Posts By: Gene Osofsky

Q. My wife and I are concerned that our adult children might be held financially responsible for our care in the event we run out of our own resources. Our children are good kids, but they have their own financial responsibilities, including putting their own kids through college. Can you shed any light on this?

A. Sure. This topic has generated some discussion in the news lately, prompted by a recent case out of the state of Pennsylvania. In that case, a son was held liable for his mother’s unpaid nursing home costs of about $93,000, even when the mother had an application for Medicaid (called “Medi-Cal” in California) pending. The case has sent shivers throughout the country, and elder law attorneys have expressed concern that this case could signal a new wave of claims by nursing homes and assisted-living facilities to recover unpaid bills.

For now, the good news is that the statutes in California seem to disfavor claims of this nature. While statutes are on the books which – on their face – would seem to permit children to be held responsible for the costs of their parents’ care, yet California carves out a huge exception to this liability: if the parent is an “applicant for” or “a recipient of ” Medi-Cal, SSI, or other public benefits, then no claim of any kind can be made to recover the cost of care. In short, the law in California appears very unlike that in Pennsylvania, which apparently did not include a similar exception.

Since a parent in need would most likely qualify for some kind of public benefit, and would presumably apply for that benefit, it would be an unlikely scenario where a child would have financial responsibility for his parent’s care. Indeed, I could not find any reported case decision in California which imposed such liability, absent egregious fact patterns involving extreme neglect of a parent amounting to elder abuse.

Still, the law is developing in this area. Conceivably, I can imagine a situation wherein a parent – for some reason – could not qualify for Medi-Cal, but was nevertheless indigent. Such a parent would not qualify under the exception noted above, and in that situation it is conceivable that a child of means could be held financially responsible. Such a situation might arise, for example, where a parent foreclosed his or her own Medi-Cal eligibility by making improvident gifts of assets to children without complying with the strict Medi-Cal rules regarding gifts. Still another example may be where a child signed as guarantor for the parent’s expenses at a senior living facility.

The best way to ensure that your children do not find themselves on the financial hook is to ensure that you and your wife have a plan in place to pay for your own long-term care. That plan may include setting aside sufficient assets to cover that cost, relying upon long-term care insurance (if you qualify and can afford it), or making a timely application for a Medi-Cal subsidy when appropriate.

Keep in mind that there are lawful strategies to accelerate Medi-Cal eligibility while still preserving assets, but these require strict compliance with Medi-Cal rules. In this regard, Medi-Cal planning is similar to tax planning. These strategies should only be employed under the supervision of an elder law attorney with special expertise in Medi-Cal planning. If handled incorrectly, gifts to children could prevent a parent from qualifying for a Medi-Cal long term care subsidy and expose children to financial responsibility.

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References: CA Family Code §’s 4400–4405; CA Welfare & Institutions Code § 12350 [“No relative shall be held legally liable to support or to contribute to the support of any applicant for or recipient of aid under this chapter……..’] ;

Court Decisions: Ventura v. Stark, 158 Cal. App. 3d 1112 (1984); Marriage of Leni, 144 Cal. App. 4th 1087, 1097-1098, 50 Cal. Rptr 886 (2006)

 

Posts By: Gene Osofsky

Q.  Before relocating to California, my wife and I lived in Ohio where we signed wills. Are they now valid in California?

A.  If they were properly prepared and signed under the laws of Ohio, the short answer is “yes”. But, it would still be wise to have them reviewed — and perhaps revised — by a California lawyer. Even though prepared in Ohio, they might be interpreted under the laws of California, perhaps with unanticipated results.  Here are some examples:

Bequest to Caregiver: Under California law, a bequest to a person who is a caregiver, or who is acting as a fiduciary to the will-maker, is generally presumed to be invalid unless an independent attorney has evaluated the planned bequest, and issued a Certificate of Independent Review affirming that the bequest was made voluntarily and not under duress.  Otherwise, the bequest will generally fail.  That may not be the same rule in the state where the will was originally prepared.  So, even though an out-of-state will may be deemed valid in other respects, it is possible that any bequest to a caregiver or a fiduciary may fail if the will is offered for probate in California.  Presumably, such a result was not what the will-maker intended.

