Bulletin: CA2016001

Date:
January 20, 2016
To:
All California Issuing Offices
RE:
UNDERWRITING - Transfer on Death Deeds

Dear Associates:

California has passed Assembly Bill No.139, which was approved by the Governor and filed with the Secretary of State on September 21, 2015, and Chaptered as Chapter 293. It amends, renumbers, and repeals sections of the Family and Probate Code, and adds sections to the Probate Code. It is effective January 1, 2016, and remains in effect until January 1, 2021. The main provisions of the new law are found in the Probate Code, commencing with Section 5600. It provides for a non-probate transfer of real property by use of a revocable Transfer on Death Deed (TOD Deed). The deed is valid if made by a transferor who dies on or after January 1, 2016, whether the deed was executed or recorded before, on, or after January 1, 2016.  

Pursuant to the Family Code, the real property described in the TOD Deed must be (1) improved real property with not less than one nor more than four residential dwelling units, (2) a condominium unit, including the limited common elements, or (3) a single tract of agricultural real estate consisting of 40 acres or less that is improved with a single-family residence.

Key provisions of the Act are as follows:

  • The grantor is referred to as the “Transferor”, and the person named in the TOD Deed as the transferee is referred to as the “Beneficiary”.
  • A TOD Deed is revocable, either in writing or by contrary action by the Transferor, as provided below.
  • It is not effective until the Transferor’s death.
  • The Transferor must have the capacity to contract to make a TOD Deed or to revoke a TOD Deed.
  • Unlike a normal conveyance, the Beneficiary is not required to accept the TOD Deed, and delivery is not required.
  • The TOD Deed is not effective unless recorded on or before 60 days after the date it was executed.
  • A revocation must be in writing and executed and recorded before the transferor’s death.
  • When 2 or more TOD Deeds are recorded, the subsequent one revokes the previous one. If the subsequent one is revoked by the Transferor, the previous one is notrevived.
  • Unlike a transfer by Grant deed, a TOD Deed transfers the property without covenant or warranty of title.
  • It does not affect the ownership rights of the Transferor (the Transferor may subsequently sell and encumber, and liens and judgments against the Transferor attach to the property).
  • It does not convey any rights to the Beneficiary or to creditors of the Beneficiary (liens and judgments against the Beneficiary do not attach).
  • If the property is held in joint tenancy or as community property with right of survivorship at the time of the Transferor’s death, the TOD Deed is void and the property passes to the survivor.
  • A TOD Deed does not sever a joint tenancy.
  • A TOD Deed transfers only the interest of the Transferor. Any co-owner’s interest in the property is not transferred unless the co-owner executes and records a separate deed.
  • Upon the death of the transferor, the transferee must record evidence of death of the transferor, and file a change of ownership notice. 
  • An action contesting the validity of a TOD deed may be filed by the transferor’s personal representative or other interested person.
  • A lis pendens may be recorded in connection with such action. The law provides certain protections to a purchaser or encumbrancer for value and in good faith where their interest was acquired before commencement of a proceeding and recordation of the lis pendens filed and recorded more than 120 days after the death of the Transferor.

There are statutory forms for both the TOD Deed and the Revocation. The use of other forms must be in substantially the form of the statutory forms. The statutory forms are found in Probate Code Sections 5642 and 5644, respectively. 

The use of the Revocable TOD Deed is primarily an estate planning device. As such, as with other estate planning devices, the concerns of fraud, elder abuse, and family disagreements are present. Although new to California, many other states have passed legislation allowing the use of TOD deeds, and their use can be a viable vehicle in estate planning. While we work through handling these TOD Deeds, especially where there are TOD Deeds of record, and subsequent TOD Deeds or revocations, contact an STG underwriter for approval. Once we look at a number of these and they are “tried and tested”, a subsequent bulletin will be issued with specifics regarding what circumstances can be relied upon without underwriter approval.  

If you have any questions relating to this or other bulletins, please contact a Stewart Title Guaranty Company underwriter.

For on-line viewing of this and other bulletins, please log onto www.vuwriter.com.

THIS BULLETIN IS FURNISHED TO INFORM YOU OF CURRENT DEVELOPMENTS. AS A REMINDER, YOU ARE CHARGED WITH KNOWLEDGE OF THE CONTENT ON VIRTUAL UNDERWRITER  AS IT EXISTS FROM TIME TO TIME AS IT APPLIES TO YOU, AS WELL AS ANY OTHER INSTRUCTIONS. OUR UNDERWRITING AGREEMENTS DO NOT AUTHORIZE OUR ISSUING AGENTS TO ENGAGE IN SETTLEMENTS OR CLOSINGS ON BEHALF OF STEWART TITLE GUARANTY COMPANY. THIS BULLETIN IS NOT INTENDED TO DIRECT YOUR ESCROW OR SETTLEMENT PRACTICES OR TO CHANGE PROVISIONS OF APPLICABLE UNDERWRITING AGREEMENTS. CONFIDENTIAL, PROPRIETARY, OR NONPUBLIC PERSONAL INFORMATION SHOULD NEVER BE SHARED OR DISSEMINATED EXCEPT AS ALLOWED BY LAW. IF APPLICABLE STATE LAW OR REGULATION IMPOSES ADDITIONAL REQUIREMENTS, YOU SHOULD CONTINUE TO COMPLY WITH THOSE REQUIREMENTS.

References

Bulletins Replaced:
None
Related Bulletins:
None
Underwriting Manual:
4.16 Deeds Of Conveyance
Exceptions Manual:
None
Forms:
None