By Patrick McCarran
Real Estate Broker
If you lack the assets for a living trust or prefer not to invest time and money into one then a transfer-on-death (TOD) deed may be a valuable tool for you, it allows a homeowner to pass their family home directly to beneficiaries without the need for probate. It can be change while you are still living and become permanent once you pass. This can simplify the transfer process and help families avoid the often lengthy and costly probate proceedings. Many people may believe that if they have a Will the property will not go through probate, this is patently wrong. Your heirs will go through probate and pay the state a hefty sum to make a difficult period in your family lives more difficult.
The probate process in California can be expensive. The fees for Probate are based on the gross value of the assets and are a tiered rate according to the value of the estate, so if you have a house worth $500,000 but there is a $480,000 loan on the property you would potentially owe the state $13,000 for the probate tax leaving the heirs with $7000. In addition there are attorney fees, Executor fees, filling fees, and miscellaneous court fees!
The process for a probate is not quick and can easily take a year or more. If there are disputes, problems or a backed up court system, it can take much longer delaying closure for the family and draining money from the estate for expense such as a mortgage, other loans and credit cards.
While TOD deeds can be beneficial, they come with specific conditions that must be met for the transfer to be effective without probate. The property must be valued at less than $1 million and The beneficiary must intend to make the property their primary residence.
Given the high real estate prices in California, these conditions may limit the usefulness of a TOD deed for many homeowners. If this is the case then I recommend looking into a living trust and avoiding probate
To enhance the reliability of TOD deeds the California Senate introduced several safeguards and terminology to better protect older or vulnerable homeowners:
- The notarization of a TOD deed requires the signatures of two witnesses (excluding the beneficiary).
- Revoking a TOD deed will necessitate signing a new document in the presence of a notary.
- Upon the homeowner’s passing, the beneficiary is required to notify the homeowner’s heirs.
The purpose of this article is to help get you thinking and start a conversation with your family and appropriate legal counsel to consider your options. While these Transfer on Death deeds remain a relatively simple and cost-effective option for transferring property, California homeowners considering a TOD deed should be aware of the guidelines and rules. I am not an estate planner nor an attorney. This article is not meant as tax or legal advice. The examples I have given are merely illustrative and should not be relied upon.
Given the potential ramifications, especially if the beneficiary is a minor, it is advisable to consult with a tax consultant and/or estate planning attorney. This professional guidance can help ensure that your estate planning objectives are met effectively and securely for your specific circumstances.
Patrick McCarran is a local Realtor and Broker DRE# 01325072. He can be contacted by phone or text at (925) 899-5536, pmccarran@yahoo.com or www. CallPatrick.com. An independently owned and operated office. In association with Realty One Group Elite DRE# 0193160. Equal Housing Opportunity.
