Transfer on death deeds (TODD), also sometimes referred to as beneficiary deeds, are documents that transfer an asset to a specified beneficiary upon the owner’s death. The transfer is automatic and does not require court intervention. Many people create TODDs in an effort to help their loved ones avoid probate after they pass away. TODDs are typically less complicated and less expensive than drafting a trust.
How Do Transfer on Death Deeds Work?
A transfer on death deed allows you to choose a beneficiary who will automatically have ownership of the property after you pass away. During your lifetime, you can still typically use the property as you wish, as the TODD will not impact your rights. You can still sell, transfer, or use the property in any manner you wish. You, or your power of attorney, can also revoke or change the TODD during your lifetime. The beneficiary you choose will not have access to the property until you pass away. You may also be able to choose a contingent beneficiary in the event that the first beneficiary passes away before you.
Benefits of Transfer on Death Deeds
Transfer on death deeds have many benefits. These are as follows:
- Avoid probate: Assets that have a TODD are not subject to the probate process. Probate can be a lengthy and expensive process that depletes assets in the estate, leaving less for your loved ones.
- Avoid federal gift taxes: If you give property away during your lifetime, the IRS may view it as a gift and it may have federal gift taxes attached to it. TODDs do not go into effect until you pass away, so it avoids the federal gift tax.
- No impact to Medicaid eligibility: If you have transferred property in the five years before applying for Medicaid, it can drastically impact your eligibility for benefits. Property attached to a TODD is not counted as an instant transfer of property and therefore, should not impact your eligibility.
While transfer on death deeds do have many benefits, they can only be realized if a TODD is executed properly. A Nevada estate planning lawyer can ensure a TODD is drafted properly so you and your loved ones can realize all of the benefits.
Drawbacks of Transfer on Death Deeds
It is true that TODDs have many benefits. Unfortunately, they also have some drawbacks. These are as follows:
- Subject to creditors: If you had any debt when you passed away and there are not enough probate assets to cover it, creditors have a certain amount of time to pursue the property attached to a TODD. This can make it more challenging to obtain title insurance for the property and therefore, make it more difficult to sell.
- Multiple beneficiaries: If you want to name multiple beneficiaries in a TODD, they will all receive equal shares of the property after you pass away. If you wish to leave different percentages to different beneficiaries, a will may be a better option than a TODD.
- Disinheritance: If you forget to update the TODD after the birth of a new child or grandchild, one of your loved ones may be unintentionally disinherited if you pass away.
- Conflicting documents: Probate may be necessary if your TODD specifies one beneficiary but another estate planning document, such as your will, specifies another. For this reason, it is critical that estate planning documents are consistent with each other.
- Passing of beneficiary: When a beneficiary passes away before the owner, it can raise questions about who will inherit the property. Naming contingent beneficiaries can help resolve this issue. If contingent beneficiaries are not named, there may be confusion over whether unnamed surviving beneficiaries should be named, or if the named beneficiary’s heirs should receive the property.
Many of the above drawbacks only occur when a TODD is not drafted properly. A Nevada estate planning lawyer can ensure yours is executed properly to avoid these drawbacks from impacting you or your family.
Call Our Estate Planning Lawyer in Nevada Today
Transfer on death deeds can play an important role in your estate plan, but it is critical that they are executed properly. At Boyer Law Group, our Nevada estate planning lawyer can provide the sound legal advice you need and ensure your TODD is drafted in a way that will protect you and your loved ones and help you avoid the potential problems associated with them. Call us now at 702-255-2000 or contact us online to schedule a consultation and to learn more about how we can help.