A new development in probate law involves the use of transfer on death deeds for real property located in California. Other states have authorized the use of such deeds but it has only been available in California since January 1, 2016. Essentially, the deed works like any other transfer on death designation. When you die, your designated beneficiary inherits your house. The process sounds great in theory. Such a deed would completely circumvent a probate process. However, the use of such deeds should be done with extreme care and caution.
First, the transfer on death deed must be drafted in substantially the form outlined in the Probate Code Section 5642. The deed must be notarized and the beneficiary, or beneficiaries, must be specifically named. You cannot state, “to my children” or “to my siblings.” Such language is invalid and the transfer on death deed would fail.
Second, the person executing the deed must have “contractual capacity.” This is different than “testamentary capacity” and is a higher standard. Preparing a will requires only testamentary capacity. Testamentary capacity means that you understand that you’re signing a will, you understand who your natural heirs are, and you have an understanding of the types of property you own. Contractual capacity is a higher standard and requires that a person understand fully and completely whatever they are contracting to do.