Transfer on Death Designations (Part 2: The Story of Two Friends)


Part 1

What about Transfer on Death Designations to Avoid Probate?

Let’s assume that Marge and Phil’s deed was joint and survivor. 

When Marge passed away many years after Phil’s death, her children got together to figure out what to do about her things, including the house. It turned out that, apart from recording an Affidavit of Surviving Spouse, Marge didn’t take any other action regarding her house. 

Her children discovered that, because Marge died without a living joint owner, her home (and other assets) could only be distributed to her children through probate.

Marge wanted to avoid probate, knowing it was a tedious process, but she wanted all three of her children to share equally in the house after her death, and didn’t want to make all three of her children joint owners of the home with her.

Was Marge’s only option to avoid probate to make all three of her children joint and survivor owners of her home with her? No. Marge had another option.

If you name another person as joint owner of your real estate, you can’t take that gift back. They are owners of the property with the same rights as you! And this doesn’t just apply to real estate; it works that way with bank accounts as well. Parents often name one or more children as joint owners of their home (or bank account) in the hopes of simplifying their lives avoiding probate, but what they don’t realize is that their “gift”—whether they intended to make a gift or not—can’t be taken back, and the child named as co-owner of the home or account has no obligation to share the property with anyone else. It doesn’t matter what your will says. When you pass away, your joint owner gets the real estate or account.

What about Real Estate?

For real estate, you can sign a Transfer on Death Designation Affidavit, naming your desired beneficiary or beneficiaries. Then, after you pass away, your designated beneficiaries take over ownership of the property without having to deal with the tedious probate process. And a Transfer on Death Designation Affidavit doesn’t transfer anything to anyone until you’ve passed away. Unlike a deed, you have a right to change your Transfer on Death Designation Affidavit at any time before you pass away.

In Marge’s case, there were two options:

1. Marge and Phil could have signed a TOD Affidavit while Phil was still alive, naming their three children as beneficiaries of the property. Then, after Phil passed, the survivorship deed would have passed the property to Marge, and then on Marge’s passing, the property would have passed to their three children through the TOD Affidavit. No probate. No mess.

2. Marge could have signed a TOD Affidavit naming all three children as beneficiaries of her house after Phil passed away. Then, after Marge passed away, her children would become equal owners of the property.

The same principle applies to bank and investment accounts. Rather than naming children or other intended beneficiaries as co-owners of an account, you can name your children as Transfer on Death Beneficiaries of your accounts. And accounts are even easier to deal with than real estate. Your financial institution will provide you with a form for naming beneficiaries.

If you are unsure of your options and whether your or your loved one's estate planning is adequate, give us a call and schedule a time to sit down with one of our attorneys for an honest, no-cost assessment. We can be reached at info@sovelaw.com or 937-985-1843.