Witness Authentication: Generally speaking, before a will can be admitted to probate in most states, two witnesses must have signed a sworn statement reciting that they were present, observed the will-maker sign the will, and affirm that he or she was in possession of his mental faculties and not acting under duress.  In some states, and I believe Ohio is one, this sworn statement is typically not included in  the original will.  Instead, when the testator later dies and the will is offered for probate, the witnesses must then be located and their sworn statements secured before the will can be offered for probate. Sometimes, they must appear in court and give testimony about the signing of the will. If the witnesses cannot then be located, or if they have predeceased the testator, the matter of proving the validity of the will becomes problematic.

California law avoids this problem by permitting the original will, itself, to contain the sworn statement immediately above the witness’ signatures.  This is called a “self-proving” will, and allows the will to be admitted to probate without any additional evidence. This avoids the need to locate the witnesses and secure their sworn statements, sometimes years later.  That sworn statement usually reads something like the following: “Each of us declares, under penalty of perjury, that the foregoing recitals [about the signing of the will] are true and correct”.

Real Property:  If the will disposes of real property in another state, the will should comply with the laws of both states in order to avoid problems. I would advise the same if the realty is held in a Living Trust.

The question as to which state’s laws govern any particular legal issue concerning  a will may vary.  It is therefore wise to have your Ohio wills reviewed, and perhaps revised, if you have relocated to California.  An ounce of prevention is worth a pound of cure.

Posts By: Gene Osofsky

Q. My husband may need to go into a nursing home soon, and I fear that the high cost of nursing care will rapidly deplete our savings. Since we do have some savings, would he be ineligible for Medi-Cal?

A.  Not necessarily, and this comes as a surprise to most couples. Under a law passed by Congress in 1988 called the Medicare Catastrophic Coverage Act (MCCA), Congress included provisions — sometimes referred to as the Spousal Impoverishment rules — to ensure that the spouse living at home is able to retain sufficient means to live with dignity in the community. It did so by carving out certain protections for the healthy spouse. One of the most important is called the Community Spouse Resource Allowance (CSRA). The CSRA is intended as a kind of “nest egg” for the well spouse, and permits him or her to retain a certain amount of savings and other non-exempt assets without disqualifying the ill spouse for a Medi-Cal subsidy. It might help to think of this CSRA as a special Medi-Cal exemption for married couples.

The amount of the CSRA is indexed to inflation and changes every year. In California, the CSRA amount for 2016 is set at $119,220. In addition, the ill spouse is allowed to retain up to $2,000 in non-exempt assets in his or her name.  As a result, between them a couple can keep up to $121,220 in savings, stocks, bonds, and other non-exempt assets, plus exempt assets of any value, such as a home, automobile and IRA’s, and still qualify the ill spouse for a Medi-Cal subsidy.

What if a couple has savings or investments that are above the CSRA ceiling? Can the ill spouse still qualify for a Medi-Cal subsidy?  The answer in many cases is yes.  Indeed, under the Medi-Cal rules there are a number of powerful strategies that can often be employed to enable a couple with excess resources to qualify for a Medi-Cal subsidy. Some strategies involve converting excess resources into exempt or unavailable assets, while others involve seeking a judge’s order to enlarge the CSRA. Thus, a couple faced with the need to qualify one spouse for a nursing home subsidy should not despair even if their savings are substantial. Instead, they should talk to an elder law attorney familiar with Medi-Cal planning in order to evaluate their options.  In many cases, they may be pleasantly surprised to learn that the law protects them, as well, providing they understand the rules.

In another article, I discuss another protection for the well spouse: ensuring that he or she has enough income to meet basic living expenses.

Posts By: Gene Osofsky

Q. My husband may need to go into a nursing home soon and I am looking into a Medi-Cal subsidy to help with the cost. In your recent post you wrote that Medi-Cal permits the well spouse to retain up to $115,920 in savings as a kind of safety net, and even more with planning. Is there anything comparable concerning income, as I will still have ongoing household expenses?

