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Transfer On Death (TOD) Deeds for Real Estate
Old 04-13-2022, 06:50 AM   #1
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Transfer On Death (TOD) Deeds for Real Estate

Similar to TOD and POD bank accounts, I have recently been made aware there are TOD Deeds for real estate for my state of Virginia. Realizing this may not work for everyone's situation, I think it works for mine since I am leaving most everything that remains to my only child, my biological daughter. It is my understanding this Deed avoids the hassle of probate on real estate, taking it out of the estate such that the beneficiary can immediately do what they need to do with the properties.

I have taken some time to do some research and wanted to ask this forum if anyone here has used TOD deeds and/or had any positive or negative experiences. The only thing I have been told and this was from the real estate lawyer I was going to use who said, "he had just revoked one" because the owner wanted to sell the property and the Title company required that the TOD be removed. However, it is also my understanding this typically does not happen.

My goal is to make handling my two properties at my death easier for my daughter. Thoughts?
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Old 04-13-2022, 06:58 AM   #2
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Every state's different when it comes to real estate. Our state's deeds are written "with rights of survivorship" which means the wife.

And any heir needs to get an immediate real estate appraisal upon one's death--to establish the "basis" of the property for future tax purposes. It doesn't take much of a house in this real estate market to get to where the "basis" comes into play again.

The other option would be to place the home into a trust. In our state, a trust has to pay full property taxes--where my wife's disablity waives all property taxes. Many states give a cut on senior citizens' property taxes--but not trusts.
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Old 04-13-2022, 07:14 AM   #3
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Thanks for the reply Bamaman. Right of Survivorship doesn't apply in my case (divorced). Yes, state laws can be different in each state.
My goal is to allow her to be able to do with the properties what she needs to do immediately, avoiding the probate process and/or even manipulations of a Trust...if possible. I have a Trust but am rethinking that as well. After all, aside from some very small bequests, she will inherit the bulk of it. So, I am thinking why not a 'Transfer on Death" real estate deed, like I have done for some bank accounts.?
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Old 04-13-2022, 07:14 AM   #4
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I'm also in Virginia, and I filed a TOD on my house. I'm trying to remember if I did this before or after talking to my estate attorney. I think she was hoping to set up a trust for me but she acknowledged that a TOD on the house and all non-IRA investment accounts would work fine for me, with a single child heir.

I hadn't thought about what happens if I sell the house, but my small county office is great to deal with on this stuff. It was quick and easy to register the TOD.
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Old 04-13-2022, 07:22 AM   #5
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In NY they call that a "Life Estate Deed". Used to isolate the Estate from a Medicaid claw back since only probate items are subject to a recovery. TOD to the "Remainderman".
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Old 04-13-2022, 07:22 AM   #6
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Thank you RunnningBum...that is good to know! Even after researching, I can't think of a reason not to do the same. I will add a "per stirpes" designation to the TOD in the event something happens to my child, so it will go to her heirs.
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Old 04-13-2022, 07:24 AM   #7
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In NY they call that a "Life Estate Deed". Used to isolate the Estate from a Medicaid claw back since only probate items are subject to a recovery. TOD to the "Remainderman".
Interesting Jim584672, I think I had read about that. Since the TOD takes it out of your estate it protects it from clawback since at death, it is not longer in our names.
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Old 04-13-2022, 07:26 AM   #8
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https://www.medicaidplanningassistan...dy-bird-deeds/

Think this is what you are talking about, and I, not a lawyer, think they are pretty cool. We actually have a place that we sold that is TOD to the buyer at the time of the last of Gal or I dying. Lawyer said order of and timing of filing of the sales contract and TOD deed were critical, but our desire is to have the property transfer and the contract be satisfied at our time of death. Until that time the contract is in force, buyer can sell and pay us off or we can revoke the TOD deed. Hope the law dogs got it right - we also want to avoid probate and make life simple.
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Old 04-13-2022, 08:25 AM   #9
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Thank you calmloki. Yes. "Life Simple". I think I want a T-Shirt with this on it!

I really think a TOD will make it simpler for my daughter.
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Old 04-13-2022, 08:36 AM   #10
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@sheehs1, after you consult SGOTI for some education you're planning to work with a trusts & estates specialist attorney, right? This is important stuff, as is an appendectomy. Neither should be approached on a DIY basis. Mistakes will only be discovered after you are dead and unable to correct them.
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Old 04-13-2022, 09:27 AM   #11
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DW and I did a complete estate plan with our attorney a couple years ago. I own 1/3 interest in some hunting land that I wanted to bequest to DS in my will. Our attorney suggested a TOD for this piece of property. DD will receive an equal amount of cash for its appraised value at my passing.

It will avoid probate.

I'm in MN, I'm sure each state has its own laws on this. Like Old Shooter said, this is Attorney territory.
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Old 04-13-2022, 09:36 AM   #12
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It sounds like a great idea. I was wondering about that recently. We are also in VA with a single heir.

It seems far easier than complicating life with a trust, but I also suspect probate is not a big deal on Virginia.

