December 8th, 2019
Have questions about some estate planning tools? Here's some information about Transfer on Death Deeds that you might find helpful.
Transfer on Death Deeds are another tool to avoid probate like the Trust, but they are very limited in scope. These deal specifically with real estate and you must do one for each piece of real estate that you own if you want it to apply. These are like a normal deed in the sense that they transfer ownership in your property. However, they lie "dormant" until you die. Once you die then your ownership interest is given to the person that you named as a beneficiary.
Drawback: One Needed Per Property
The drawback to the Transfer on Death Deed is that you have to do one for each property, so if you have your house and a rental property you need to do two. Likewise, if you sell your property and get a new one you will need a new Transfer on Death Deed for the new property. But these are relatively cheap compared to a trust or will.
Benefit: Keeps Property Out of Probate
The benefit to the Transfer on Death Deed is that they keep your house and other real estate assets out of probate, and the house is usually one of the biggest assets and biggest debts for the surviving family members of the deceased person. Having ownership transfer instantaneously to the spouse, for example, means the surviving spouse is now free to sell, refinance, rent out, maintain and do anything they need to with the property without having to wait for the probate court process.
Drawback: Transfer Simplicity
Another drawback is that it is very simple in how it transfers ownership - if you have more than one beneficiary it has to be split evenly between the beneficiaries. If a minor is a named beneficiary then you have the problem of a minor owning real estate and being unable to take care of it (as opposed to the Living Trust or Testamentary Trusts where a Trustee takes care of it for them then when they are old enough they can take over).