Season
October has come and gone, and the fall season is among us. It’s certainly my favorite season. Just in the past couple of months, I have personally seen an uptick in property owners passing on with a Revocable Transfer on Death Deed in place.
In 2016, California implemented this new way to pass down real property to heirs, likely as an option for those who find estate planning to be costly and those who mainly just have one property to leave to loved ones.
Setup
The RTOD can be completed as simple as downloading the form from the state website, filling in the property information and name(s) of beneficiaries, signing with a notary and 2 witnesses, and finally getting it recorded at the county.
As real estate professionals (not attorneys), we should always steer away from offering legal advice, so it’s certainly best for the property owner to either research carefully on their own or seek proper legal advice before using the RTOD.
Witnesses should always be people who are accountable and have nothing to gain from the use of an RTOD. The parties using the RTOD should be sure to read and follow all processing instructions.
Inheritance
Here we are 10 years later, and you can imagine that many people who used the RTOD are now passing on, and those of us in various real estate professions are starting to come across people who have inherited a property in this fashion.
Some want to simply hold the property, and others may want to sell. For many of those who want to hold the property to live in it, they will need to refinance out of reverse mortgages.
Requirements
Regardless of whether the heirs need to refinance or sell the home, there are several steps required before they can move forward. The heir has their own requirements to follow through with, but in this article, I am only covering the title-related requirements.
The heir(s) must collect the death certificate and record an Affidavit of Death of Transferor and wait 120 days before they can take any action as the owner (e.g., sell/transfer/refinance).
The 120-day rule is mandatory and meant to allow time for other possible heirs to contest the RTOD. I’ve seen this to be most urgent to get ahead of when there is a reverse mortgage to refinance out of.
Support
If you are working on any upcoming transactions where your seller is inheriting a property in any way, whether it’s out of a trust, probate, joint tenancy, or RTOD, please reach out. I’m here to help with any situation to make sure you and your clients are on track to close smoothly.
See you next month!
Joe
