The California Revocable Transfer on Death (TOD) Form – The One Upside & Many Drawbacks

The California Revocable Transfer on Death (TOD) Form – The One Upside & Many Drawbacks

By Attorney Paul Hanks of Ironclad Living Trusts in California

Are you thinking about trying to accomplish sound estate planning on a shoestring budget ? Have you been considering using the California Revocable Transfer on Death (TOD) form instead of a Living Trust ? It may be time to rethink your decision.

The one upside to the California Revocable Transfer on Death (TOD) form is that it may avoid the probate of your home. Now brace yourself for the many downsides of utilizing this form of deed, also commonly known as the TOD form.

The California Transfer on Death deed form does not insulate your estate from Medicare/ Medi-Cal estate recovery as would a revocable living trust.

Use of the California TOD form also removes all your previous flexibility with using your home’s equity to make improvements to your property. For example, if you had a TOD form in place and thereafter wanted to obtain an equity line of credit, your named TOD beneficiary would need to be involved in the process.

Let’s go even a step further and assume that you named your son Joe as the TOD beneficiary. Another troublesome downside of using the TOD form instead of a living trust is the loss of trust provisions which would insulate the home from Joe’s creditors.

A beneficiary under a revocable TOD deed could also become liable to the estate for the transferor’s unsecured debts. It is important to keep in mind that the transfer on death form does not protect the estate from the unsecured debts of the individual signing the TOD form. California Probate Code section 5677 provides that if any proceeding is initiated for the administration of the transferor’s estate, a beneficiary under that TOD deed is personally liable to the estate for a share of the transferor’s unsecured debts.

And the list of risks with the Transfer on Death form goes on. The TOD form does not provide any protection at all against loan fraud which a living trust quitclaim deed would provide. A trust’s protection against loan fraud arises by reason of the fact that the trust transfer deed converts title of your home into the name of your trust.

The California TOD form also lacks complete flexibility with naming alternate beneficiaries in the event of the death of a primary beneficiary. The California Transfer on Death deed is no more than a rigid limited fill-in-the blanks type form.

The Transfer on Death deed form also cannot place protective restrictions on a beneficiary’s inheritance in the event of that beneficiary’s subsequent disability. In contrast a living trust has provisions which are highly protective of the inheritance of a disabled beneficiaries inheritance.

A living trust can also safeguard an inheritance from opportunistic in-laws, but the TOD form lacks all such flexibility.

And finally the California Revocable Transfer on Death deed form offers zero protection against elder financial abuse which a Living Trust provides by way of powerful provisions providing for the management of the elderly’s assets while they are still living. Without a trust in place the elderly are a great risk of the huge prevalence of financial scams.

In summary, based on the many reasons discussed above, the California Transfer on Death deed is a very restrictive and limiting document. The more prudent course of action is to obtain a consultation with an experienced estate planning law firm to protect your estate.

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