By Dan Barney
Last week we discussed various types of deeds. There is, however, another option for the transfer of real property.
This newer type of deed was created in November of 2008 and can provide for the automatic transfer of ownership of your property at your death, without probate.
This act, the Non-Testamentary Transfer of Property Act, permits you to prepare a deed that will, upon your death, automatically transfer ownership of your real property to persons you name in the deed.
This is a “Transfer on Death” deed, similar in concept to a Payable on Death bank account.
• How does the new deed work? A person (the “Grantor) executes a deed that names a successor as the recipient of the property at the death of the Grantor. The deed is signed, acknowledged and recorded in the county records.
The Grantor remains as the legal owner so long as he is living. In addition, he retains the right to revoke the deed at any time prior to death by executing and recording a formal revocation in the records of the county or by executing a new Transfer on Death deed.
Upon his death, the property immediately becomes the property of the person or persons named as grantees in the deed.
• What is the advantage of this new deed?
1. The property will pass to the named persons without probate.
2. The Grantor retains ownership and control of the property so long as they are living.
3. The property passes to the new owner immediately after death. No delay occurs in the transfer of ownership, only the filing of an affidavit to affirm the death of the Grantor is required. No tax release is required if the new owner is a spouse or if the transfer occurs after January 1, 2010.
4. This type of deed can also be used to transfer mineral interests.
• How does this compare to a deed with retained life estate? A similar transfer that has been used for many years is the immediate deeding and transfer of property to a new owner but in which the Grantor retains a life estate (the right to use the property for the rest of his life).
A life estate transfer also avoids probate but:
1. The use of a life estate transfers legal ownership immediately to another person. The Grantor does retain the use and benefit of the property but cannot revoke the deed or change the persons owning the property.
A Transfer on Death deed thus provides more control and future flexibility and the ability to revoke or change beneficiaries.
2. The impact on Medicaid eligibility is also a consideration.
(a) A Transfer on Death deed does not transfer property until death, so the property will be counted against the assets of the Grantor so long as he lives.
(b) On the other hand, if property is deeded and a life estate is retained, the property is not counted as an asset (after a five year look back period), only the value of the life estate is counted as an asset. Usually the life estate has a lower value than the asset itself.
This technique is a new “tool.” Not all states have such a law. One of the goals of the law is to simplify transfer for persons with small estates who may have only a home as real property.
Use of this method will enable transfer of that home at death without probate and without the need to lose control of that property prior to death.