Understanding How Deeds at Death can Promote Family Harmony

 

This guest post is offered by Amy Welton, Regent Law 3L and current Wills, Trusts, & Estates student:

Lady Bird Deeds, also known as the Enhanced Life Estate Deeds, and Transfer on Death Deeds (TODDs) are often used in Estate Planning to avoid property going through probate, typically protecting it from creditors or just simplifying matters for the surviving family after the property owner’s death. These deeds create a cost-effective way for individuals to leave their property to another person at their death while maintaining all property rights including their rights to sell or partition the real property during their life. Unlike typical life estate deeds, the grantor in an enhanced life estate deed retains the right to revoke the deed and to mortgage or sell any or all of the property. He or she can do this and still leave any remainder of it left upon their death to the person listed to receive it. The deed even includes the homestead exception status so that the tax benefit may also transfer to the recipient. If the testator does change her mind, she must record before her death a document indicating she revokes the deed.

If an estate is small enough that a trust is not recommended and most of the assets have been appropriated to different beneficiaries through non-probate mediums, the probate stays small and inexpensive for the decedent’s family and possibly even unnecessary. Some main concepts to understand regarding these deeds are title/ownership repercussions and who can sign them. The remainder beneficiary has no interest until the original owner dies and his interest in the remainder vests in the beneficiary. This showcases the main benefit of both deeds – they are revocable. For title purposes, the Transfer on Death Deed has to be recorded before the property owner’s death to be valid. The same is true with its revocation. However, a Lady Bird Deed can be signed by the property owner or a Power of Attorney for the property owner that has received the power to transfer real property. A Transfer on Death Deed offers no such opportunity for a Power of Attorney to help manage the desires of an incapacitated property owner. Also, in the event that a remainder beneficiary passes away before the original owner, there may be confusion regarding the ownership of the property, but in such a case the interest in the property never vested, and thus the property would pass in the grantor’s probate estate.

Transfer on Death Deeds can work to preserve the testator’s intent, and potentially family harmony as well.