For many people, the most important asset they are concerned about passing on after their death is their home. Oftentimes, the home is the bulk or a large part of their estate. As such, it is vitally important that the home be transferred after death in a way that is both quick, safe and easy to accomplish. To most this means transferring the home in such a way that it avoids having to go through the probate process. After all, probate can be slow, expensive and very few people enjoy the idea of inviting the courts to scrutinize their assets and affairs. For years the go to alternative to probate has been the revocable living trust. Establishing such a trust before death and titling the home in the name of the trust is an established way to ensure that the home is taken out of the probate estate and transfers through the trust rather than through probate.
However, for many individuals a revocable living trust is not a good fit for their estate plan. Oftentimes the house comprises an overwhelming majority of the estate, so much so that if it were removed there would not be enough assets left over to require going through probate. Thankfully for those individuals Indiana law provides them an alternative: the Transfer on Death Deed.
A transfer on death deed allows a property owner to directly transfer the ownership of real estate at the owner's death to whomever the owner designates by name. It functions very similarly to a beneficiary designation like on a life insurance policy or individual retirement account (IRA). The beneficiary has no interest in the property until the owner dies and has no effect on the present ownership of real estate. This means the deed can be updated or changed by the owner whenever the owner wants without the beneficiary’s consent.
While a transfer on death deed is a versatile tool to remove real estate from the probate process, it is not without its pitfalls. The transfer on death deed accomplishes a very specific purposes, that is to transfer the title of real estate without court intervention or oversight. Once the original title holder of the real estate passes away, the title passes automatically to the next person, with no stipulations or strings attached. Compare this to the power of the revocable living trust which can attach stipulations to the transfer of the real estate, such as holding the title in the name of the trust for a certain amount of years or directing that the real estate be sold, and the proceeds be doled out over time.
Married couples in particular should reconsider before using a transfer on death deed in lieu of other methods of avoiding probate. Most married couples usually have their real estate titled jointly with rights of survivorship in both spouses’ names, which means that if one spouse dies the other automatically receives the other’s interest. Recording a transfer on death deed destroys that right and can lead to unintended legal and financial implications.
While the transfer on death deed can be a valuable part of a person’s estate plan, it is not to be used without consideration into how it fits in the overall plan. That is why if you are ever considering changes to your estate plan, it is vitally important that you sit down with a qualified estate planning attorney to review changes and to assess what impacts they might have on your overall plan.