New Revocable Upon Death Trust Deed

Revocable Transfer Upon Death Deeds AB 139 [Gatto]

Signed into Law on September 21, 2015

The Governor has signed into law legislation that, effective January 1, 2016, establishes the Revocable Transfer on Death Deed [RTDD] which would transfer real property on the death of its owner without a probate proceeding.

PFAC has been engaged and closely following the legislation since it was introduced on January 9, as it was considered and amended by the Legislature, and as it was then presented to the Governor.

 

PFAC as well as the Legislature identified the potential for this new RTUDD to be abused. Working in consultation with representatives of State Bar with expertise in this area of law, the association confirmed that there are provisions in the final bill that are intended to address this issue, and that the final version was not opposed by the State Bar.The enacted legislation requires the California Law Review Commission [CLRC] to study the impacts of the RTDD and to report its recommendations prior to a 2021 sunset on the new law.
PFAC will continue to be engaged as this new, temporary RTDD law is implemented, as its effects are studied by the CLRC, and as action is taken to either let the law sunset [expire] in 2021 or to extend the law as-is or with revisions.The legislation was supported by AARP California, the California Communities United Institute, the California Senior Legislature, the Conference of California Bar Associations, and the Howard Jarvis Taxpayers Association.

For the text of the enacted measure: click here

 

The official summary of the legislation:SUMMARY: Seeks to establish, until January 1, 2021, a new, non-probate method for conveying real property upon death through a revocable transfer upon death deed [RTDD].

Specifically, this bill:

▪ Allows an interest in certain residential real property to be transferred on death by recording an RTDD signed and acknowledged by the record owner of the property, with the capacity to contract, and designating a beneficiary or beneficiaries. The deed transfers ownership of that property interest upon the death of the owner. Is effective for any RTDD made by a transferor who dies on or after January 1, 2016, regardless of when the RTDD was executed or recorded. No RTDD may be executed on or after January 1, 2021, but any RTDD properly executed before that date remains valid and may be revoked after that date.

▪ Requires that to be valid an RTDD must be recorded within 60 days of execution.

▪ Provides that an RTDD does not affect any ownership rights during the transferor’s lifetime, nor does it convey any rights to the beneficiary or the beneficiary’s creditors during the transferor’s lifetime. An RTDD is not effective until the transferor’s death.

▪ Provides a statutory form RTDD and requires that an RTDD must be in a substantially similar form. The statutory deed provides information to the transferor, including explaining how the RTDD works, how it is effectuated and some of its consequences.

▪ Provides a statutory form for revocation of an RTDD.

▪ Provides that an RTDD may have multiple beneficiaries, who take in equal shares as tenants in common, but does not provide for alternate beneficiaries. The RTDD does not provide for class gifts, e.g., gifts to the transferor’s unnamed grandchildren. Provides that if a beneficiary dies prior to the transfer, the remaining beneficiaries take in equal shares. If all beneficiaries die prior to the transfer, the RTDD has no effect.

▪ Provides that an RTDD is revocable at any time by a transferor with capacity to contract. If an RTDD and another revocable instrument have both been recorded and both purport to dispose of the same property, the instrument that has been executed later prevails. If two deeds – one revocable and one irrevocable – are both recorded, the irrevocable deed prevails, even if recorded earlier.

▪ Provides that an RTDD must transfer all the transferor’s interest in the property.

▪ Provides that property subject to an RTDD is still part of the transferor’s estate for purposes of Medi-Cal eligibility and will be subject to Medi-Cal reimbursement claims. Property subject to an RTDD is subject to claims from the transferor’s secured and unsecured creditors. Allows the beneficiary to avoid unsecured claims by returning the property to the transferor’s estate.

▪ Requires the beneficiary to effectuate transfer of the property by recording an affidavit of the transferor’s death.

▪ Provides that, if property is held in joint tenancy or as community property with right of survivorship when the transferor dies, the transfer is void and the property passes pursuant to the right of survivorship. Provides, in the information accompanying the statutory deed, that if a transferor wants to sever the joint tenancy and not have the property pass through right of survivorship rules, the transferor cannot use the RTDD.

▪ Permits contest of the RTDD for, among other things, lack of capacity to transfer, transfer to disqualified person, fraud, duress, and undue influence.

▪ Requires the California Law Revisions Commission [CLRC] to study the effects of the RTDD and make recommendations to the Legislature by January 1, 2020.

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