Few people are familiar with the details of California’s Revocable Transfer on Death Deed (TODD), a relatively simple and low-cost estate planning tool codified under California Probate Code Sections 5600 to 5698. Misconceptions abound about how it functions, and perhaps a bias against its widespread adoption often leads individuals to rely on incorrect notions about its effectiveness. This article aims to clarify the essential aspects of the TODD, a mechanism that allows for the nonprobate transfer of real property, with important flexibility and specific requirements that set it apart from other estate planning tools.

What is All the Fuss About?

In the ongoing debate over Transfer on Death deeds, or TOD deeds, we find two sides with starkly different views. On one hand, supporters of TOD deeds paint a picture of simplicity and affordability. They argue that these deeds offer property owners a straightforward path to transfer real estate upon their death, neatly sidestepping the often complex and costly probate process.

The benefits, proponents say, are clear and compelling. First, there's the matter of cost - TOD deeds are significantly less expensive than setting up trusts or going through probate. Then there's the simplicity factor; these deeds are designed to be user-friendly, easy to understand and implement. Another key advantage is the flexibility they offer. Unlike some other estate planning tools, TOD deeds can be changed or revoked during the owner's lifetime, providing a level of control that many find reassuring. And of course, there's the primary goal: avoiding probate altogether, which can save time, money, and stress for beneficiaries.

However, on the other side of the argument, we find a more cautionary tale. Opponents, particularly trusts and estates attorneys who are well-versed in the complexities of estate law, warn that the seeming simplicity of TOD deeds may be deceptive. They argue that this simplicity could open the door to a host of unintended consequences.

One of their primary concerns is the potential for fraud or elder abuse. The ease of creating and changing these deeds, they argue, could make vulnerable individuals, particularly the elderly, targets for manipulation. There's also the worry about legal mistakes. Without proper guidance, uninformed users might make errors that could have serious repercussions for their estates and beneficiaries.

Furthermore, opponents point out that TOD deeds don't exist in a vacuum. They warn of potential conflicts with other estate planning documents, which could lead to confusion and legal disputes. Lastly, rather than simplifying estates as intended, these attorneys fear that TOD deeds might actually complicate matters, adding another layer of complexity to an already intricate area of law.

As the debate continues, it's clear that both sides present valid points to consider. However, in order to participate in the discourse, discussants should know what the provisions of the Probate Code actually say. The question remains: do the potential benefits of TOD deeds outweigh the risks, or are the concerns raised by opponents too significant to ignore?

What Does the California Probate Code Say?

The TODD statute provides significant flexibility in estate planning. The statute allows the transferor to designate a variety of beneficiaries, including natural persons, trusts, or legal entities, thus accommodating diverse estate planning needs. Additionally, TODDs allow for multiple beneficiaries to inherit property as tenants in common, with the transferor retaining control of the property until death. Notably, Section 21110, the California antilapse statute, does not apply to TODDs, meaning that if a beneficiary predeceases the transferor, the share lapses rather than passing to the beneficiary’s heirs.

Unusual Witness and Notary Requirements

One of the more distinctive features of the California TODD, as outlined in Probate Code Section 5624, is the specific formalities required for execution. To be valid, a TODD must be signed by the transferor in the presence of two witnesses who are present simultaneously. In addition, the deed must be notarized. This combination of witness and notary requirements is unusual compared to many other types of property transfers, which may not require both witnesses and a notary. These strict formalities ensure the validity of the deed and help prevent fraud or undue influence in the creation of the TODD.

What Mobile Homes Qualify?

According to Probate Code Section 5610, the statute sets limitations on what kinds of property can be transferred via a TODD. While residential real property can be transferred, mobile homes are only included if they qualify as “fixtures” under state law. This means the mobile home must be legally considered a permanent part of the real estate to be eligible for transfer under a TODD. Other types of nonresidential property or agricultural land over 40 acres are excluded from transfer by TODD.

