By: Justin M. Kennedy, Attorney
Law Office of Roy W. Litherland
In 2016, the State of California introduced a new Transfer on Death Deed (TOD Deed). When the TOD Deed was first announced, we advised our clients against using it. One of the many reasons against using the TOD Deed is that the property could be subject to a Medi-Cal Estate Recovery claim upon the owner’s death. As of January 01, 2017, so long as the TOD Deed has at least one living beneficiary upon the owner’s death such that the property will not be subject to the death probate, the property will not be subject to a Medi-Cal Estate Recovery claim. This change is due to a new law (SB 833) which limits the Medi-Cal Estate Recovery to assets passing through the probate estate.
While the risk of the Medi-Cal Estate Recovery claim has decreased, the risk is not eliminated, and in addition there are other reasons for not using the TOD Deed, including:
- The TOD Deed will only pass to the surviving beneficiaries. If you list three children as beneficiaries and one child predeceases you, only the two surviving children would inherit the property rather than 1/3 passing to the deceased child’s descendants.
- If there is no living beneficiary of the TOD Deed, then the property would need to go through the court death probate process.
- If the beneficiary is living at the time of your death, but dies shortly thereafter, that beneficiary’s interest in the property would need to be probated.
- The TOD Deed keeps the property within your estate for estate tax purposes.
- The TOD Deed may prevent Medi-Cal planning for individuals who are alive but incapacitated.
- The TOD Deed possesses heightened risks of elder abuse.
- The TOD Deed law expires on January 01, 2021 if the existing law is not extended.
Our office recommends against using the TOD Deed.