Huntington Beach, CA (PRWEB) September 29, 2016
This Tip Sheet by Deed and Record explains the advantages of revocable transfer on death deeds and the disadvantages of a quit claim deed. Often, an older generation gifts by quit claim deed California real property to a younger generation to avoid probate. California has a new deed called a “revocable transfer on death deed” that avoids probate while at the same time protects the owner and protects the property tax base.
The problems with gifting by quit claim deed may nclude: property tax increase, required lender approval, loss of control, exposure to the transferee’s creditors and exposure to the transferee’s divorcing spouse. The first problem with any change in real property ownership in California is the increase in the property tax base to current fair market value. There are exceptions to property tax increases and one is a parent to child transfer. Transfers from a grandparent to the grandchild of a deceased parent are also excluded.
To claim these exceptions, a “claim for reassessment exclusion” must be filed with the county assessor; revocable transfer on death deeds do not require filing a claim. All other ownership transfers will result in a property tax base increased to current market value.
Another problem with ownership change in California real property is an outstanding loan secured by the real property. Except for parent to child deeds, changes in ownership allow the lender to call the loan payable in full. To avoid the due on sale clause, the lender’s written permission is needed. A revocable transfer on death deed does not change ownership and the due on sale clause does not apply.
Finally, when ownership is transferred or a co-owner is added, the original owner losses control over the real property. The new owner or co-owner’s consent and cooperation is needed on any future sales, financing or change in ownership. Also, the co-owner’s creditors can attach the property for outstanding debt. Additionally, the new owner’s spouse may claim an ownership interest in a divorce.
A revocable transfer on death deed does not change ownership of the real property and avoids the problems of ownership change. The current owner maintains control over the real property. This deed has no effect on property taxes and does not affect eligibility for Medi-Cal.
A revocable transfer on death deed is not valid for real property held in joint tenancy or as community property with right of survivorship. The real property owner’s interest in the property is governed by the right of survivorship and not by the revocable transfer on death deed.
A revocable transfer on death deed avoids probate. The owner maintains control over the real property. This deed avoids the problems of property tax increases, lender approval and the exposure to creditors that lifetime gifts create with a quit claim deed.
This press release is provided by Mark W. Bidwell, an attorney licensed in California. Office is located at 4952 Warner Avenue, Suite 235, Huntington Beach, California 92649. Phone number is 714-846-2888. Email is Mark(at)deedandrecord(dot)com.