What a Transfer-On-Death Deed Can Do For You

The last thing you want when you die, is for your passing to spark a battle royale among your loved ones. A transfer-on-death deed can be an important estate planning tool to avoid such chaos.
A transfer-on-death deed is also known as a Lady Bird Deed. The name came from the Lyndon B. Johnson era. When President Johnson deeded property to his wife, Lady Bird Johnson, the name stuck. “When a Lady Bird Deed is drafted correctly, these deeds will transfer your real property to your heirs upon death. Unlike a bank account, where you can name a beneficiary to an account, you can’t name a beneficiary to your house,” explains Patrick Simasko, principal of Simasko Law. “These deeds are the next best thing. Until your death, you have the right to sell, lease or convey your property.”
Why this can be ideal
What’s the big advantage of a transfer-on-death deed? “You avoid the cost and delay of probate. There is an automatic transfer of your real property upon death to named beneficiaries. This transfer also allows beneficiaries to avoid paying any filing and inventory fees for a house that would be associated with the probate process,” says Simasko.
With any real property there’s always Uncle Sam to worry about. However, with a transfer-on-death deed, there is no county transfer tax or state transfer tax to be paid, says Simasko. Your property will also not lose a step up in basis under IRS Code 1014 and 2036(a), he says.
“The beneficiaries can sell the house at your death and not pay taxes on the proceeds. Another advantage is that you avoid the hassle of transferring liability insurance. By keeping the property in your name for your lifetime, you avoid unnecessary transfer paperwork for both taxes and insurance,” says Simasko.
There’s more good news. For Medicaid planning, you are allowed to keep your home or one primary residence as an exempt asset. These deeds keep your home in your name and allow you to keep this exemption during your lifetime when applying for Medicaid. This is critically important, explains Simasko because Medicaid has the right to file a lien on your loved one’s probate estate to get reimbursed for the benefits paid while living in the nursing home. “This means that if the home or any other asset has to go through probate, Medicaid can be reimbursed for the benefits that they paid out. However, with a Lady Bird Deed, there is no divestment for Medicaid purposes, the home never goes through probate, and no lien will be attached.”
Understand the particulars
However, there is much to know about transfer-on-death deeds. “In my experience the first thing people think is that a TOD is perfect. You still need to talk to an attorney or financial planner to be sure it’s good for you,” says Bijan Golkar, a certified financial planner with FPC Investment Advisory.
For one thing, a transfer-on-death deed may be too simple for a complex estate. “If the only thing you own is a house, this is a good option,” says Golkar.
It’s important to know the rules. “Generally, they cannot be revoked by will, only by recorded revocation, and they may be not useful where minor beneficiaries are involved. The property also generally remains subject to debts of the decedent,” says Sam Long, of counsel at the law firm of Shackelford, Bowen, McKinley & Norton.
In California, Golkar says there are requirements, “the property must be a single family home, or condo, can’t have more than four units, farming land of more than 40 acres,” among other things.
Know too, that not all states allow them. “In states like New York, it is not possible to create a deed that transfers ownership of the property to a third party that is not currently in the title upon the owner’s death,” says Alan Doran, general counsel of OneTitle National Guaranty Company.
But for many people, a transfer-on-death deed is an important piece of the estate planning pie. Says Simasko, “Used with other estate planning tools, like a will, trust, power of attorney, and patient advocate, you can protect yourself on a legal and financial level.”
http://www.nolo.com/legal-encyclopedia/free-books/avoid-probate-book/chapter5-1.html
Very few people can use TOD do to mortgages, lens, creditors and greedy lawyers.
I had a neighbor who has a life estate that his lawyer cousin did for him in the 70's when I moved in across the street from him. Our property was joint until my husband passed and I had this done. Cost $150. In the state where I live you can have stock, bonds, checking, savings, CD's, IRA's, life insurance all with beneficiaries to avoid probate. A motor vehicle worth less that $60,000 will not go through probate, nor watercraft worth less than $100,000 will go through probate. All house furnishings, jewelry, collections worth less that $15,000 will not have to go through probate. Built in stoves, ovens, dishwashers, refrigerators, carpeting, drapes etc go with the house and are not categorized as furnishings in my state.
I went to the car read it again. Immediately drove down to the County Building and went to the Reg of Deeds and had it filed and Registered. Doing it myself save the lawyers fee. I think the recording fee was $17 in my state.
Furthermore, if there is a mortgage on the property and the inhertant has no means to service it or it is not allowed to be assumed, good luck with keeping the property. There can not be a TOD on a reverse mortgage or if there are legal proceeding against the owner.
Those are a just few samples of the bad side of TOD, I'm sure a good attorney can find hundreds of loop holes to stop such transfer just by declaring the desist as mentally ill.
The best way to transfer is by joint tenancy in common in the title and you can add variations or conditions to the title when and how and how many percents of the deed to transfer the rights to.
There is no probate, courts of any kind and reverse mortgage is not affected and the title is clear on transfer and no liens can jump in since there is no transfer of title at all. I bet many attorneys know all of these but are keeping it to themselves.
We have ALL paid into Medicare one part of which is Medicaid...get off your horse. It has been paid and if legally one can obtain it...then go for it!
Medicaid for healthcare is for limited income/assets. Medicaid/Medi-Cal for LTC has a relative complex income/asset calculation AND unlike for healthcare the latter requires pay back if the assets are there...required by Fed law, not so for Medicaid for healthcare.
22. WILL THE PROPERTY BE SUBJECT TO MEDICAID ESTATE RECOVERY UNDER CURRENT LAW IF I CURRENTLY RECEIVE OR PLAN TO APPLY FOR LONG TERM CARE? No, as the property does not go through the probate system, under current law it is not subject to Medicaid estate recovery, whether you are currently receiving long term care or plan to apply for it.
http://texaslawhelp.org/resource/transfer-on-death-deed-answers-to-frequently-asked-questions?ref=7k...
http://budgeting.thenest.com/tax-consequences-quitclaiming-deed-son-24538.html
If over $14,000 it is over the gift tax amount.