• transfer on death deed vs living trust

Transfer on Death Deed vs Living Trust for Estate Planning

When considering estate planning, real property owners often find themselves comparing a transfer on death deed vs living trust. A transfer on death deed and a living trust are both great estate planning tools to use when transferring real property to loved ones. Both tools allows the grantor to own and manage the property while living and transfer it on to his/her loved ones upon passing away. However, most attorneys recommend a living trust as the best estate planning tool to transfer real property to family or friends. Read on to learn more.

Transfer on Death Deed Overview

When assessing a transfer on death deed vs living trust for estate planning, a person needs to understand what a transfer on death deed can and cannot do. A transfer on death deed allows an owner of property to execute a deed that names a beneficiary who will obtain the title of real property upon the owner’s death. This allows the property to be distributed without having to go through probate. The beneficiary must be living at time of death and should not be a minor. It should be noted that a transfer on death deed is revocable at any time prior to the owner’s death.

The real property to be transferred must be a single family home. Furthermore, the deed must be signed and dated before a notary public. Finally, the owners must record the deed within 60 days of it being notarized. If any aspect of the transfer on death deed is inconsistent with the legal requirements under California law, the deed will be considered invalid.

“Our family learned the downside of a transfer on death deed the hard way. Our grandpa signed one thinking it was an easy way to give the property to our dad when he died.” K. Storm
“Unfortunately our father unexpectedly died before grandpa which made his transfer on death deed useless. Grandpa’s estate had to be probated since he did not have a trust.” K. Storm

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Living Trust for Estate Planning

A living trust is a written legal document in which assets are placed into a trust for the benefit of the grantor until he/she passes away. Upon the grantor’s death, the assets within the trust are transferred to specified beneficiaries.  A living trust is revocable prior to the grantor’s death. It can also manage other assets besides real property.  

Transfer on Death Deed vs Living Trust

When comparing a transfer on death deed vs living trust, a living trust is a better estate planning tool. The transfer on death deed is a simple estate planning option for a person whose only asset is their primary residence. It is also a tool that can be used when there is not enough time to create more comprehensive estate documents. There are, however, several downsides to a transfer on death deed vs living trust. For example, if a beneficiary dies before the grantor, the transfer on death deed is no longer valid – there is no “Plan B” for the estate distribution. Secondly, if the beneficiary is a minor, the this will pose a legal problem. Thirdly, if property is held as joint tenants with rights of survivorship, the tenant wishing to transfer his/her property through a transfer on death deed must outlive the other tenant. If he/she passes away prior to the other tenant, the joint-tenant will receive the property. Another important consideration is if the property owner becomes mentally ill.  In this situation, he/she may have no one to revoke the transfer on death deed which may impact his/her ability to get Medicare. Lastly, and most importantly, real property may end up being probated if the grantor dies without the transfer on death deed being validly executed and recorded.

Though setting up a transfer on death deed is quicker than establishing a living trust, the better solution is for a property owner to create a complete estate plan with a living trust, financial power of attorney, healthcare directive and pour-over will. When considering a transfer on death deed vs living trust, an important benefit is that a living trust provides benefits both during and after the death of the trust maker and property owner. A living trust can make sure the grantor’s assets are well-managed according to their wishes. Furthermore, A living trust can provide for assets to be distributed to a minor. A trustee can be designated besides the grantor to assume the administration of the trust in case the grantor becomes incapacitated or dies. A transfer on death deed offers none of these protections and has inherent problems that, unfortunately, are typically not discovered until the grantor has died and it is too late to fix.

Contact A People’s Trust to discuss preparing a transfer on deed death deed vs living trust. We can direct you to resources that will help you decide which one 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 would charge. Contact us today for free information at 800-747-2780!

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By |2018-01-18T15:46:37+00:00October 19th, 2016|Estate Planning, Real Property|0 Comments

About the Author:

Sandra M. McCarthy, founder of A People’s Choice Inc., has worked exclusively in the legal field since 1976. She served as the 2004-2005 President of CALDA (California Association of Legal Document Assistants). She obtained a Paralegal Certificate from the University of California, Santa Barbara. During her career in the legal field, she has worked as a freelance paralegal, law office manager and paralegal studies teacher, and has co-authored numerous legal publications and written hundreds of self-help legal articles. As a registered Legal Document Assistant, Sandy is dedicated to providing affordable, low-cost, self-help document preparation services for California consumers in all 58 counties.

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