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Paul H. Roskoph Professional Corporation

October 2015


I am pleased to announce the landlord has not (yet) exercised its right to terminate our lease. He has to give us 6 months' notice, so that means we are here, and I will remain in practice until at least May 2016. My original letter stating the transition in practice might be as early as October 2015 (based upon the terms of the lease) is now revised so that we will be on Hamilton Avenue until at least May.

Dramatic Change of Law Regarding Transfer of Real Estate

California is usually a leader in the country for innovative action whether it be in estate planning, environment, health issues or whatever. In the case of transfers of real estate without probate, however, California has lagged behind twenty other states with respect to the transfer at death of a personal residence (real property) without the need of probate, a living trust or joint tenancy to transfer the residence to the children.

Individuals can place title of the property in joint tenancy with others, but that gives the other individuals (presumably the children) current ownership with equal ownership rights similar to any co-tenant. It places the property in jeopardy if the children have debt and creditors. Refinancing or sale of the property requires their approval. Parents may desire to avoid probate and simplify the transfer process, but usually do not desire these potential complications. Now, on September 21, 2015, the legislature passed and the governor approved Assembly Bill 139 which permits the owner of property to establish a revocable deed designating a successor-of-interest similar to a "payable on death" bank account or stock account. This is a dramatic change and will have a substantial impact on planning and the use of revocable trusts when the major or sole asset of an estate is the principal residence. Caution is urged: a well thought out estate plan and living trust is still the most flexible and preferred approach to estate planning, but in straight-forward planning where the entire estate is to pass equally between or among the children, this may now be an alternative to the trust. Prior to the enactment of this law, it would be necessary to have your wishes fulfilled for real estate through the use of a living trust to avoid the court supervised probate process. I will not dwell on the detrimental aspects of probate as that has been covered many times. With this new legislation, it is possible to take title in the owner's name and designate the successors in interest on a deed that grants no present interest to the successors in interest and is revocable by the owner. This law applies to only:

(1) real property improved with not less than 1 not more than 4 residential dwelling units;
(2) a condominium unit;
(3) a single tract of agricultural real estate consisting of 40 acres or less that is improved with a single family residence.

Another current restriction is that the law has been implemented with a "sunset" provision whereby this law automatically terminates in 2021. The legislature obviously wants to test the waters before making this a permanent part of the California law. What happens to deeds in 2020? Do they get "grandfathered" or terminated?

The law also mandates that the deed be recorded within 60 days after it is signed and notarized. Why this limitation? Probably to avoid surprise unrecorded deeds. The form must state the owner and the full name of the designated successor-in-interest/beneficiary. One cannot state "my children" or "my issue" but must state the name and relationship to the owner. The successor interest must be equal so that you will not be able to give child A 40% and child B 60%.

What if you are in a second marriage, owning a property as community, but desire that your 50% interest be held with a life interest for your spouse and a guaranteed remainder interest of your 50% share to your children? It appears this "POD deed" will not suffice and a trust or Will will be required.

Stay tuned. There will be much more written about this topic.

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© 2013 Roskoph Associates
Paul H. Roskoph
Paul H. Roskoph Prof. Corp.
550 Hamilton Ave. #100
Palo Alto, CA 94301

tel 650.470.5300
direct tel 650.470.5301
fax 650.326-2404