.
 

If you're lucky enough to own your primary residence in one of the 30 states that offer TOD (Transfer on Death) Deeds (also called "beneficiary deeds" in some states), it's a great way to transfer your house at death and avoid probate without needing a living trust. 

A Transfer On Death Deed (TODD) takes effect upon your death.

You register the deed now with the county recorder's office to specify a beneficiary for a piece of real estate at the moment of your death. Your beneficiary can then claim their ownership by going to the county records office and presenting a valid death certificate. (In some states like California, there may be a few additional steps that must be completed, but it is far simpler than the probate process.  And can be done without the need of a lawyer.)

Transfer on death deeds can be revoked at any time and are automatically revoked if you sell the property (because you will no longer own any right to that property at your death if you sell it).

The states that have pay-on-death deeds have a statute that generally specifies an approved statutory form with limited flexibility. However, if it fits your situation, it offers a low-cost way to avoid probate without the hassle of setting up a living trust and transferring property to the trust. 

If you have a will and a transfer and death deed, which one wins?

Transfer on death deed will prevail over a designation in a will because the transfer on death deed takes effect immediately upon death, and at that moment, the will no longer has any power over that property. It is not part of the estate, which is how it avoids probate.

If you have a transfer on death deed, and living trust, which one wins?

This is kind of a trick question because if you have a living trust and have set it up properly, that means you have transferred ownership of the property to the trust. if you have properly set up a living trust, your deed should say something like it's owned by the John Doe Revocable Living Trust, (of which John Doe is the trustee and beneficiary). 

The trust doesn't die, so there can't be a transfer-on-death designation for property owned by a trust. What happens in a trust is that a successor trustee takes over as trustee of the trust and becomes the new beneficiary of the trust upon the original trustee's death. But through all of that time, the trust owns the property. And that ownership does not change. Just the trustee and the beneficiary change. Once that happens, the successor trustee can dissolve the trust and take direct ownership as beneficiary. And that is how a trust transfers ownership and avoids probate. 

Why would I make a living trust if I can make a transfer on death deed?

Living trust, offer flexibility, that a statutory TOD can't offer. Living trust can have clauses that say, the successor trustee takes over in cases of incapacity.

Their legal documents you could set up to handle who will handle your financial affairs in cases of incapacity. Without setting up a living trust. But people often use living trust to handle this event. But if the only reason you're using a living, trust is to avoid probate a transfer on death deed may fit the bill just fine.

However, there are often limitations on the number of beneficiaries you can or whether you can name alternates. In California for example, they don't allow you to name alternate beneficiaries in case the beneficiary dies.

For example, if you had three children and wanted each child to keep their share, even if they predeceased you and have it go to their offspring, you could do that in a living trust. But in a transfer on death deed, all you can be able to do is name them as joint beneficiaries who will own the property equally, and each gets a larger share if one of the others dies. (However, with a TODD you could simply create a new TODD if one of your children predeceased you, and designate who gets their share in the new deed.)

In the living trust, you could set it up more complicated to say if one of the children died, then their children would get their share rather than sharing it between the siblings.

On the other hand, if you just have a simple situation where you are a single parent, and want to leave your property to a single child, a transferred death deed can be an ideal and easy way to avoid probate at little cost.

Tools for Making a TODD Yourself

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How to Use a TOD Deed:

  1. Determine Eligibility: First, ensure that the state in which the property is located allows TOD deeds.

  2. Obtain a TOD Deed Form: You can find forms online or get one from a local attorney. Some county recorders' offices might also provide these forms.

  3. Complete the Form: You'll typically need to provide details such as the legal description of the property, the current property owner's details, and the beneficiary's details.

  4. Notarize: Most states require the deed to be notarized. This means signing the deed in the presence of a notary public.

  5. Record the Deed: Once completed and notarized, the TOD deed must be recorded with the county recorder's office where the property is located. There might be a small fee associated with this.

  6. Revocation or Change: If you change your mind later on about the beneficiary or wish to revoke the TOD deed, you usually can. This typically involves recording another document (often another deed) that changes or cancels the earlier filed TOD deed.

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States That Allow Transfer on Death Deeds (as of 2022):

Western states and Midwestern States allow them, but not so much in the Northeast.

  1. Alaska
  2. Arizona
  3. Arkansas
  4. California
  5. Colorado
  6. District of Columbia
  7. Hawaii
  8. Illinois
  9. Indiana
  10. Kansas
  11. Maine
  12. Minnesota
  13. Mississippi
  14. Missouri
  15. Montana
  16. Nebraska
  17. Nevada
  18. New Mexico
  19. North Dakota
  20. Ohio
  21. Oklahoma
  22. Oregon
  23. South Dakota
  24. Texas
  25. Utah
  26. Virginia
  27. Washington
  28. West Virginia
  29. Wisconsin
  30. Wyoming

Some other states might have similar mechanisms but under different names or procedures. It's always wise to consult local legislation or a local attorney to understand the current rules in a particular state.

Ladybird Deeds

A Lady Bird deed, often referred to as an "enhanced life estate deed," is a legal document that changes the rights to real estate property ownership. It allows the owner (grantor) to retain complete control over the property during their lifetime, including the ability to sell, lease, or mortgage the property without the beneficiary's consent. Upon the grantor's death, the property automatically transfers to the beneficiary without having to go through probate.

Key features of a Lady Bird deed:

  1. Control: The grantor maintains full control over the property during their lifetime.
  2. Avoidance of Probate: Upon the grantor's death, the property transfers directly to the beneficiary without the need for probate.
  3. Flexibility: The grantor can change the beneficiary or sell the property without the beneficiary's consent.
  4. Tax Benefits: In many cases, because the transfer is only effective upon death, the grantor doesn't incur gift tax, and the beneficiary can benefit from the "step-up" in basis, which can reduce capital gains taxes if they later sell the property.

States That Allow Lady Bird Deeds (as of 2022): While the use and formal recognition of Lady Bird deeds vary by state, they are most commonly associated with and used in:

  1.  
  1. Florida
  2. Texas
  3. Michigan

Other states may have similar mechanisms or might recognize the concept, but the specific rules, nomenclature, and characteristics might differ.

If you're considering using a Lady Bird deed or any other estate planning tool, it's essential to consult with an attorney familiar with real estate and estate planning laws in your state. They can provide tailored advice and ensure that all documents are prepared and recorded correctly.

AI Prompts for More About TOD or Ladybird Deeds in Georgia

Prompt: Does Georgia allow Transfer on Death (TOD) or Ladybird Deeds to transfer real estate at death without requiring probate? And if Georgia allows either one, Can you explain how the process works in Georgia, cite relevant statutes, and link where I can get the correct forms for Georgia?

Try this prompt on:
Perplexity.ai Google Gemini ChatGPT4Claude.ai

 


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