A. Yes. The Medi-Cal rules have been written to ensure that — in addition to a savings nest egg — you can also retain sufficient income to meet your own living expenses. The goal is to ensure that you are not impoverished by the cost of your husband=s care.

The rules do this by permitting an allocation of income from the nursing home spouse to the well spouse in an amount sufficient to meet the well spouse’s basic living expenses. Medi-Cal determines this basic amount on an annual basis and refers to it as the Minimum Monthly Maintenance Needs Allowance (MMMNA). In year 2016, the MMMNA has been set at $2,980.50 per month. Thus, if your own income falls below the MMMNA, the shortfall would be made up from your husband’s income before his co-pay is calculated.

An example illustrates how this works: Let’s suppose the husband is in a nursing home and has income of $2,500 per month, and the wife is living at home with income of $1,200 per month. The wife’s monthly income is less than the MMMNA by $1,780.50 ($2,980.50 — $1,200). She is therefore entitled to an income allocation of $1,780.50 from her husband to bring her up to the MMMNA. This allocation to wife thereby reduces the husband’s income to $719.50 ($2,500 — $1,780.50). Result: after the spousal allocation the wife has monthly income of $2,980.50 and the husband has income of $719.50.

Husband’s co-pay to the nursing home is based upon his now reduced income of $719.50 (less some further adjustments to cover the cost of his health insurance premiums and a modest Personal Needs Allowance of $35 per month), and his Medi-Cal subsidy pays the balance of his cost of care.

There is further good news: (1) if the wife needed a further allocation of her husband’s income to meet her own basic living expenses, she might petition a judge to increase the spousal allocation above the MMMNA, possibly up to the full amount of her husband’s remaining income; and (2) if wife’s own income were already greater than the MMMNA, she would automatically be entitled to retain all of it without the need to make any contribution toward her husband’s cost of care. By way of example, if wife were still working and earning, say, $4,000 per month, she could retain the entire $4,000 per month, and her own income would not be considered in determining her husband’s eligibility for Medi-Cal. However, in that situation she would not also be entitled to a spousal allocation from her husband, because her own income would already be greater than the MMMNA.

Remember: eligibility for a Medi-Cal nursing home subsidy depends upon a couple’s savings and other non-exempt assets being within the Medi-Cal resource ceilings, as described in another post. This asset test must first be satisfied and Medi-Cal eligibility established before the income rules described in this article come into play.

Posts By: Gene Osofsky

Q. I have a large Traditional IRA, and I wish to name my wife as primary beneficiary and my children from a previous marriage as backup beneficiaries. Can I lock in this beneficiary designation plan on the IRA Beneficiary Designation Form I sign at the bank?

A. Unfortunately, not likely. While it is always a good idea to name both primary and contingent beneficiaries when you create your IRA, those designations merely determine the identity of the new IRA owner upon your death.  Under most plan documents, once the primary beneficiary – in this case, your wife – survives you, she then becomes the owner of the IRA for all purposes, and your contingent beneficiary designations become inoperative.  Your wife would then able to designate her own “successor beneficiaries” to take in the event that funds remain in the IRA when she dies.

If she neglects to do so, then the remaining funds would go per the default provisions of the plan document, which likely would be to her estate, potentially resulting in a probate, the distribution of the IRA to her beneficiaries, and the loss of the “stretch” payout option.

In short, most IRA custodians will not permit you to name successor beneficiaries at the time you create your account. This problem usually comes as a surprise to clients and typically arises in two contexts:

1) Your wife has given you her assurance that, if she survives you, she will re-designate your children from your previous relationship as her own successor beneficiaries.  However, at your demise, she suffers from some form of dementia and cannot take the steps necessary to honor her promise; or

2) You are concerned that your wife may remarry and feel it appropriate to name her new spouse as her primary beneficiary, and her own children as contingent beneficiaries.

What to do?

