Notwithstanding any other statute governing priorities among creditors, a creditor of the transferor whose right is evidenced at the time of the transferor’s death by an encumbrance or lien of record on property transferred by a revocable transfer on death deed has priority against the property over a creditor of the beneficiary, regardless of whether the beneficiary’s obligation was created before or after the transferor’s death and regardless of whether the obligation is secured or unsecured, voluntary or involuntary, recorded or unrecorded.
EffectCreditors
Section § 5670
This law states that if someone who has passed away transferred property using a 'revocable transfer on death deed', and a creditor had a documented claim on that property when the person died, this creditor will have priority over any debts or claims from the person who inherits the property. This holds true whether or not the inheritor's debt is recorded or not, and regardless of when the inheritor's debts were created.
revocable transfer on death deed creditor priority property transfer
Section § 5672
When someone passes away, their beneficiaries can be personally responsible for paying off any debts the deceased person left behind. This responsibility is limited by the terms in Section 5674. Creditors can pursue the beneficiaries for payment in the same way they could have pursued the deceased if they were still alive. Beneficiaries have the right to use any legal defenses or counterclaims that the deceased could have used. However, creditors cannot enforce debts that are legally barred. Also, certain time restrictions on filing claims, as detailed in the Code of Civil Procedure, apply here.
Each beneficiary is personally liable to the extent provided in Section 5674 for the unsecured debts of the transferor. Any such debt may be enforced against the beneficiary in the same manner as it could have been enforced against the transferor if the transferor had not died. In any action based on the debt, the beneficiary may assert any defense, cross-complaint, or setoff that would have been available to the transferor if the transferor had not died. Nothing in this section permits enforcement of a claim that is barred under Part 4 (commencing with Section 9000) of Division 7. Section 366.2 of the Code of Civil Procedure applies in an action under this section.
beneficiary liability unsecured debts deceased person's debts
Section § 5674
This law section explains when a beneficiary who receives property through a revocable transfer on death deed isn't responsible for the deceased's debts. A beneficiary isn’t liable if the deceased's estate is being managed through court and if they meet certain conditions. Also, if they are liable, the amount they owe can't be more than the property's market value at death minus any debts like mortgages on the property.
(a)CA Probate Code § 5674(a) A beneficiary is not liable under Section 5672 if proceedings for the administration of the transferor’s estate are commenced and the beneficiary satisfies the requirements of Section 5677 or 5678.
(b)CA Probate Code § 5674(b) The personal liability of a beneficiary under Section 5672 shall not exceed the fair market value at the time of the transferor’s death of the property received by the beneficiary pursuant to the revocable transfer on death deed, less the amount of any liens and encumbrances on the property at that time.
beneficiary liability transferor's estate administration estate proceedings
Section § 5677
When someone with a revocable transfer on death deed passes away, the beneficiary who receives property through this type of deed is responsible for paying a portion of the deceased's unsecured debts. The share of the debt the beneficiary must pay is determined using specific rules, treating the transferred property like it was a direct gift in a will, valued at what it was worth minus any loans on it when the person died.
The personal representative of the estate will issue a written statement to the beneficiary, detailing how much they owe. Any prior payments made by the beneficiary towards the deceased's debts are credited, and if they paid too much, the estate must reimburse them. If disagreements arise, the court can be petitioned to resolve the issue.
The costs tied to resolving these financial responsibilities are considered extraordinary and are charged to the beneficiary, being clearly listed in the liability statement.
(a)CA Probate Code § 5677(a) If proceedings for the administration of the transferor’s estate are commenced, a beneficiary of a revocable transfer on death deed is personally liable to the estate for a share of the transferor’s unsecured debts.
(b)CA Probate Code § 5677(b) In calculating the beneficiary’s share of liability under subdivision (a), the abatement rules provided in Part 4 (commencing with Section 21400) of Division 11 shall be applied, using all of the following assumptions:
(1)CA Probate Code § 5677(b)(1) The property that was transferred to the beneficiary by revocable transfer on death deed shall be treated as if it were a specific gift made by the decedent’s
will.
(2)CA Probate Code § 5677(b)(2) The value of the property received by the beneficiary pursuant to the revocable transfer on death deed shall be deemed to be the fair market value of the property at the time of the transferor’s death, less the amount of any liens and encumbrances on the property at that time.
