California Creates “Transfer on Death Deed” for Real Estate

Reno Fernandez

The California legislature has created a new “transfer on death deed” for real property.  On Monday, November 9, 2015, Governor Jerry Brown signed AB 139 into law, allowing for deeds that provide for a transfer upon the death of the owner.

This new form of deed has some special features and restrictions.  In particular, unlike other deeds, it must be recorded within sixty days after signing or else it will be invalid.

Moreover, the validity deed can be challenged within 120 after the death of the owner.  This is to help mitigate the potential for abuse, especially elder abuse.  Accordingly, it appears that title insurance will not be available to protect such transfers in the first 120 days after the owner’s death.

This deed can be used only to transfer one- to four-unit dwellings, condominium units and agricultural land up to 40 acres with a single-family residence.

The deed can be revoked.  Also, if multiple deeds are recorded, the most recently recorded deed will control (as opposed to the most recently signed deed).

The statute will automatically expire after five years if the legislature does not act to extend it.  This period is to observe whether the statute creates unacceptable problems.

The statute is likely to give rise to legislation regarding the owner’s testamentary intent, especially when the deed contradicts a will, trust or other written instrument.  A carefully prepared estate plan remains a superior way to pass assets.

reno-fernandezAbout the author:

By Reno Fernandez of Macdonald Fernandez LLP, providing estate plans for businesspeople, entrepreneurs and professionals.