In the first case, one solution is for her to sign, now, a properly designed Durable Power Of Attorney (“DPOA”), which contains specific and comprehensive powers permitting her agent to act with respect to your IRA, including the power to elect to roll your IRA into hers to achieve the “stretch out” of payments.  Caution: To achieve your goal, it would be wise to verify that the beneficiary designations on her IRA are consistent with your own beneficiary wishes.  Also, some custodians have their own DPOA forms, so check with yours and, if so, complete the custodian’s forms as well as your own attorney-drafted DPOA.  Of course, if your wife has capacity at the time of your demise, she should, herself, re-designate her IRA beneficiaries as soon as possible.

In the second case, where you wish to lock-in the designation of your own successor beneficiaries, consider a stand-alone IRA Trust, sometimes called an Individual Retirement Trust (“IRT”).  This is a special kind of trust and is different from the typical “Living Trust”.  Note: there are pros and cons in making a trust the beneficiary of an IRA, including the possibility that doing so may preclude the surviving spouse from rolling your IRA into hers in order to “stretch” the distributions over a longer period of years, and thereby reduce the annual tax bite while allowing the IRA to grow in value over the longer term.

These are complex matters, and seeking the advice of qualified financial and legal advisors to assist you in choosing the most suitable strategy is strongly recommended.

Posts By: Gene Osofsky

Q.  My 86-year-old mother is in a nursing home and receives a Medi-Cal subsidy. We just learned that her brother died and left her $200,000 in his trust.  Will the receipt of this inheritance bounce mom off of Medi-Cal?  Is there anything we can do?

A.  The answer to your first question is easy: yes, the receipt of that inheritance will put her over the resource ceiling and result in the termination of her Medi-Cal nursing home subsidy. If she is unmarried, that resource ceiling is a very modest $2,000.

As your second question, there may be things you can do. Here are some options:

1) Purchase A Prepaid Funeral Plan.  If she has not already made her final arrangements, she can purchase a prepaid funeral contract or fund an irrevocable burial trust for herself and other members of her immediate family.  Most mortuaries have forms available. Those funds will then be considered exempt and will not count toward her resource ceiling.

2) Pay Debts and Expenses:  If Mom has any outstanding debts or expenses, she can pay them.  Be sure to pay by check and retain full documentation.

3) Reform Brother’s Trust?  In some cases, it may be possible to reform her brother’s trust by court order during trust administration, so that the bequest would bypass your mother and, instead, go into a Special Needs Trust (“SNT”) for her benefit.  The SNT would then be managed by a trustee, which could be a family member or a professional trustee appointed by the court.  If properly set up and administered, the funds distributed to the SNT would then not count against her $2,000 Medi-Cal resource ceiling.  Instead, they could be used to pay for things that Medi-Cal does not cover, such as a companion to spend time with her or even to supplement healthcare expenses not paid by Medi-Cal.

4) Join Pooled SNT: If it is not possible to reform her brother’s trust, consider joining a pooled SNT.  These are SNT’s set up and managed by nonprofit organizations, whereby all of the funds are invested and professionally managed as a group, but separate accounts are maintained for each individual beneficiary.  Distributions from the pooled SNT could likewise be used to pay for things that Medi-Cal does not cover.  The drawback is that funds remaining in the pooled account after Mom’s death must first be used to reimburse the state to the extent of Medi-Cal benefits paid out for her, and the excess, if any, may remain in the fund for its ongoing nonprofit purposes.

5) Make Gifts?  If mom has full capacity to consent to gifts, or if she has in place a Durable Power Of Attorney which has adequate gifting powers (unfortunately, most do not), consideration might be given to a very carefully designed plan of divestment in favor of children or other family members. CAUTION:  gifts are frowned upon by Medi-Cal, and any gifting plan should be designed and supervised by an Elder Law attorney with expertise in this area.  If gifts are not handled properly, they may result in the termination of Mom’s Medi-Cal benefits.

As to all of the options, timing is very important, and it is usually necessary to design the plan before the inheritance is actually received so that it can be fully implemented in the month of receipt.  To avoid running afoul of the Medi-Cal rules, obtaining expert advice is essential.

