Transfer On Death (TOD) Deeds for Real Estate

[sheehs1]

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?

 

[Bamaman]

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.

 

[sheehs1]

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.?

 

[RunningBum]

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.

 

[jim584672]

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".

 

[sheehs1]

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.

 

[sheehs1]

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.

 

[calmloki]

https://www.medicaidplanningassistance.org/lady-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.

 

[sheehs1]

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.

 

[OldShooter]

@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.

 

[Stormy Kromer]

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.

 

[Montecfo]

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.

 

[sheehs1]

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.

 

[SecretlyFI]

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?

 

[sheehs1]

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.

 

[Happyras]

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....

 

[OldShooter]

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.

 

[Sunset]

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.

 

[ncbill]

https://www.medicaidplanningassistance.org/lady-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-encyclop...term-care-from-your-estate-after-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."

 

[PatrickA5]

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.

 

[Kwirk]

When we sold our Va house we were required to withdraw the existing TOD. The attorney we hired did the withdrawal and created a new TOD for the new house.

 

[jkern]

I live in CA and have TOD deeds on my house and three rental properties. For me the purpose is to avoid probate for my single heir (daughter).

 

[I am He]

WI has a TOD option.

 

[sheehs1]

I think if more people knew about TOD for real estate and if their state allows it, more people would use it. I have an appointment with the lawyer to sign the new Deeds on Tuesday of next week.

Could probably have done it myself but this way, no one at the Court House will hang it up due to a technicality. One phone call with her told me she was going to be a problem. Ha!

With both pieces of real estate now TOD, all bank and brokerage accounts either TOD or with IRA beneficiary designations (except the ones at my local bank that I call "working" accounts and that I will take care of shortly), I am going to sit down and rewrite my will, getting rid of the Trust. Hoping to make things simpler for my single heir daughter.

Now I just have to take care of the stock I own in the Family Business, to avoid that going into probate.

Within the last 3 weeks, I also executed a Power of Attorney at my brokerage that ceases at my death. I was worried my daughter would not have funds to take care of me should it be needed. Getting her into a bank to change title on the local bank accounts and/or getting the bank to add to titles without her has not been the easiest. In some cases they wanted me to close and reopen the accounts and I didn't want to do that. This takes care of that.

My recent birthday definitely started me rethinking everything!

 

[pb4uski]

We've been going through an estate planning initiative to minimize what has to go through probate if DW and I die simultaneously.

In addition to TOD deeds, 5 states have enhanced life estate deeds (aka Lady Bird deeds) which are substantively the same as TOD. Florida, Michigan, Texas, Vermont, and West Virginia.

Luckily, our two homes are in Florida and Vermont. Initially, I planned to establish a joint revocable living trust and change the deeds to have the properties owned by the joint trust. However, after finding out that our states allow Lady Bird deeds, I decided that was a better route. We'll sign the Lady Bird deed for our Florida home next week and do a Lady Bird on our Vermont home this summer.

I did find one use for the joint trust... to buy more ibonds... so creating it wasn't totally wasted effort... it only cost me $10 to have our signatures notarized anyway.

https://www.toupslaw.com/post/let-s-talk-deeds-lady-bird-deed-vs-transfer-on-death-deed