A payable-on-death account is a bank or brokerage account with a designated beneficiary. Sometimes these are also called "Totten Trusts" or transfer-on-death accounts.
Whatever they're called, at the death of the account owner, the assets in the account are distributed to the person or people designated as account beneficiaries.
Usually, all that's required at the death of the account owner, is for the designated beneficiary to fill out a claim form and to supply a copy of the death certificate.
If you're not sure whether or not an account had a designated beneficiary, you'll need to check with the bank or brokerage company and check on the account's registration.
For example, if Nila opened a checking account and then designated her brother, Jack, as the payable-on-death beneficiary, upon Nila's death, Jack will receive the account's assets.
Real Estate: TOD Deeds
Also, if you're lucky enough to own property in of the 25+ states that offer TOD (Transfer on Death) Deeds, it's a great way to transfer your house without the need of a living trust.
Between TOD financial accounts and TOD deeds, many people leave little or nothing through probate or a will.
- Nolo offers an excellent overview of how to use transfer and death deeds, and how a new owner claims TOD real estate.
- eForms offers Transfer on Death Deeds for 30 different states.
States That Allow Transfer on Death Deeds (as of 2022):
- District of Columbia
- New Mexico
- North Dakota
- South Dakota
- West Virginia
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.
How to Use a TOD Deed:
Determine Eligibility: First, ensure that the state in which the property is located allows TOD deeds.
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.
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.
Notarize: Most states require the deed to be notarized. This means signing the deed in the presence of a notary public.
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.
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.
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:
- Control: The grantor maintains full control over the property during their lifetime.
- Avoidance of Probate: Upon the grantor's death, the property transfers directly to the beneficiary without the need for probate.
- Flexibility: The grantor can change the beneficiary or sell the property without the beneficiary's consent.
- 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:
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.