Transfer on Death Deeds: A Simple and Effective Tool for Real Estate Planning
Every single day, I talk to people who were not prepared for ‘life’ to happen to them. For truckers specifically, the danger is more present due to the long hours on the road and the relative damages a trucking accident can do to those involved.
In previous articles I’ve reviewed Advanced Directives, Wills, Trusts, and Power of Attorney documents. There are a large and varied number of tools out there for planning, and these articles barely dig in on all the options you are going to have in developing your plan. If you only take away a single bit of info from all of these, let it be this: go talk to an estate planning attorney in your state about all of these things to discuss your planning options.
While you are exploring your options and researching this topic, also be mindful of the capitalist aspect of the estate planning industry. Do not fall for a sales pitch, in other words. Lots of people out there will try to sell you things under the guise of being ‘informative’.
Yes, I’m looking at you Dave Ramsey.
Do your own research through reputable sources and then have a discussion with an estate planning attorney (and your trusted non-commission financial advisor). Local rules are different across the country, and your specific situation may be just different enough from your buddy’s that the thing they used and loved just isn’t right for you. The most direct way to make sure your decisions work for your specific case is to review and confirm with an estate planning attorney directly.
With that general information out, today we’re looking at a very specific tool used for real estate. This option is worth considering (and talking to your local attorney about!) if your primary/one of your main assets is your house.
Or a rental house.
Or a farm.
It just has to be real property, something with dirt under it, is my point.
If your state allows some version of them, you can use it to designate beneficiaries who will inherit the real property upon your death. When you see it written about in various places, you’ll often find the deed is abbreviated as a ‘TOD’ (transfer on death) or ‘TODD’ (transfer on death deed). They typically do not require probate to affect the transfer, making the process faster and less expensive than most estate cases end up being.
More directly, here are some of the primary benefits of using a TODD for your real estate planning:
1. Avoiding Probate: Probate can be time-consuming, costly, and public, potentially delaying your beneficiaries’ access to the property. Using a TODD, correctly executed and followed-through by the heirs after your passing, avoids the time delay a probate or summary administration poses.
2. Cost-Effective Estate Planning: Creating a TODD is generally much less expensive than setting up a trust or other probate avoidance instruments. It provides a simple and direct way to ensure your property is transferred according to your wishes.
3. Flexibility and Control: A TODD offers flexibility as it can be altered or revoked at any time during your lifetime. This means you can adapt your estate plan as your circumstances or relationships change without undergoing a lengthy legal process.
4. Clear Beneficiary Designation: A TODD provides a clear and legally-recognized method for transferring property, reducing the potential for disputes among heirs. By explicitly naming beneficiaries, you minimize ambiguity and ensure your intentions are honored.
Let’s review a quick example for those unfamiliar with the process. All the names are made up, any resemblance or connection to any person real or fictional is probably not intentional. The below should highlight some of those benefits mentioned above, and hopefully give you a decent idea on what the process of using a TODD involves.
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Meet Sid Vicious, a Resident of Oklahoma
Sid, a 65-year-old retiree living in Oklahoma, owns a home valued at $300,000. They have two adult children (Bam Bam and Booker), and want to ensure that their property passes directly to those cute and lovable kids without the delays and expenses associated with a probate action in court. Let’s do another number set to walk through the basics of Sid’s planning process with a TODD:
This process is straight-forward, and works great for a lot of families out there that count the residence as their main (and often only) asset to pass to the family. A Payee on Death designation on a bank account, a beneficiary designation on a retirement account or life insurance, and a TODD for the home is all many families need to keep the court system away from the disposition and decision-making of your estate.
There are a couple of common risks with using a TODD that are worth mentioning for Oklahoma specifically. The first is the legislation itself. The law as written only gives those heirs (Bam Bam and Booker above) nine months from the death of the owner to file the appropriate paperwork with the county. If they don’t meet that 9 month deadline, a probate or summary administration will need to be started in the courts. You might be able to do a quiet title instead, but in any event a court will need to be included.
Second, the way the legislation was worded when passed makes it a bit vague on how many beneficiaries you can name on a TODD. All of the beginning portions of the statute seem to only consider a single heir/individual as the beneficiary. If you want to name two or more people on the TODD, then, you will want to check with local counsel to see if there have been any cases or rumblings from the courts there regarding those multi-heir TODD documents.
All in all, a Transfer on Death Deed is a solid and flexible estate planning tool that allows owners to ensure their real estate is transferred according to their wishes without the delays and costs of probate. By understanding how TODDs work and their benefits, you can make informed decisions to protect your legacy and provide for your loved ones efficiently. As with all estate planning strategies, it’s advisable to consult with a qualified attorney to ensure that your TODD is properly executed and aligns with your overall estate planning goals.
There’s a lot more to say about these and other options, depending on your specific circumstances and estate planning goals. For now we’ll close this off and iterate my main point: go talk to an attorney licensed in your state today about estate planning.
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Legal Disclaimer: The information contained in this article is provided for informational purposes only, and should not be construed as legal advice on any subject matter. Except the last part above; it is absolutely my legal advice to you that you should talk to a licensed attorney in your state about estate planning. Right now. Go.
More Disclaimer: This article is written to provide a surface-level introduction to the basics of transfer on death deeds (beneficiary deeds). This space, unfortunately, isn't big enough to cover all the ground you would need to for a comprehensive look at a TODD comparative to your other options. That’s why I keep hammering home the ‘talk to an attorney’ recommendation. Social Media articles, radio interviews, tv shows, podcasts, etc are never a true substitute from a good ol’ fashioned consultation.
Also important to keep in mind that i practice in the states of Kansas and Oklahoma, so this information is provided with those laws and background in mind. Each state has their own quirks, verbiage, and approach to these things. So make sure to discuss these general ideas with an attorney in your area if you have questions. That includes a weird thing in some states called a ‘ladybird’ deed. The basic idea behind it is solid, but the name is weird and not all states use them. So, just be mindful when doing research that some of what you read about may or may not be available in your state.
Stay safe out there.
Until next time.
Copyright: ?2024 Zac Hargis, Attorney for Riggs Abney Law Firm. All rights reserved