As you begin to think about the best structure for your estate plan, you are likely guided by one thought, which is how do I avoid probate? The consensus about probate is that it can be costly and time consuming. For that reason, many people structure their estate plan with the hope that probate can be avoided. One way to do this is to create a trust and place your assets, that would typically need to go through probate, into the trust. However, sometimes the cost of implementing a trust can be impractical for the size of your estate. Therefore, another solution for some estates is to utilize a transfer on death deed to avoid probate.
A transfer on death deed is a document that is recorded with the register of deeds in the county where the property is located and designates a beneficiary to take title to the property upon the death of the sole owner or the last to die of multiple owners. This document can be cancelled or changed at any time by the owners of the property simply by executing and recording another deed that designates a different beneficiary or no beneficiary. Moreover, the owner of the property does not need any consent or permission by the beneficiary in order to make these types of changes.
The clear advantage to using a transfer on death deed is that it will bypass probate and as a matter of law the property will pass to the designated beneficiary. Furthermore, there is the added benefit that the owner of the property maintains full and complete control in their interest in the property during their lifetime. This document does not grant any type of current interest in the property to the beneficiary. It is only upon the death of the owner(s) that the beneficiary obtains the interest in the property. Therefore, it allows for the owner of the property to continue to use their property as they see fit, with the benefit that upon their death the property shall avoid probate and pass directly to the beneficiary.
Despite the advantages to the transfer on death deed, there are still some disadvantages to executing this type of document. For example, the transfer on death deed must be publicly recorded in order to be effective. Therefore, the identity of the beneficiaries will be available in the public record during the property owner’s lifetime. This can be problematic if the beneficiary is not a family member or if there is tension among the beneficiaries of the owner’s estate. Depending on the individual and their circumstances, it may be preferable to keep this type of information private and thus utilize a different strategy to avoid probate.
In light of the possible advantages and disadvantages, it will be important to seek the advice of an estate planning attorney before executing a transfer on death deed. An estate planning attorney will be able to analyze your situation and advise you on the best course of action to take in structuring your estate plan to avoid probate, which may include executing a transfer on death deed.