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Transfer on Death Deeds

May 21, 2015

When giving your property as part of your estate including it in your will is not your only option. You might consider a Transfer on Death Deed to accomplish this. A Transfer on Death Deed is a document recorded during a property owner’s lifetime that directs that the property will be transferred to a beneficiary when the owner passes away.  A life estate transfers the ownership of the property to a new owner right away, but allows the original owner to stay at the property as long as they want or until they pass away. Of course, you always have the option of giving gifts of your property while you are alive, as well.  All of these are ways to help keep your property in your family and avoid going through probate.

A Transfer on death deed can be recorded at any time during the property owner’s life. It can also be revoked at any time prior to death as well, giving the property owner a chance to change their mind unlike Life Estates or Gifts of Equity which has an immediate irrevocable effect. A valid Death Deed cannot be overridden by a contrary provision in the transferor’s will, the only way to revoke a Death Deed is through recording a revocation. A beneficiary to a death deed is liable for an allowed claim against the transferors probate estate and statutory allowances to surviving spouses and children.

A transfer of death deed does not require notice, delivery, or acceptance by the beneficiary while the transferor is alive and only become effective upon death. Additionally, taxes on the real estate transfer do not become due until death as well.

PROS of Transfer on Death Deeds

  • Allow full use of the property without having to obtain approval from the other person because they essentially own the property. You can sell it, if necessary, with much greater ease
  • Protects the transferor from the beneficiary, the person getting the house at death, taking on debts that use the house as collateral.
  • Although revocation is difficult, it is possible, whereas a life cannot be taken back.
  • Doesn’t impact the beneficiaries’ or transferor’s ability to apply for government benefits
  • Doesn’t count against the gift tax threshold

CONS of Transfer on Death Deeds

  • Doesn’t allow the beneficiary to have a say in property decisions, and allows them no way to ensure that there is no waste on the property as they don’t have a current interest
  • The liabilities, claims, estate taxes, and administration expenses are incurred by the beneficiary when the transferor passes away.
  • There is a question of whether it counts as a transfer for Medicaid and makes the transferor ineligible for Medicaid. It would likely not affect Medicaid eligibility as it doesn’t transfer the property. However, Colorado’s law states that the grantor is not eligible for Medicaid.
  • If the people who are named as beneficiaries don’t outlive the transferor, the interest lapses and will be given out according to the will.
  • Responsible for liens recorded with 24 months AFTER the transferor’s death.

If you have questions or concerns about transferring property, call Limitless Law PLLC at (360) 685-0145 or use the “Ask an Attorney” link on our website to contact us today!

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