Written by Steven Katz, Esq.
Many people use a will to dictate where their real estate goes when they pass away. But is that really the best way to pass real estate to a loved one? In many cases, the answer is no.
There are several tools for distributing real property at death.
One tool available is known as a Transfer on Death Affidavit (Commonly referred to as a TODA or TOD Affidavit). TOD Affidavits are a quick and cost-effective way to transfer real property, making them increasingly popular. In a TOD Affidavit, the owner of real property designates a beneficiary or beneficiaries to receive the real property upon the owner’s death. Any person or entity may be named as the beneficiary. In addition, an owner may name multiple beneficiaries and may assign differing portions and sizes of the property to each of the beneficiaries.
To be effective, a TOD Affidavit must meet several requirements.
It must be notarized prior to the owner’s death, describe the property (including the instrument number), describes the part of the property being transferred, and name the beneficiary or beneficiaries. In addition, if the owner is married, the owner’s spouse must also sign the TOD Affidavit. The owner, or owner’s representative, must record the TOD Affidavit with the county recorder. Once these requirements are met, the affidavit is a legally enforceable document. With any filing, always check with the County Recorder’s Office where the real property is located for any special county-specific requirements or preferences.
TOD Affidavits have many benefits.
Most importantly, TOD Affidavits avoid probate. The probate process of administering an estate can be a costly and lengthy process. More specifically, selling or distributing real property through an estate can be a long, tedious process. A TOD Affidavit allows for a transfer of real property after death while saving both the estate and the beneficiaries a great deal of time and money.
An owner may revoke or modify a TOD Affidavit at any time prior to the owner’s death. The owner may modify the named beneficiaries, the portion of the property that the beneficiaries will receive, or both. It is important to note that the owner retains possession of the property until his or her death. When an owner executes a TOD Affidavit, he or she retains the same property rights as he or she had before the TOD Affidavit was executed. The property rights do not transfer to the beneficiaries until the owner’s death so the owner has the freedom to use the real property in any way that they choose during their life, while still being sure that their wishes after death are granted.
One potential drawback with TOD Affidavits is that the transfer does not avoid federal estate taxes.
If the real property in question is extremely valuable, it may be wise to consider other estate planning tools to transfer the real property to try and avoid federal estate taxes. Finally, TOD Affidavits do not protect from attachment to the property by the owner’s creditors. The owner’s creditors may also attach to the land after the owner’s death. In other words, the beneficiaries receive the real property as well as any debts or liabilities associated with the real property.
TOD Affidavits, like any estate planning tool, can be complicated. Mistakes can have serious consequences for you or your estate. If you have any questions about TOD Affidavits or estate planning, please contact an attorney at Katz, Pryor & DiCuccio, LLP today for a free consultation.
This article or any communication made through this website is for general information purposes only. Nothing conveyed through this article or website should be taken as legal advice and under no circumstances constitutes an attorney-client relationship.