Formal Revocation Procedures

Another key aspect of TODDs is the formal procedure required for revocation. Under Probate Code Section 5630 - 5632, a TODD remains revocable until the transferor’s death, but revocation must follow specific procedures to be effective. The transferor can revoke a TODD by recording a revocation form, creating a new TODD for the same property, or transferring the property to another entity, such as a trust. However, revocation cannot be done by will, and to be valid, the revocation must be recorded within 60 days of notarization, similar to the original TODD.

Detailed Overview of California's Revocable Transfer on Death Deed (TODD) Statute

California law provides a framework for nonprobate transfers of real property through TODDs. The statute remains effective until January 1, 2032, per Probate Code Section 5600, with important rules concerning execution, revocation, and the potential repeal of the law.

• Effective Dates and Repeal Clause: The TODD law applies to all deeds executed by a transferor who dies on or after January 1, 2016. It remains effective until January 1, 2032, unless extended or revised by future legislation. Importantly, deeds executed before the repeal will remain valid.
• Validity and Flexibility: TODDs do not prevent other legally permitted methods of transferring property at death, providing flexibility in estate planning (Section 5602).

Execution and Requirements

• Eligibility to Create a TODD: Any property owner with legal capacity may create a TODD for their real property (Section 5620).
• Naming Beneficiaries: The transferor must clearly identify beneficiaries by name. For trusts, the name of the trust and trustee, as well as the date of the trust, must be specified (Section 5622).
• Execution Formalities: The TODD must be signed and dated by the transferor in the presence of two witnesses who are present simultaneously. The deed must also be acknowledged before a notary public. These steps ensure the validity of the deed and reduce the risk of fraud (Section 5624).
• Recording Requirements: For a TODD to be effective, it must be recorded within 60 days of notarization (Section 5626). The transferor does not need to deliver the deed to the beneficiary during their lifetime, nor does the beneficiary need to accept it before the transferor's death.
• Revocation: The latest recorded TODD automatically revokes any previously recorded TODD for the same property. Revocation procedures require recording a revocation form, creating a new TODD, or transferring the property to another entity. Revocation by will is not permitted (Section 5628).

Key Definitions in the Statute

• Real Property: Defined in Section 5610, this includes land improved with one to four residential units or a separate interest in a common interest development. Excludes agricultural land over 40 acres.
• Beneficiary: Defined as the person, trust, or legal entity named to receive the property under the TODD (Section 5608).
• Transferor: The owner of the real property who creates the TODD (Section 5616).
• Unsecured Debts: Include funeral expenses, last illness expenses, and wage claims, all of which may affect the distribution of property under a TODD (Section 5618).

Post-Death Procedures and Beneficiary Responsibilities

Upon the transferor's death, Probate Code Section 5652 provides that the TODD transfers the entire interest in the property to the beneficiary, but only if the beneficiary survives the transferor. If a beneficiary does not survive, their share lapses and is divided among the remaining beneficiaries. The transferred property remains subject to liens, encumbrances, or other interests that were recorded before the required affidavit was filed.

• Notification to Heirs: After the transferor’s death, the beneficiary must notify the transferor’s heirs and provide them with a copy of the TODD and the death certificate. The notice must be specific in form and content and served in accordance with Section 5681. Beneficiaries may face liability for damages if they fail to notify known heirs.
• Protections for Third Parties: Third parties dealing with a TODD beneficiary who has complied with notice requirements are protected as though the beneficiary were named in a final court order distributing the estate (Section 5682).

Creditor Rights and Beneficiary Liability

• Creditor Priority: Creditors with recorded liens on the property at the time of the transferor's death take priority over the beneficiary's creditors, regardless of when the beneficiary's obligation was created (Section 5670).
• Beneficiary Liability: Beneficiaries are personally liable for the transferor’s unsecured debts to the extent of the value of the property received. Liability is capped at the fair market value of the property at the time of the transferor's death, less any liens or encumbrances (Section 5672).
• Voluntary Return of Property: Beneficiaries may voluntarily return TODD property to the estate for administration and may receive reimbursement for debts paid or improvements made to the property (Section 5678).

