Certain legal terms cause people to clutch their wallets in fear. With regard to income taxes, people fear the word “audit”. In family law, they fear the word “alimony”. The scariest word in estate planning is “probate,” which refers to the process by which the court effectively dictates what happens to a deceased person’s property. Knowing the term “transfer on death deed” can make probate far less scary.
A big part of estate planning revolves around trying to avoid probate. Why is this important? There are several reasons. First, the court requires the estate to pay the deceased person’s taxes and debts first. Of course the person can do nothing to stop this from happening, because he or she is already dead. Only after that does the court follow the instructions in the will and distribute the person’s property to his or her heirs. Certain options can help you keep real estate properties out of probate. California’s transfer on death deed may enable homeowners keep at least some of their assets safe from the sticky fingers of the law.
How do Transfer on Death Deeds Work?
A transfer on death (TOD) deed creates an automatic transfer of ownership upon your death. This can keep real property out of probate. The California Assembly Bill 139 of 2016 made TOD deeds legal. The TOD deed is a legal document that states that, when you die, instead of your house being part of your estate (“estate” means the property that you leave to your heirs in your will), your house automatically becomes the property of the family member (the “beneficiary”) you specify in the TOD deed.
Single or widowed individuals are ideal candidates for TOD deeds. If you are married, your spouse automatically gets your house when you die unless your will says otherwise. If you are not leaving a property to a spouse, a TOD deed may speed the process. With a properly prepared and notarized TOD deed, your child, sibling, grandchild, or whichever other beneficiary you choose becomes the new owner very quickly. He or she does not have to wait for the probate process to finish.
What About Title Insurance?
When you inherit a real estate property in California, you also inherit its title insurance. This is true as long as you can prove you inherited it. You must provide documentation such as a will or TOD deed as proof. Failure to provide properly prepared and notarized documents may create a costly, time-consuming situation. You might even have to go through a quiet title action in court. If you plan to use a TOD deed, the safest thing to do is also list the beneficiary of your TOD on your title insurance policy while you are alive.
A People’s Choice: Cheaper Than a Lawyer, More Legal Than a Paralegal
A TOD deed can be an inexpensive alternative to a will, but it will only help your family member inherit your house easily if it is prepared correctly. A registered legal document assistant (LDA) can help you prepare your TOD deed or other estate planning documents for a lower price than you would have to pay for a lawyer. Contact A People’s Choice about estate planning document preparation services.