Posts By: Gene Osofsky

Q. I hear that Medicare will now pay for me to discuss my end-of-life wishes with my doctor. Is this true?

A. Yes, beginning January 1 of 2016, Medicare will begin reimbursing physicians for time spent in counseling patients regarding their end-of-life wishes. This development, just announced October 31, 2015, by the Center for Medicare and Medicaid Services (“CMS”), was 6 years in the making and has been supported by the American Medical Association and many other groups and individuals.

Originally a part of the Affordable Care Act, this provision was removed in 2010, just before passage, to avoid the political controversy which arose when some individuals, notably former Vice Presidential Candidate Sarah Palin, accused the Obama administration of supporting “death panels”.  Since then, the mood of the country has changed and the desire to encourage end-of-life counseling has gained broad support.

Until this announcement, Medicare only paid physicians for end-of-life counseling if the counseling occurred during the one time “Welcome to Medicare” examination that occurred within a beneficiary’s first 12 months of Medicare enrollment.  The problem with that arrangement was that many beneficiaries were neither interested nor prepared to discuss this matter with their physician during that very first Medicare visit.

Beginning January 1, 2016, patients may now schedule a visit with their physician for the sole purpose of advance care planning, and the physician may now bill Medicare for that counseling.  Alternatively, the patient may choose to discuss advance planning as part of his visit to address other healthcare issues.  In either event, the physician may now bill Medicare for separate reimbursement, using one of two new billing codes added to the Medicare Physician Fee Schedule, effective in 2016.

One tip: if the discussion takes place during the Annual Wellness Visit, you will typically have no co-pays and the doctor will still get fully reimbursed.  However, if the discussion takes place during any other visit, you may then have the usual co-pays just as for other Medicare services.

Another tip: if you have a Medicare Advantage Plan, be sure to first check with your plan to see whether it covers this counseling and, if it does not, ask if the plan can still bill Medicare for your advance planning visit.

Once you have these discussions with your physician, be sure to take the next steps and create or update your Advance Health Care Directive and discuss your wishes with your family and designated health care agent.  Just as you may prepare a will or trust to plan for your assets, so, too, must you plan for your end-of-life healthcare.  In doing so, you will be doing a service, not only for yourself, but also  for your loved ones who may one day take comfort in knowing that your own wishes were honored.

For more:  Kaiser Family Foundation 10 FAQ’s and CMS Proposed Policy and Changes to Medicare Physician Fee Schedule.

Posts By: Gene Osofsky

Q.  I have heard friends complain that their parent’s financial power of attorney was not honored by their bank. Is there a way to avoid this?

A. Unfortunately, we hear that complaint from time to time. While there may be no way to draft a power of attorney that completely eliminate the risk that it will not be honored at the time of need, here is my short list of steps you can take to  minimize that risk:

  • Sign the Bank’s Own Forms: most banks and other financial institutions have their own, short form Power of Attorney with which they are familiar. While the bank’s own forms are more limited and are usually targeted to specific accounts, signing them – in addition to your attorney-drafted document — usually eliminates the risk that your designated agent will have problems at that bank down the road.
  • Include Hold Harmless Provisions in Your DPOA: financial custodians are concerned about their exposure if they mistakenly rely upon a Durable Power Of Attorney (“DPOA”) that appears valid on his face. It sometimes helps if your DPOA includes specific language that a bank or other custodian will be held harmless if it relies, in good faith, upon a DPOA presented to it.
  • Fully Describe Real Property: title companies are sometimes reluctant to honor a DPOA that refers, generally, to “all real property”.  Their comfort increases dramatically if the DPOA recites, specifically, the full legal description of each piece of real property covered by the DPOA.
  • Preserve Evidence of Capacity: if you anticipate any question down the road as to whether an elderly signer knew what he was signing at the time the DPOA was executed, consider asking him to secure a letter from his doctor that the elder has full capacity to sign such documents.  That letter can then be kept on file to be shown to any financial institution should such concern later arise.
  • Keep the DPOA Current: third parties are often concerned if a DPOA has been signed so long ago so that it is “stale” in their eyes. I recommend re-executing a financial DPOA at least every 3 to 5 years and, if possible, annually.
  • Offer a § 4305 affidavit: custodians are sometimes concerned that the DPOA may have previously been revoked.  To allay that concern, the agent can submit an affidavit to the custodian, made pursuant to section 4305 of the Probate Code, that the DPOA has not been revoked.  Once completed, that affidavit becomes conclusive proof of non-revocation.
  • Anticipate Language That the Custodian May Prefer: if the DPOA is being created to be used at a specific bank or title company, ask whether it prefers specific language in the DPOA and, if so, incorporate same in your document.
  • Legal Proceedings to Enforce Acceptance: as a last resort, consider a lawsuit.  The law provides that a third party who refuses to honor a DPOA, after being provided a 4305 affidavit, may be liable for the petitioner’s attorney’s fees incurred in the court proceeding.  Bringing this to the custodian’s attention often generates the desired compliance.