Legal Remedies and Disputes

• Contesting a TODD: Beneficiaries or interested parties can challenge a TODD on the grounds of fraud, undue influence, or mistake (Section 5690). Successful challenges may result in the revocation of the deed, with the court determining appropriate remedies.
• Cy Pres Doctrine: Courts may reform TODDs for charitable purposes if the charitable beneficiary no longer exists or declines the gift, redirecting the gift to a similar purpose (Section 5658).
• Protection Against Fraud: General principles of fraud, duress, and undue influence apply to TODDs, and statutory penalties for such actions remain intact (Sections 5696 and 5698).

Is the RTODD Neither Fish nor Fowl?

The Revocable Transfer on Death Deed (TODD) is a unique legal instrument that presents conceptual challenges because it doesn't neatly fit within traditional categories of testamentary or inter vivos transfers.. 

Unlike a testamentary transfer, which takes effect upon the death of the transferor and typically requires probate, the TODD avoids probate entirely by transferring real property automatically at death. However, unlike traditional inter vivos transfers, which require the transfer of some present interest to the beneficiary during the transferor's lifetime, the TODD does not transfer any interest until the transferor's death. This creates a legal paradox: the deed is effective during the transferor’s life but does not vest any rights in the beneficiary until after death, complicating its classification.

This hybrid nature raises conceptual issues, as it blurs the lines between a lifetime gift and a testamentary disposition, making it difficult for courts and practitioners to apply traditional legal principles. For instance, because the TODD is revocable, it challenges long-standing doctrines regarding irrevocable property transfers and estate planning, and it can introduce uncertainties about creditors' rights, the beneficiary's standing before death, and potential conflicts with other estate planning tools. These concerns often lead to hesitancy among estate planning attorneys, who must navigate these unresolved issues in advising their clients.

Conclusion

The California Transfer on Death Deed (TODD) offers an accessible, low-cost alternative for transferring real property outside of probate, providing flexibility in beneficiary designation and ease of use. With its avoidance of probate, revocability, and simplicity, the TODD can help reduce the financial and administrative burdens on an estate. It remains a compelling option for individuals seeking to simplify their estate planning while retaining control over their assets during their lifetime.

However, the hybrid nature of the TODD raises significant concerns. As it straddles the line between testamentary and inter vivos transfers, its lack of immediate interest vesting in the beneficiary opens the door to a host of potential issues. Foremost among these are the risks of elder abuse and fraud. The simplicity of executing a TODD—requiring only two witnesses and a notary—may make it an attractive target for unscrupulous individuals seeking to take advantage of vulnerable transferors, especially the elderly or those with diminished capacity. Unlike the more rigorous oversight found in trust and probate administration, the informal process surrounding TODDs may lack adequate safeguards to prevent undue influence or coercion.

Additionally, the TODD's revocability, while beneficial in offering flexibility, can complicate matters if the transferor falls prey to manipulation. The ability to revoke and replace TODDs may lead to disputes among family members or heirs, particularly if a TODD is used in isolation without proper integration into a broader estate plan. Concerns over conflicting documents, creditor rights, and the lack of coordination with other legal instruments further exacerbate the risk of unintended consequences for beneficiaries and the estate.

These potential pitfalls highlight the importance of caution and informed decision-making when utilizing a TODD. While it remains a useful estate planning tool for many, the risks associated with its use—especially concerning elder abuse, fraud, and legal conflicts—should not be underestimated. Estate planners and legal practitioners must be vigilant in advising clients to ensure that the TODD is used appropriately and that all potential risks are mitigated through proper legal guidance and estate planning strategies.

A podcast that summarized the points of this article is available here:

Further Reading

David Major, Revocable Transfer on Death Deeds: Cheap, Simple, and Has California's

Trusts & Estates Attorneys Heading for the Hills, 49 SANTA CLARA L. REV. 285

(2009).

Danaya C. Wright & Stephanie L. Emrick, Tearing down the Wall: How Transfer-on-Death

Real-Estate Deeds Challenge the Inter Vivos/Testamentary Divide, 78 MD. L. REV. 511

(2019).