Borg, attorney, details pros, cons of transfer on death deeds
Deed allows bequeathed property to avoid probate without a trust
LAS VEGAS – Estate planning can be complicated, especially if the rules are misunderstood. One common misunderstanding, according to Las Vegas estate planning attorney Brooke Borg, founder and attorney for Borg Law Group, is the value of a will and what it does and doesn’t allow. Borg has found many of her clients didn’t realize a will is required to go through probate (court involvement in the distribution of a deceased’s assets) if the deceased did not also have a trust or properly title his or her assets. Those legal documents also allow his or her assets to avoid sole ownership without a beneficiary.
A trust is an investment, and one not many people are willing to make even though it can be an invaluable asset. A transfer on death deed (TODD) may prove to be a better option, as TODDs also allow for probate to be avoided in the transfer of real estate upon death. But, as with most things, TODDs have pros and cons.
In addition to avoiding probate, TODDs can be revoked by the property owner at any time prior to the owner’s death. If the beneficiary should die before the property owner, or if it’s revoked, a different beneficiary can be named. The transfer of property doesn’t take effect until the owner’s death, and if the beneficiary has any current liability, that liability will not attach until ownership transfers to him/her.
Aside from all of the positive aspects of the TODD, there are some valid concerns associated with it as well.
The property may be used to satisfy any creditors associated with the property’s owner after the owner’s death. There is a possibility the beneficiary could never see any benefits from the property, depending on the size of the owner’s debt. According to a Nevada Revised Statute, any creditor of the estate has up to 18 months to file a claim against the property after the death of the original owner.
If the property owner has multiple properties bequeathed to different beneficiaries, any debts owed will be shared in proportion by all the beneficiaries receiving property.
“For instance, if a $200,000 home and a $600,000 home were bequeathed to two different beneficiaries, an outstanding $10,000 credit card payment would be shared, based on the worth of each home,” Borg said. “The new owner of the $200,000 home would pay one-third of the bill, leaving two-thirds of the bill to the owner of the $600,000 home.”
Any outstanding mortgage also remains with the property and, therefore, the beneficiary is responsible for the payments. If the beneficiary wishes to sell the property, the title insurance company will likely require some action on behalf of the estate to put creditors on notice of the death and wait the required 18 months before a sale can be completed. In the meantime, the estate is left to pay any monthly outstanding mortgage payments.
If the property owner loses capacity to make informed decisions prior to his or her death, the ability to revoke or amend the TODD is lost. In this case, for those who already have a TODD, Borg reiterated the importance of having a financial power of attorney in place to make the property owner’s decisions for the owner, if needed.
For the beneficiary, there may be tax liabilities to consider, which is why all parties should be well informed, Borg said.
“Additionally, if you do not have a TODD, a joint owner or trust as owner of your property, you may want to consider your options to avoid probate for your loved ones once you pass away,” Borg added. “As always, there are tax considerations that often come up when transferring assets, so it is important to use the information you get from your estate planning attorney in conjunction with information you receive from your tax accountant or certified public accountant.”
Borg Law Group provides legal services to individuals and businesses in the areas of real estate, corporate law, estate planning and probate. The firm’s founder, Brooke Borg, is admitted to the State Bar of Nevada and the State Bar of Michigan.
For more information regarding Borg Law Group, call 702-318-8808 or visit BorgLawGroup.com.
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