 

Posts By: Gene Osofsky

Q.  Our mother is in assisted living and may need to go into a nursing home soon. To raise money for her ongoing care, we are thinking of selling her home which is now vacant.  Any thoughts as to whether that makes sense?

A.  Yes. In some cases, selling the home may be appropriate.  However, consider also the following:  selling mom’s home may undermine her ability to qualify for a government subsidy to help pay for the cost of care, whether now in the Assisted-Living Facility (“ALF”), or later in a nursing home. Reason: once she receives the sales proceeds she will then likely be “over resourced” and not eligible for government benefits to ease the cost of care. Instead, by taking steps to preserve her access to government benefits, her own resources will last longer and minimize the risk that she will run out of money.

Background:  There are two key government programs designed to subsidize the cost of long-term care: (1) the Veterans Pension Program, which works best for wartime veterans or their spouses receiving care in an ALF setting, and the (2) Medi-Cal Long-Term Care program which is designed to subsidize care in a nursing home.  Both programs have resource ceilings: individuals with countable assets which exceed those ceilings do not qualify.

Were you to sell mom’s home, the sale proceeds would likely cause her to exceed those resource caps. She would then be ineligible for benefits and would then be obliged to rely upon those proceeds to pay the full cost of care. Over time, those funds would be spent down and, perhaps, exhausted.

Where she would otherwise be able to qualify for one of the subsidy programs, a better approach would involve selling the home inside a very specially designed irrevocable trust, which I sometimes call a “House Trust”.  This trust is designed to preserve home sales proceeds while also preserving eligibility for government long term care benefits. Caution:  this House Trust is very different from the more commonly known “Living Trust” with which you might be familiar.

Using this plan, your mother’s home would be transferred into this House Trust, and only then would it be sold.  Because the home would then be owned by the trust, the proceeds would go to the trustee rather than to your mother.  If properly designed, this trust would  (1) permit the sale of the home as contemplated; (2) preserve her eligibility for a subsidy under either the Veterans Pension Program or the Medi-Cal LTC program; (3) permit indirect access to the home sale proceeds to pay for her care expenses to the extent not subsidized by government benefits, (4) preserve her eligibility for the $250,000 capital gains exclusion associated with the sale of her personal residence, notwithstanding the transfer of her home to the trust, and (5) protect the proceeds from Medi-Cal estate recovery after your mother’s demise.

By facilitating her eligibility for government benefits, this House Trust would prevent the rapid depletion of her assets by the cost of care.  It would also honor what likely is your mother’s desire to preserve her estate for her children and grandchildren, or perhaps even for her own use should she recover and be able to return home.

In our view there is nothing wrong in planning’s one’s affairs to qualify for government programs, so long as full disclosure is made at the time of application.  To put it another way, public benefits planning on behalf of middle-class folks is akin to sophisticated tax planning in which the wealthy engage.  Both impact the public treasury.  To be sure, the impact of tax planning is greater by far.

Posts By: Gene Osofsky

Q. I hear that Governor Brown just signed a new law that makes it easier for a homeowner to transfer a home, on death, to his name beneficiaries without going through probate or creating a trust. Do you know more about this?

