During the three years she’s crusaded to give homeowners a straightforward deed transfer that would avoid Probate Court, Mary Pat Toups has racked up thousands of travel miles, including more than 30 trips to Sacramento. Some lawyers probably wish the tireless seniors’ activist would get lost en route.
If the legislation that Toups is pushing for prevails, a standardized, one-page form no longer than a tire-rebate mailer will be available on the Internet or from retail stores for people grappling with one of life’s touchier questions: Who inherits their property after they’re gone?
The proposed “revocable transfer on death deed,” or TOD deed, is aimed at giving homeowners a simple, inexpensive and secure method of handing down property, rather than retaining lawyers to create trusts or guide heirs through the probate system. Elderly people and others with little disposable cash but relatively large accumulated equity in their homes are expected to capitalize most on the option.
Advocates, including the California Federation of Republican Women, several senior-advocacy agencies, and a gay-rights organization concerned about domestic partnership protections, say the idea is long overdue, noting that it’s already on the books in 10 other states. Because the transfer wouldn’t take place until the owner’s death, the chances of someone being duped out of their residence while still living by signing a document they didn’t understand would be reduced.
All owners would have to do would be describe the property, list the beneficiaries and indicate whether they wanted a spouse or someone else to live there as an intermediary owner until their death. Owners could rescind and reissue the deed anytime — provided they retain the mental capacity to grasp their actions — giving them flexibility to change their minds.
Populist appeal
Despite potent opposition from the California Bar’s Trusts and Estates Section, the plan that its proponents tout as “consumer friendly” could be law by next year.
Detractors in the legal community argue that trusting a one-size-fits-all form, without an attorney’s advice, is chancy, because every family has different circumstances.
Yet even critics admit it has a populist hook. As long-term real estate appreciation has grown, life spans have increased and so has some people’s reluctance to lose a portion of that wealth to attorneys’ fees.
No one knows for sure whether the simple form would effectively streamline deed transfers because ownership lines can be so blurry — and subject to family infighting.
Most deed transfers revolve around bloodlines. Of the roughly 330,000 deeds recorded last year for single-family homes and condominium units in Los Angeles County, for example, an estimated 200,000 involved real estate transfers into family trusts and among kin, according to the county assessor’s office.
Toups, 79, a pro bono attorney and a grandmother, says she’s lost count of how many clients have told her of their desperation to spare their loved ones the hassle and cost of Probate Court. Typically, the process takes more than six months, with fee rates tied to the estate’s value. Under the state probate code, a $1-million house would generate $44,000 in fees for lawyers and administrators.
“How to avoid probate is a very big deal among the senior population,” Toups said. “They’ve heard the horror stories that it takes too long and gets expensive. You add up all the fees, and it’s astronomical. The seniors of today are children of the Great Depression. We still value a penny.”
If you’ve never heard of the bill by Assemblyman Chuck Devore (R-Irvine), you’re in good company. Devore introduced it on his first day in office in 2004 after meeting Toups at a retirement-village event. The California Bar’s Trusts and Estates Section batted it immediately, persuading the Assembly Judiciary Committee to downgrade it into a study bill. That motion effectively muted wider discussion within real estate circles for about two years, even as legal journals went toe-to-toe on the concepts’ merits.
The California Law Revision Commission, a 10-member independent state panel that analyzes and recommends legal reforms for state government, endorsed the idea last October, nonetheless. In June, the Assembly unanimously approved AB 250, though it advised adding explanatory language and consumer warnings on the form’s back.
“My opponents expected me to just drop the issue and move on, but I didn’t,” Devore said. “Neither did they expect that Mary would spend her own money to attend every meeting of the Law [Revision] Commission, or that she’d gather hundreds of signatures from seniors. This isn’t like some half-baked idea.”
The probate process, while it may strike fear in the hearts of some, is how the courts oversee the transfer of someone’s estate to designated beneficiaries, while providing parties a forum to contest distributions. Outstanding debts and taxes also are sorted out there. The proceedings are public record.
