Planning for Real Estate: Transfer on Death Deeds & Alternative Tools in California (2025 Guide)

Your home is likely your most valuable asset, and figuring out how to pass it on to your loved ones doesn't have to be complicated or expensive. California offers several tools to help property owners avoid the time-consuming and costly probate process, with Transfer on Death (TOD) deeds being one of the newest and simplest options available.Whether you're a single homeowner, part of a blended family, or planning for your golden years, understanding your options can save your family thousands of dollars and months of legal headaches. Let's explore what's available in 2025 and help you choose the right approach for your situation.

What's New for TOD Deeds in 2025

Transfer on Death deeds have been available in California since 2016, but recent updates have made them even more flexible. As of 2022, California’s SB 315 updated the law to allow you to name trusts, corporations, partnerships, or other legal entities as beneficiaries—not just individual people. This opens up more sophisticated planning opportunities while keeping the process simple.The basic concept remains unchanged: you record a special deed during your lifetime that automatically transfers your residential property to your chosen beneficiaries when you pass away, completely bypassing probate court.

How TOD Deeds Work: The Basics

A TOD deed is like writing a letter to the future. You're telling the county recorder's office exactly who should get your house when you're gone, but until that happens, you maintain complete control over the property. You can sell it, refinance it, or even cancel the TOD deed entirely without anyone's permission. To revoke a TOD deed, you must record California’s statutory revocation form before death—simply destroying the deed does not cancel it.Tax note: In most cases, beneficiaries receive a step-up in cost basis for capital gains purposes on inherited property at death whether the home passes by a TOD deed or through a living trust.Important Limitation: California TOD deeds can only be used for 1–4 unit residential real estate, not commercial property, multi-family properties over 4 units, or real property held in business entities (Probate Code §5610).

Legal Requirements You Must Follow

Getting a TOD deed right requires attention to detail. Here's what California law requires:Proper Form: The deed must substantially follow the format outlined in Probate Code §5642. County recorder offices typically have these forms available.Notarization: The deed must be notarized, which requires you to appear before a notary public with proper identification.Recording: After notarization, the deed must be recorded with the county recorder's office where your property is located. This step is crucial—an unrecorded TOD deed is worthless.Mental Capacity: You must have the legal capacity to enter contracts, which is actually a higher standard than what's required for making a will. California law requires the grantor to have contractual capacity (Probate Code §5623), which is a higher standard than the testamentary capacity required to make a will.

Common TOD Deed Pitfalls That Can Ruin Your Plans

Even though TOD deeds seem straightforward, several common mistakes can send your property straight into probate court:When Your Beneficiary Dies First: If your chosen beneficiary passes away before you do and you haven't updated the deed, the TOD deed fails the property may end up in probate anyway. Always keep beneficiary information current.Improper Completion or Recording: Small errors in filling out the form, missing notarization, or failing to record the deed properly can make it completely invalid. When this happens, your property reverts to probate as if you never created the deed.Not Understanding the 120-Day Wait: California law requires beneficiaries to wait 120 days after your death before they can formally take ownership (Probate Code §5694). This legal waiting period can complicate immediate needs like selling, refinancing, or accessing equity until the period has passed.Tenants in Common ownership: If you name more than one beneficiary on a TOD deed, they will take title as tenants in common, not joint tenants, unless otherwise specified. This affects what happens if one beneficiary dies before you—updating your deed is essential to avoid probate in those cases (Prob C §5652).

The Hidden Problem: Title Insurance Issues

There is a required 120-day waiting period before title can be transferred to a TOD beneficiary (Probate Code §5694). During this time, the property generally cannot be sold or refinanced because the law delays the transfer to allow for creditor claims and objections.The good news: after the 120-day waiting period required under Probate Code §5694, most title companies will insure sales or loans on TOD deed property, provided the beneficiaries supply the required affidavits and documentation. In other words, this is primarily an underwriting and paperwork issue—not a legal barrier. Practically, your beneficiaries should expect a short-term impact on marketability and liquidity until the 120 days pass and the title company’s requirements are satisfied.