A. Yes. The new law (AB 139) creates a Revocable Transfer on Death Deed (“TOD Deed”) as a simple way for homeowners to transfer residential property to named beneficiaries, effective upon death. When properly executed, notarized and recorded, the TOD Deed will allow your named beneficiaries to acquire ownership of your home following your demise without the formalities of a probate or trust administration. For many, this new deed will be a welcome alternative to the more elaborate Living Trust and in most cases will accomplish the same result.

In substance, it operates much like the Transfer on Death (“TOD”) or “Pay on Death” (“POD”) provisions long available for brokerage or bank accounts. The new law requires use of a specific form, with required provisions, and should be readily available at stationery stores or for online download in the very near future. Attorneys may even begin using the TOD Deed in appropriate situations for their own clients.

For many, this new deed will be a welcome alternative to the more elaborate Living Trust, as it promises to reduce the complexity and cost of designing a plan for the transfer of one’s home at death.

As with anything, however, the new law has both “good” and “bad” features. Among them are the following:

The Good: The new TOD Deed

  • Will be simple to use;
  • Will be less expensive than creating a Living Trust;
  • Will eliminate the time and expense of a probate;
  • Will remain revocable during the lifetime of the grantor; and,
  • Will greatly simplify the transfer process at death.
  • Because it dispenses with post-death transfer formalities, it may reduce or eliminate the acrimony among heirs or beneficiaries which sometimes accompanies a formal probate or trust administration.

The Bad:  The New TOD Deed

  • Offers no protection from the grantor’s creditors;
  • Can only be used for a residential property of up to four units or sitting on up to 40 acres of agricultural land.
  • Does not permit the designation of beneficiaries by class description (e.g., “my children”);
  • Cannot designate contingent beneficiaries:  If a designated beneficiary predeceases the grantor, the property goes to the other surviving beneficiaries or, if none, then it reverts to the grantor and may then require a probate;
  • Cannot be used to transfer residential property held as Joint Tenancy or as Community Property with Right of Survivorship;
  • Unlike a “Living Trust”, cannot be used to manage, sell, or borrow against the residential property during the grantor’s incapacity;
  • Title Insurance Companies have indicated a reluctance to insure clear title until the running of three (3) years after the death of the Grantor. During this time, the beneficiary will likely be unable to sell or borrow against the property;
  • Validity requires strict adherence to the statutory form. Any deviation might render the deed void. Example: Some title companies require that the Q&A’s, which accompany the form in the statute, also be recorded;
  • Most importantly, there is concern among some advocates that the availability of this simple transfer deed will facilitate the commission of elder abuse upon frail seniors.

The TOD Deed will be effective for grantors who die after January 1, 2016. Initially, the new law will have only a five-year life-span. During that term, lawmakers will study its operation and will later decide whether it should be extended or modified. However, even if the law is not extended, a TOD Deed will still be effective if properly executed and recorded while the law was in effect.

Caution: While the new TOD Deed holds much promise as a way of simplifying the title transfer of a home upon the owners’ demise, it is not suitable for everyone. Before deciding upon its use, it is best to seek professional guidance from an elder law or estate planning attorney.  Even More Caution:  [Updated 7/7/2017]:  Further, many practitioners, including this author, believe the statute authorizing same to be fundamentally flawed and now recommend against use of the TOD Deed.  See the opinion of the Executive Committee of the Trusts & Estates Section of the California Bar, appended as an exhibit to the California Law Revision Commission’s Memorandum # 2017-35 (June 22, 2017).

References: The TOD Deed statutes were set to “sunset” on 01/01/2021. However, the Legislature and Governor extended their availability for one (1) more year via SB 1305.

AB 139 Signed by the Governor on September 21, 2015; California Law Revision Commission Staff Memorandum, July 10, 2015; California Board of Equalization Opinion issued Jan. 20, 2016. Update: The bill’s author, Assembly Member Gatto, has recently proposed an expansion of the law to permit a trust to be a beneficiary of a TOD Deed, in AB 1779; Follow Up Study by California Law Revision Commission, ) Memorandum 2017-6 (January 9, 2017) on whether the Q&A’s Need to be recorded with the TOD Deed.