Generally, people prefer to avoid probate when it comes to estate planning because it can be expensive and time-consuming. Fortunately, there are several ways to transfer property without going through the probate process. In addition to living trusts and joint tenancies, a transfer-on-death deed is one of the ways to transfer property after your death without probate. Read on to discover whether transfer-on-death beneficiary is an option for you.
What Is a Transfer-on-Death Beneficiary for Property?
You can create a transfer-on-death beneficiary deed (also called a beneficiary deed) to transfer property upon your death to a beneficiary you name in the deed. The deed should state the following details: (1) your name as the owner of the property, (2) property description, and (3) the name of the beneficiary(s). The deed should also explicitly state that it won't become effective until you pass away.
To create a valid transfer-on-death deed, you must properly sign, execute, and record the deed. After drafting the deed, you must sign the deed in front of a notary public. Then, you need to record the deed with the local county office. If the owner fails to sign or record the deed, the deed is deemed invalid. Once the deed is created, you have full power over the property during your lifetime. Thus, you can revoke the deed anytime before you pass away through any methods of revocation or execution of subsequent deed.
Advantage of Transfer-on-Death Beneficiary Deeds
There are several benefits to transfer-on-death deeds. First, you can change the beneficiary at anytime during your lifetime. The beneficiary does not have any legal interest in the property until you pass away, so the beneficiary's creditors won't be able to reach the property until the deed becomes effective. Second, expenses related to the transfer-on-death deed are less than the ones related to other methods of transferring property, such as revocable trusts and wills. Third, probate is not required to transfer the property under transfer-on-death beneficiary for property. Avoiding probate is a huge benefit because probate process is usually expensive and time-consuming.
Disadvantage of Transfer-on-Death Beneficiary Deeds
Because transfer-on-death beneficiary deeds do not become effective until you pass away, someone can challenge the validity of the deed after you die. For example, someone can aruge that you lacked capacity to create a valid deed. Or, beneficiaries and family members can sue each other to take the property entirely. In this case, a court proceeding may be required to resolve the issue.
Another disadvantage is that the beneficiary won't be able to sell the property immediately upon the transfer. As opposed to joint tenancy with right of survivorship, transfer-on-death beneficiary for property does not automatically transfer the title to the beneficiary. Most states give people time to challenge the title on the property for a certain amount of time.
State Laws on Transfer on Death Beneficiary for Property
When you name a beneficiary, who will obtain title to the property upon your death, you must do so according to the applicable state law. Today, the majority of the states allow transfer-on-death beneficiary deeds to leave property to someone after your death. However, keep in mind, some states do not allow transfer-on-death deeds at all. Be sure to check your state's law on transfer-on-death beneficiary, if available, or contact an attorney to get help.
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There are several requirements to create a valid transfer-on-death deed. If you fail to comply with your state law, your transfer-on-death deed can become invalid, which can lead to a legal dispute after your death. Depending on your situation, there may be a better option, like a living trust, to transfer your property. To avoid any possible troubles or issues, contact an attorney in your area today for a free case review.