Volume 8 • Issue 5 • May 2018
The Counselor is a monthly newsletter of Hallock & Hallock dedicated to providing useful information on estate planning, business succession planning, and charitable planning issues. In this month’s issue, we are discussing revocable transfer on death deeds. If you are interested in learning more about the ideas and processes discussed in this newsletter, please contact us for an initial consultation.
A growing number of states recognize a form of deed known as the revocable transfer on death deed. In 2018 Utah joined that group. This type of deed allows an owner of real estate to name who will inherit their real property upon their death. The intent is to allow real estate to pass without the need of probate. Historically, real estate only transferred without probate if it was held as joint tenants or community property with a right of survivorship, or if it was held in a trust.
How Does a Revocable Transfer on Death Deed Work?
The exact format of a revocable transfer on death deed can vary from state to state and certain technical language is often required. If your state allows a revocable transfer on death deed or similar instrument, you should have a qualified professional prepare the deed. A revocable transfer on death deed will generally include a legal description of the property that is covered by the deed. The deed will also identify the person(s) who will become the new owner of the property upon the current owner’s death. This is much like a beneficiary designation on a bank account. The deed is then recorded in the county recorder’s office or other repository established by state law for the recording of deeds. In most states, these deeds are capable of being revoked prior to your death.
How Does a Revocable Transfer on Death Deed Compare to a Trust?
Generally, the main purpose of a revocable transfer on death deed is to avoid probate. This goal can also be accomplished by establishing a living trust to hold title to the real property. So, when does a revocable transfer on death deed make sense? A living trust is a better estate planning tool as it provides for a comprehensive plan for all of your assets, whereas the revocable transfer on death deed will only address the specific real property covered by the deed. Some of the problems that can arise when relying on a revocable transfer on death deed as opposed to a trust include:
- If the beneficiary dies first, there is likely no contingent beneficiary;
- If the beneficiary is a minor, ownership of property can create problems if no one is in place to manage the property for property;
- If the property is owned in joint tenancy the property will pass to the surviving joint tenant and may not make it to your beneficiaries;
- If you become incapacitated the deed does not provide authority to manage the real property and it will be necessary to rely on a power of attorney; and/or
- You or your heirs may run into problems with obtaining title insurance, at least for a period of time.
The revocable transfer on death deed can provide a less expensive alternative for smaller estates in obtaining probate avoidance. However, careful consideration should be given to the deed’s limitations when comparing it to a trust-based plan. If you would like to learn more about whether a revocable transfer on death deed is a viable option for your estate planning, please feel free to contact us and discuss your individual concerns.
This Newsletter is for informational purposes only and not for the purpose of providing legal advice. You should contact an attorney to obtain advice with respect to any particular issue or problem. Nothing herein creates an attorney-client relationship between Hallock & Hallock and the reader.