(3)CA Probate Code § 5677(b)(3) Any unsecured debts of the transferor that were paid by the beneficiary pursuant to Section 5672 shall be treated as if they were claims made against the transferor’s estate.
(c)CA Probate Code § 5677(c) The personal representative shall provide a written statement of liability to the beneficiary, which specifies the amount that must be paid to the estate.
(d)CA Probate Code § 5677(d) The beneficiary is personally liable
to the estate for the amount specified in the statement of liability. Any amount that the beneficiary paid toward the unsecured debts of the transferor pursuant to Section 5672 shall be credited against the amount that the beneficiary owes the estate under this subdivision. If the amount that the beneficiary paid pursuant to Section 5672 exceeds the amount specified in the written statement of liability, the estate shall reimburse the difference to the beneficiary. For the purposes of Section 11420, this reimbursement shall be deemed an expense of administration.
(e)CA Probate Code § 5677(e) In the event that the beneficiary and the personal representative cannot agree on the reimbursement or liability due under this section, the beneficiary or personal representative may petition the court for an order determining the amount of the reimbursement or
liability.
(f)CA Probate Code § 5677(f) The reasonable cost of proceeding under this section shall be reimbursed as an extraordinary service under Sections 10801 and 10811. The beneficiary is liable for the payment of that cost, which shall be separately identified in the statement of liability.
revocable transfer on death deed beneficiary liability unsecured debts
Section § 5678
If someone receives property through a revocable transfer on death deed and the original owner's estate is being managed, the beneficiary can choose to return the property for estate administration. Returned property is treated as if it was specifically left to the beneficiary.
If the beneficiary made improvements or payments that increased value or reduced debts, the estate must reimburse them. Conversely, if their actions decreased value or increased debts, they owe the estate. The estate’s representative will provide details of money owed or reimbursed to the beneficiary.
If there's a dispute over payments, either party can ask the court to decide. The court will consider intentions and fairness.
(a)CA Probate Code § 5678(a) If proceedings for the administration of the transferor’s estate are commenced, a beneficiary who receives property from the transferor under a revocable transfer on death deed may voluntarily return that property to the transferor’s estate for administration.
(b)CA Probate Code § 5678(b) Property returned to the transferor’s estate under this section shall be treated as if it had been specifically devised to the beneficiary by the transferor.
(c)CA Probate Code § 5678(c) If the beneficiary’s action or inaction increased the value of property returned to the estate or decreased the estate’s obligations, the estate shall reimburse the beneficiary by the
same amount. Actions or inaction that increase the value of returned property or decrease the estate’s obligations include, but are not necessarily limited to, the following actions:
(1)CA Probate Code § 5678(c)(1) A payment toward an unsecured debt of the decedent.
(2)CA Probate Code § 5678(c)(2) A payment toward a debt secured against the returned property.
(3)CA Probate Code § 5678(c)(3) A significant improvement of the returned property that increased the fair market value of the property.
(d)CA Probate Code § 5678(d) If the beneficiary’s action or inaction decreased the value of property returned to the estate or increased the estate’s obligations, the beneficiary is personally liable to the estate for that amount. Actions or inaction that decrease the
value of the returned property or increase the estate’s obligations include, but are not necessarily limited to, the following actions or inaction:
(1)CA Probate Code § 5678(d)(1) An action or inaction that resulted in a lien or encumbrance being recorded against the property.
(2)CA Probate Code § 5678(d)(2) The receipt of income from the property, if that income would have accrued to the estate had the property not been transferred to the beneficiary.
(e)CA Probate Code § 5678(e) The personal representative shall provide the beneficiary a written statement of any reimbursement or liability under this section, along with a statement of the reasons for the reimbursement or liability. For the purposes of Section 11420, any reimbursement under this section shall be deemed an expense of administration.
(f)CA Probate Code § 5678(f) In the event that the beneficiary and the personal representative cannot agree on the reimbursement or liability due under this section, the beneficiary or personal representative may petition the court for an order determining the amount of the reimbursement or liability. In making a decision under this subdivision, the court should consider the surrounding circumstances, including whether the parties acted in good faith and whether a particular result would impose an unfair burden on the beneficiary or the estate.
revocable transfer on death deed estate administration beneficiary rights
