Understanding "Transfer on Death" (or similar) and buyouts for TOD contracts.

Property Manager · Baltimore, MD · Member since 2014 · 1k+ posts · 1k+ votes

There are a lot of good questions in here, and it's great that you're asking them. That said, I would strongly advise that you get a lawyer involved, or at a minimum a licensed Realtor (you mention "brokering" the deal, and that you are a SWE for Google, but not that you are a licensed Realtor...if you are then disregard that last part). There are a lot of details that will need to be handled, and handled properly. I would call a Broker you trust and ask them for a referral to a few Title Companies that employ attorneys (not all do, at least not in Maryland).

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Katie Balatbat

CPA and Attorney · San Diego, attorney · Member since 2022 · 302 posts · 219 votes

2y

@Armand Gray

Lots of good questions. The owner of the property really needs to hire an estate planning attorney. Transfer on death deeds are not widely used, and in fact, the last that I had heard, were only recently extended in terms of availability in California. Most of the time, they are revocable, the same as a Will or a Trust. Typically in California, a Will alone is not sufficient to avoid probate - which is a pain, time consuming, and very expensive. Most of the time these things would pass via a Trust, and a deed would be recorded from the owner's name into the owner's trust, and then ownership would pass by the trustee after death via the trust terms.

*This post does not create an attorney-client or CPA-client relationship. Readers are advised to seek professional advice. The information contained in this post is not to be relied upon.

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Bill B.

Investor · Las Vegas, NV · Member since 2013 · 8k+ posts · 10k+ votes

2y

Every TOD form I’ve ever seen specifically says the owner can change the beneficiary at any time. It’s to prevent scammers from stealing elderly people’s homes.

You’re going to need an estate planner, an attorney, and if the owner is over 65 you darn well better have an elder advisor or whatever California calls them. You get accused of taking advantage of an elderly person not only will you not get the house you’ll be in jail instead.

You’re going to want a real good story about why someone is giving you $500k, a $1M? You’re going to want to make sure they know that whatever church/charity/friends they have are specifically getting nothing because this other person is taking it. Otherwise those people are probably suing.

If I was a realtor I don’t think I’d want to be involved. It’s all downside and no upside. Hopefully it’s all legit but asking about getting a contract before sliding out seems a bit shady. Otherwise it should be brought up ahead of time they plan to leave.

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Mark Pedroza

Real Estate Agent · Sacramento/Placer ~ San Francisco Bay Area counties · Member since 2012 · 1k+ posts · 743 votes

2y

Quote from @Armand Gray:

Hello BiggerPockets Community,

I'm a new out-of-state Real Estate Investor based in California (I work as a SWE at Google as my W2) and I'm working on brokering a potential deal between friends and a prospective landlord. I have to assume this is a situation many others have found themselves in before and so I'm hoping there could be some clear guidance on process and legality.

Situation: There's a prospective landlord in San Francisco with no next-of-kin and no social ties to name a recipient to transfer ownership of their property to after they pass away. More interestingly, a current tenant has a direct relationship with the owner and is close friends with my Client. This tenant currently has a verbal agreement with the owner to receive the property upon their death. However, for personal reasons the tenant is no longer interested in remaining in this rental and wants to be "bought-out" of their "ownership".

First and foremost, a verbal agreement just isn't going to cut it and getting a signed legal contract is the first step. But there's several questions and parties (eg. lawyer, realtor, title company?...) that I think would need to get involved to make an exchange like this legally binding. Through a quick google search I came across the term "Transfer on Death" (TOD).

Questions:

1. A naive sanity check for me is just making sure that a TOD is actually a legal contract that's not subject to change later by the owner like a Will or Living Trust would be.

2. Does a TOD have precedence over a Will or Living Trust is one is created or updated in conflict before the death of the owner.

3. Is a TOD legal in the state and county of San Francisco, CA and are there any specific legal intricacies to be aware of?

4. For a deal of this nature, which parties from my Work Network need to be involved? And which parties should be involved assuming a lack of experience? Lawyer? Realtor? Title Company? Lender? Anyone else?

Any advice, recommendations or experience with the above topic would be very helpful. We're hoping to bridge a large knowledge gap through various resources and I'm hoping this forum will share it's wealth of knowledge.

Lastly, as with any post.. if anyone has any great Attorney or Realtor or any other party that should be involved a referral would be extremely helpful and greatly appreciated.

Thanks in advance for you time.

I am not an attorney and this is not legal advise but the three ways to revoke a T.O.D. deed is 1) Record a revocation 2) Record a new T.O.D. deed or 3) Record a deed transferring to a third party or a trust.

You can also try legal aid in San Francisco: https://www.sfbar.org/jdc/free-legal-help/

Good luck....

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Understanding "Transfer on Death" (or similar) and buyouts for TOD contracts.

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