Revocable Transfer on Death Deed: The Simple Estate Plan

For most Americans, the largest asset they own is their home. However, the cost of establishing an estate plan can be prohibitive for some. To create an affordable means to transfer real estate and avoid Probate, the California Assembly passed Bill (AB) 139 (codified in California Probate Code Section 5642), which created a deed that allows an owner to name a beneficiary to their real estate.

Before the passage of Assembly Bill 139, the only way to assign a beneficiary to real property was through an estate planning device such as a will or trust.  Moreover, if a person passed away without naming a beneficiary in any document (will or trust), the property would have to be submitted to Probate, leaving a Court to establish ownership based on the California laws of succession.

Who can use a revocable transfer on death deed? Pursuant to AB 139, the deed only applies to single-family homes or condominiums, residences with fewer than 4 units, and single-family homes on 40 acres or fewer of agricultural land. In addition, the deed must be filed with the county recorder no more than 60 days after the owner’s signature is notarized. The owner is also free to revoke the deed at any time by filing the appropriate revocation form with the county recorder.

However, the revocable transfer on death deed has some disadvantages. It is important to understand that if a beneficiary predeceases the transferring owner, the revocable transfer on death deed is invalid. In situations of joint tenancy, if the transferring owner predeceases the other joint tenants, the revocable transfer on death deed is invalid.  In situations where a transferring owner becomes incapacitated, there is no way for anyone to revoke the beneficiary.

Notwithstanding the disadvantages associated with AB 139, the biggest advantage it has is to allow someone on a limited budget to use the deed to ensure their property avoids administration by a Probate Court. The cost and time savings likely outweigh any of the discussed disadvantages.

Like all good things, AB 139 is set to expire, unless the state legislature acts otherwise. Although, any revocable transfer on death deeds filed prior to January 1, 2021, will still be valid.

About Tim Burke

Tim is a licensed attorney in California and Nevada. He brings over 19 years of transactional and litigation experience to JohnHart. Prior to joining JohnHart, Tim was in private practice providing legal guidance to clients on Real Estate, financial, corporate, estate planning, and employment matters.

Leave a Reply