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Five years ago, Grant consulted with an estate planning attorney to draft his will. His will provided that Norbert, Grant's favorite nephew, would inherit Grant's lake house in California. A year later, Grant and Norbert had a falling out. When Grant became very sick last year, he consulted with his attorney and decided to update his estate plan to transfer the lake house to his favorite charity. Grant's attorney prepared a TOD deed, which Grant signed and then gave to his girlfriend, Margaret, with instructions to record the deed. Grant passed away the next afternoon and Margaret was so distraught she forgot to record the TOD deed. Three months later, Margaret found the deed and brought it to the recorder's office to have it recorded.
Because the TOD deed was not timely recorded within 60 days of signing, under California law, the TOD deed will fail. Accordingly, Grant's favorite charity will not receive the property even though that was clearly Grant's intent. Rather, the property will pass through Grant's probate estate where, by the terms of Grant's will, the lake house will go to Norbert. If the TOD deed had been timely recorded, not only would Grant's wishes have been fulfilled, but his estate would have received a charitable estate tax deduction due to the intended real estate gift to the charity.
Gertrude knew that her health was deteriorating and that she needed to quickly designate a beneficiary for her home. Knowing that her granddaughter Jenny would be graduating from college soon and need a place to live, Gertrude executed a TOD deed naming Jenny as beneficiary. A month later, Gertrude was transferred to an end-of-life care facility. While there, she learned that Jenny was moving across the country to start her career. Gertrude decided to put together a quitclaim deed to convey her home to her other granddaughter, Zoe, who still lived in town. Unfortunately, Gertrude passed away one day before the deed was recorded. As such, the TOD deed was the controlling document and the home was transferred to Jenny.
Tom executed a TOD deed naming his girlfriend Julia as beneficiary of his Texas home. A year later, Tom and Julia were in a car accident. Tom died instantly and Julia passed away a few hours later at the hospital. As such, the TOD deed designation failed and the home became part of Tom's probate estate.
Donna owns a beach house in Malibu, California, but her permanent residence is located in Indiana. Donna decides to execute TOD deeds for both homes and name her three daughters as beneficiaries. On the California TOD deed, she simply lists her three daughters (i.e., she does not include a provision that specifies the amount of each daughter's share). As such, when Donna passes away, each of her daughters will hold a one-third interest in the California home as tenants in common. This works great for Donna because she hopes that her daughters will keep the home and use it as a shared vacation home when she passes away.
Donna believes that her daughters will choose to sell her Indiana home upon her death. As such, she leaves a 20% interest to her two married and working daughters and a 60% interest to her unmarried daughter who is struggling financially. Donna is happy because the Indiana TOD deed will be able to provide for her daughters according to her goals and her daughters' individual needs.
Gary owns two homes—one in San Diego and one in Monterey. Gary's will provides that his three sons – Nick, Kevin and Brian – will inherit the Monterey home. Gary also signed and timely recorded a TOD deed naming his three sons as TOD beneficiaries of his San Diego home. Gary's son, Nick, passed away two years ago and Gary passed away last year.
Gary's Monterey home was distributed to his heirs according to his will. Because California has an anti-lapse statute, the one-third interest in the property that Nick would have inherited instead passed to his two daughters. Accordingly, Kevin and Brian now each own a one-third interest in the Monterey property and Nick's two daughters split his interest so they each received a one-sixth interest in the home.
The allocation of the San Diego home, however, occurred differently because that property was transferred in accordance with California's rules related to TOD deeds. California law expressly rejects the idea of anti-lapse with respect to TOD deeds. Under the law, Nick's interest lapsed because he predeceased his father. As a result, Kevin and Brian each received a one-half interest in their father's San Diego home and Nick's daughters did not receive a portion of that real estate.
Lucy and Ethel have been lifelong friends. After their husbands passed away, they decided to become roommates and purchased a home, taking title as joint tenants. A year later, Lucy recorded a TOD deed naming her son, Des, as the beneficiary of her interest in her new home. Lucy passed away five years later. Despite having executed the TOD deed after she took title as a joint tenant, the deed was ineffective because at her death her interest automatically passed to the remaining living joint tenant, Ethel. Since a joint tenancy trumps a TOD deed designation, Ethel, not Des, received Lucy's interest in the property.
Gus had a new roof installed on his home but passed away before paying the contractor. The contractor filed a mechanic's lien against the home to secure payment for the new roof. Ben received Gus' home by way of a TOD deed. Ben will have to pay off the outstanding construction bill in order to obtain a release of the lien.
Beneficiary Designations – Part III
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