Homeowners can sidestep the court route any number of ways, including creating living trusts to pass on their assets in a relatively short time frame. Yet, trusts can be expensive to create and more complicated than many middle- and lower-income people may need.
Wills have been the time-honored American instrument for passing on property. Although they can be short and basic, they require heirs to go through the probate system when the estate’s value exceeds $100,000.
Quitclaim deeds, by which an owner transfers his or her interest in a property, are another avenue. But experts say the deeds are risky, because people can trick or pressure someone out of a home using forms available at stationery stores. The transfer takes effect immediately.
“We get a lot of fraud, a lot of elderly homeowners who believe they are on the title as they have been for the last 30 years until a family member comes out of the woodwork to forge or influence a deed,” said Lili Sotelo, directing attorney for the consumer unit of the Legal Aid Foundation of Los Angeles.
In other cases, Sotelo said, a homeowner adding a family member to the deed might not realize the effect that the new co-owner’s financial status has on the property. If they have credit problems, a lien could be placed on the residence.
“Where the homeowner once owned the house free and clear, he now has a $50,000 lien and could very well lose his home,” Sotelo said. “In the last two years, I’ve had three clients die in the process of waiting for this to be reconciled.”
The Legal Aid Foundation has not taken a position on the bill.
In endorsing Toups’ idea, the Law Revision Commission found that TODs have worked effectively in other states. The commission’s report also questioned why real estate should be “the last major holdout” to inheritance-oriented reforms that have enabled Californians to bypass probate in distributing insurance proceeds, pension plans and securities to heirs.
Probate lawyers and others remain unconvinced.
Southwestern Law School professor Ira Shafiroff, who believes the “overwhelming number” of wealthy people handle property disposition with customized living trusts, opposes the bill. He thinks the concept is anti-lawyer oversimplification
“We’re talking about real estate — for most people, their most significant asset — and to transfer this with a commercial form is asking for trouble,” he said. “It’s a complex area of the law. To [believe] that a TOD deed would take care of it is like trusting a lay person to perform an appendectomy.”
Whether the safeguards and warnings on the forms about resisting pressure to sign and other scenarios are adequate depends on whom you ask.
To be legal, the proposed deed would have to be notarized and then recorded. If a married couple held the property under joint tenancy rules and one of them died, the eventual beneficiary — say, a son or daughter — would not take title until the second spouse died. Another provision exists for the owner to designate somebody other than the ultimate beneficiary to get the house for the duration of his or her lifetime. This option, the form cautions, is not for everyone, and could lead to disputes among beneficiaries over property maintenance, taxes and mortgage payments.
A ‘cookie cutter’
“The reason to be concerned about this is that it’s directed at lay people to avoid the use of lawyers without understanding the ramifications of the transfer,” said John A. Hartog, the immediate past chairman of the California Bar’s Trusts and Estates Section. “If you have an elderly widower with a happy family, and the house is the main asset, the transfer-on-death deed makes some sense. Once you get beyond that fact pattern, it’s a cookie cutter that may not work.”
Toups feels otherwise. She has spent approximately $30,000 of her own money trekking to hearings, lobbying officials, sending out mailers and launching a website, HYPERLINK “http://www.transfer-on-death-deeds.com” www.transfer-on-death-deeds.com.
“The rumor in Sacramento was about a little old lady from Leisure World picking a fight with the state Bar; the rumor was true,” Toups said. “I accused them to their face of guarding their wallet at the expense of their own clients and the expense of those who can’t afford a lawyer. The reality is that probate and trusts are cash cows.”
Devore, still optimistic about the bill’s prospects, expects action to resume on it in the Senate Judiciary Committee this January. Should that committee greenlight it, the legislation would go to the full Senate for a vote and, if approved there, to the governor’s desk.
Copyright Los Angeles Times.
Related Posts
The Brown Air Prequel for our Climate Change World
Why the Sky Disappeared, and Why L.A.'s Smog-Choked…