Limitations Of Transfer On Death Deeds-Be Careful!
A transfer on death deed can be a valuable asset in your state planning tool box. As the name implies, a transfer on death deed is a deed to property that automatically transfers to someone else, whomever you name as the beneficiary, upon your passing. One major benefit to this deed, is that the property avoids the probate process—it is transferred automatically, and thus, no probate court intervention is needed.
But like anything else, there are pros and cons to this strategy—and you surely should never execute a transfer on death deed, without consulting with a good estate planning attorney. This is especially true, because while helpful, there are some situations that need to be accounted for in your estate plan, when you execute a transfer on death deed.
No Backup Plan
One major drawback to a transfer on death deed, is that while you can name the beneficiary (who will get the property, as named in the deed), you can’t name backups, the way you can when you have a trust, and can name backup trustees.
So, if the beneficiary dies before you do, the deed is invalid. That means that you will have to execute a brand new one, or do nothing, and risk the property going into the probate court.
Transfer on Death deeds also have no way for a minor to inherit property. So, if you pass, and the named beneficiary is under the age of 18, a custodian will have to be appointed by the court to take care of the property, until the beneficiary is 18. You can’t just name a custodian in the deed to take care of the property until the beneficiary is a certain age the way you can with a trust.
Even if the beneficiary was, say, 19 or 20 or 21, that still may be way too young to take care of property or know what to do with it.
There also may be title insurance problems; some companies may not insure property that is deeded pursuant to a transfer on deed, for a number of years. This means that whomever inherits the property, would not be able to sell it for possibly years, until the property can be properly insured.
The beneficiary is also legally required to inform all of your heirs of your passing, along with a copy of the deed. This means that the beneficiary will need a way to find your heirs, and do a full and complete search. While many trustees can do this and know how to do this, a random family member whom you leave the property to, may not.
Which estate planning tools are right for you? Call the Torrance will and estate attorneys at Samuel Ford Law today.