the same real property, including a deed selling the property to someone else, then the TOD Deed is automatically revoked.
The TOD Deed remains revocable until death, so it is possible that a revocation can occur, either intentionally or unintentionally, through a new deed. And if the real property is already held in joint tenancy or community property at the time the TOD Deed is recorded, then the TOD Deed is invalid.
In other words, there are many ways in which the TOD Deed either will be invalid or revoked if the specific rules are not followed.
Second, TOD Deeds can provide an easy way for bad actors to take advantage of weakened elders. Imagine if you can gain possession of real property using a document you can draft yourself using online forms. Once the form is signed and notarized, you can record the TOD Deed and then wait for your reward as soon as the elder dies. For a wrongdoer, this is all too easy to accomplish.
And since TOD Deeds transfer ownership of the property to the named beneficiary automatically at death, without the need for court intervention, the wrongdoer can make off with the real estate before anyone knows what occurred.
In short, any device that makes transferring assets at death easy also makes abusing elders easy. That can be a real problem for many elders in California.
While the TOD Deeds may be a great planning device in theory, especially for well-planned estates that are free from abuse, they may create a lot of havoc in abusive situations.