In our last post, we described California’s creation of Transfer-on-Death Deeds (“TOD Deeds”). And while TOD Deeds could prove a useful tool when used properly in estate planning, they also can lead to additional problems and headaches. So what action must you take if you fall victim to a bad TOD Deed?

TOD Deeds fall into the broad category of Probate Avoidance Devices. Probate avoidance refers to assets that transfer by contract or by operation of law without requiring court intervention through the probate process. For example, Trusts, joint tenancy, beneficiary designations, and transfer on death accounts are all examples of probate avoidance devices.

The problem is that each of these devices operates under its own set of independent rules and they are NOT controlled by a person’s Will. That means if you have a problem with the way assets are passing, you have to challenge each asset individually using the unique set of rules set out for each of them. That goes for TOD Deeds too. If you want to challenge the effectiveness of a TOD Deed, then you have to take action against that particular asset.

First, you need to know what you are challenging the deed. It can either be based on a lack of formalities (the TOD Deed simply was not validly created based on the legal procedure required), or a defect in intent such as a lack of capacity, undue influence, or fraud. In other words, you can challenge a TOD Deed on many of the same bases used to challenge a Trust or Will.

If you file your lawsuit to challenge a TOD Deed and file a lien against the subject’s real property within 120 days of the decedent’s death, then the court has the power to redirect that real property to the proper heirs. If the lawsuit and lien are filed AFTER the 120 day period, then the court can only return the property to the extent it was not purchased by a third party in good faith. In that event, your only recourse is to seek money from the wrongdoer.
But whatever you do, a lawsuit to challenge a TOD Deed must be filed within three years of the property owner’s death. That is an important timeframe that you must be sure to consider.

The bottom line: you have the right to contest a TOD Deed, just as you can a Will or Trust, but in many cases that will be no easy task.

If you would like to learn more about this topic, and if you have any questions, please contact us. You will find lots of info and answers from our experienced attorneys at Albertson & Davidson.

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