Alternative Tools: When TOD Deeds Aren't the Best Choice

Living Trusts: The Gold Standard

Living trusts remain the most comprehensive solution for estate planning, especially for valuable properties or complex family situations. While they cost more upfront (typically $2,000-$5,000), they eliminate the title insurance problems that can plague TOD deeds and offer much more control over how and when your property is distributed.Trusts can accommodate:

• Staggered distributions (giving property to children at different ages)
• Protection for beneficiaries with special needs
• Tax planning strategies
• Business ownership structures

Small Estate Procedures

For estates valued under $184,500 (as of 2025), California offers simplified probate procedures. For personal property, families can use a small estate affidavit with Judicial Council Form DE-221 under Probate Code §13100. Real property generally requires a separate, simplified court process under Probate Code §13200.

Joint Tenancy: Immediate but Risky

Adding family members as joint tenants creates immediate shared ownership, which means automatic transfer when you die. However, this approach has serious drawbacks:

• Your co-owners become immediately responsible for the property's debts and taxes
• The property becomes vulnerable to your co-owners' personal creditors
• Adding joint tenants may trigger property tax reassessment under Proposition 19. Transfers to a spouse are generally excluded. For parent-child transfers, the exclusion is limited: the child must make the home a principal residence and claim the homeowner’s exemption, and any benefit is capped by the updated $1 million exclusion for the increase over the prior assessed value.

Real-World Case Studies

Case Study 1: Maria, Single Homeowner

Maria, 68, owns a $650,000 home in Sacramento and wants to leave it to her daughter. A TOD deed works perfectly for her situation because:

• Her estate planning goals are simple
• She wants to maintain complete control during her lifetime
• The $100 cost fits her budget
• Her daughter understands the potential title insurance delay

Case Study 2: The Johnson Blended Family

Tom and Sarah Johnson have a $850,000 home and children from previous marriages. A living trust better serves their needs because:

• They need specific instructions for property division
• They want to protect their children's inheritances
• The higher trust cost is justified by the complexity
• They want to avoid any potential disputes

Case Study 3: Elderly Couple with Simple Wishes

Robert and Linda Chen, both 75, own a $400,000 condo and want it to go to their son. They're considering both options but leaning toward a trust because:

• They've heard about title insurance issues with TOD deeds
• They want professional guidance through the process
• They have modest savings in addition to their condo. While a TOD deed is still a potential option, they’re leaning toward a trust to simplify administration and ensure all assets—including their bank accounts—are properly coordinated and avoid probate.

Quick Comparison: Your Options at a Glance

ToolCostTimelineProbate AvoidanceBest ForTOD Deed~$100Immediate setupYesSimple situations, single property ownersLiving Trust$2,000-$5,0002-4 weeks setupYesComplex families, valuable estates, business ownersSmall Estate Affidavit~$500After deathSimplified probateEstates under $184,500Joint Tenancy~$300ImmediateYesClose family members comfortable with shared ownership

Making Your Decision: Questions to Ask Yourself

Before choosing your strategy, consider:

1. How complex is your family situation? TOD deeds work best for straightforward transfers to obvious beneficiaries.
2. What's your property worth? Higher-value properties often justify the cost of more sophisticated planning.
3. How important is immediate access after your death? The title insurance issue may delay your beneficiaries' plans.
4. Do you need ongoing professional guidance? Trusts provide attorney oversight; TOD deeds are largely do-it-yourself.

Getting Started: Next Steps

If a TOD deed seems right for your situation, contact your county recorder's office for the proper forms and current recording fees. Many counties offer workshops or online resources to help property owners complete the process correctly.For more complex situations, consider scheduling a consultation with an estate planning attorney who can evaluate your specific needs and recommend the best approach.

Resources for Chinese-Speaking Families

We understand that estate planning can be especially challenging when language barriers are involved. Our office provides resources and support in Chinese to help ensure all families can access the estate planning tools they need. Contact us to learn more about bilingual assistance for your real estate planning needs.Remember, the "best" tool is the one that fits your specific situation, budget, and family dynamics. Whether you choose a simple TOD deed or a comprehensive trust, the most important step is taking action to protect your family's future.