On January 1, 2012, a new estate planning tool became available to Oregonians–the Transfer-on-Death Deed (TODD). The law allows property owners to transfer real property (i.e., real estate) to one or more beneficiaries using a TODD. The deed must be recorded while the transferor is still living, but is revocable and does not take effect until the transferor’s death. This means that the property owner can sell the property at any time during his or her lifetime, automatically revoking the TODD.
Bank accounts, certificates of deposit, investment accounts, life insurance and almost all other assets have long allowed the owner to designate a beneficiary and, thus, avoid probate. Real property, often one of the largest assets a person owns, did not allow such a designation. The TODD is intended to allow for real property to pass after death without probate.
When used in the right circumstances, a TODD could save the estate money.
As an estate planner, when I discuss TODDs with clients, I look at a number of issues:
1. Potential for Fraud and Elder Abuse. An untrustworthy individual could influence an elderly property owner to sign a TODD in his or her favor. Such a transfer may defeat the transferor’s estate planning objectives. The persons who would otherwise have inherited the property would have to bring a court action to defeat the TODD.
2. 18-month Cloud on Title. When an estate is probated, there is a four-month creditor claim period, and the State of Oregon must be informed of the probate proceeding. At the end of the claim period, clear title to the property may be transferred. If a TODD is used, there may be additional steps required by the title company in order to transfer the property before the 18 months have elapsed. The title company may require proof that the State does not have a claim related to Medicaid and that all estate taxes have been paid. It may also require that all heirs of the decedent consent to the transfer, even if they are not the person(s) named in the TODD to receive the property.
3. Multiple Grantors May Lead to Inconsistent Results. If there are joint grantors, a surviving grantor may revoke the deed after the other grantor’s death. The revocation may be inconsistent with the deceased grantor’s wishes.
A TODD may or may not be the best tool for you to use to transfer real property at your death.