To be clear, you will want an appraisal of the real estate at date of death in any case, unless selling immediately. So that is not a difference versus probate.
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Old 04-13-2022, 09:38 AM   #13
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Old Shooter, at the moment I plan on having a real estate attorney draft the deeds. He has drafted many TOD Deeds. Thought about doing it myself, looked into it and simply don't want to spend my time doing it even though I have the legal descriptions and examples to go by. Just want to make sure all are properly witnessed, notarized and recorded.
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Old 04-13-2022, 09:51 AM   #14
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Just out of curiosity, does the recipient of a TOD deed get a step up in basis on the property as of the date of death?
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Old 04-13-2022, 10:33 AM   #15
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Just out of curiosity, does the recipient of a TOD deed get a step up in basis on the property as of the date of death?
In Virginia, yes. Check your state though.

"No Gift Tax Consequences and Basis Step-up – Because a TOD deed can be revoked, it is considered an incomplete gift under the federal gift tax laws. This means that the owner owes no gift taxes on the transfer and the property qualifies for a full basis step-up on the owner’s death." (copied and pasted)

Another benefit is, it is my understanding from both an Attorney and the Clerk of Court here, is that it takes the property out of your estate. Just like a TOD bank account is not listed in the required accounting when settling an estate

I have decided against doing a "per stirpes" designation since my grandchildren are minors and it is not recommended for minor children to potentially inherit real estate. A guardian would have to be appointed. If something happens to my daughter before me, I will just have to redo everything anyway.
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Old 04-13-2022, 10:52 AM   #16
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Our state allows TOD title of real estate, so I have been questioning whether to put our home into our revocable trust or simply do a TOD on title. Here it gets complicated.....WA estate tax comes into play and our trust has 4 sub trusts under the QTIP Clayton provision to allow the surviving spouse of the decedent to maintain the personal exemption from estate tax (2M or so is the state exemption) and allow further exemption from Fed tax, should they screw with that in the future. It would get messy to fund the sub trusts if the property was not in the trust I fear. Something to consider for those with state taxes on estates. I would like to hear from any others in a similar state and trust situation....
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Old 04-13-2022, 11:16 AM   #17
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Originally Posted by sheehs1 View Post
Old Shooter, at the moment I plan on having a real estate attorney draft the deeds. He has drafted many TOD Deeds. Thought about doing it myself, looked into it and simply don’t want to spend my time doing it even though I have the legal descriptions and examples to go by. Just want to make sure all are properly witnessed, notarized and recorded.
Excellent! It seems we get so many threads like this started by people who are planning to do their own appendectomies. DW spent a career in trusts and estates from the megabank side and I have heard many horror stories.
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Old 04-13-2022, 11:19 AM   #18
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IL now has this TOD option on real estate, for approximately the past 10 years.

Prior to that, lots of people used a "Chicago Land Trust" to keep the property out of probate.
Here in IL the probate is famous for taking about a year, and being expensive.
The issue with all the old "Chicago Land Trust" is the yearly ~$100 fee, and then there is approximately $500 transfer fees when needing to do the change over.

We haven't bothered as we never thought about it, and now I keep thinking of moving.
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Old 04-14-2022, 06:38 AM   #19
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Originally Posted by calmloki View Post
https://www.medicaidplanningassistan...dy-bird-deeds/

Think this is what you are talking about, and I, not a lawyer, think they are pretty cool. We actually have a place that we sold that is TOD to the buyer at the time of the last of Gal or I dying. Lawyer said order of and timing of filing of the sales contract and TOD deed were critical, but our desire is to have the property transfer and the contract be satisfied at our time of death. Until that time the contract is in force, buyer can sell and pay us off or we can revoke the TOD deed. Hope the law dogs got it right - we also want to avoid probate and make life simple.
Per the article, "Lady Bird" deeds are recognized only by a handful of states.

Best to consult an eldercare lawyer about Medicaid planning because "claw-back" policies differ so much depending on state of residence:

https://www.nolo.com/legal-encyclope...r-you-die.html

Recovering From the Estate

The first method states use is to seek repayment from the estate of a deceased Medicaid beneficiary. Each state defines the term "estate" -- meaning what type of property Medicaid will go after -- differently. Some states are fairly conservative about what they will try to take -- they have the right to recover costs from real estate, personal property, and other assets only if they are included within the deceased person's "probate estate." A probate estate includes only assets that were owned solely by the individual at the time of death, where there is no beneficiary or joint owner designated. Joint accounts, payable on death accounts, and contracts that have designated a beneficiary are not included in the probate estate.

Other states use a broader definition of the term estate that includes any assets an individual had legal title to or interest in at the time of death, including property that bypasses probate. In these states, the estate includes assets that the individual attempted to convey to a survivor, heir, or assign through an arrangement such as a joint tenancy, tenancy in common, survivorship, life estate, or living trust."
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Old 04-15-2022, 12:57 PM   #20
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We used a TOD deed for my dad. When the time came, it was simple. Just had to file a death certificate with the county showing he passed. My brother and I were able to sell the house within a month of his death. No probate needed since his house and all of his financial accounts were TOD/POD.

I've put our house in a similar TOD deed.
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