When estate planning, real property owners often compare transfer on death deeds vs. living trusts. In fact, both of these legal documents are great estate planning tools for transferring real property to loved ones! Plus, both allow the grantor to own and manage the property while living, and transfer it upon death. However, most attorneys would recommend a living trust as the best estate planning tool to transfer real property – here’s why.
What Are Living Trusts?
On the other hand, a living trust is a written legal document that places assets into a trust for the benefit of the grantor until they pass away. Upon the grantor’s death, the assets within the trust are transferred to specified beneficiaries. Like transfer on death deeds, living trusts are revocable prior to the grantor’s death. However, they can also manage assets besides real property.
Transfer on Death Deed vs. Living Trust
Benefits of Transfer on Death Deeds
When comparing a transfer on death deed vs. a living trust, most legal professionals will tell you a living trust is a better estate planning tool. That said, a transfer on death deed is a simple estate planning option for a person whose only asset is their primary residence. Additionally, it is useful when there is not enough time to create more comprehensive estate documents.
Downsides of Transfer on Death Deeds
That said, there are several downsides to transfer on death deeds when compared to living trusts. For example, if a beneficiary dies before the grantor, a transfer on death deed is no longer valid. In other words, there is no “Plan B” for estate distribution. Second, if the beneficiary is a minor, this will pose a legal problem with distribution. Third, if property is held as joint tenants with rights of survivorship, the tenant wishing to transfer property through a transfer on death deed must outlive the other tenant. Otherwise, the joint-tenant will receive the property.
Another important consideration is if the property owner becomes mentally ill. In this situation, they may have no one to revoke the transfer on death deed, which may impact their ability to get Medicare. Last, and most important, real property may end up being probated if the grantor dies before validly executing and recording their transfer on death deed.
Living Trusts: A Better Solution
Though setting up a transfer on death deed is quicker than establishing a living trust, the better solution for a property owner is to create a complete estate plan. More specifically, this plan should include a living trust, financial power of attorney, healthcare directive, and pour-over will.
When compared to transfer on death deeds, living trusts provide benefits both during and after the death of the trust maker and property owner. For example, a living trust can ensure the grantor’s assets are managed according to their wishes. Additionally, living trusts can distribute assets to minors. Finally, a grantor can designate a trustee other than themselves to assume the administration of the trust in case of incapacitation or death. Unfortunately, a transfer on death deed offers none of these protections. Plus, it comes with inherent problems that are typically undiscovered until after the grantor has died.
Get Help With Your Estate Planning – Call A People’s Choice
Contact A People’s Choice to discuss the benefits of preparing a transfer on death deed vs. living trust. We can direct you to resources that will help you decide which tool is best suited for your estate planning needs. More importantly, we can help you draft and file all of your estate planning documents at a lower cost than an attorney. Contact us today for free information at 800-747-2780!
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