More Information On Estate Planning

Transfer-on-Death Deed (TODD).  This is a relatively new (August, 2008) estate planning tool which allows the transfer of real estate upon the death of the owner without the need for Probate.  A person (the “Grantor”) signs and files a Deed whose terms provide that upon death, the real estate will automatically transfer to a survivor (the “Grantee”).  The Grantor reserves the right to change the name of the Grantee, revoke the Deed, or sell the property without the consent of the Grantee.

A Transfer-on-Death Deed (TODD) is especially useful in small estates where the primary asset is the homestead. It generally works well where the title is transferred to one or two Grantees who are able to work well together in owning or selling the property. It does not work as well where there are multiple Grantees who may disagree with each other on whether or at what price the property is to be sold. Consideration should be made that once title is transferred after death, any Deed would also need the Grantee’s spouses’ signatures to sell the property. For example, if a Grantor were to sign and file a TODD naming his/her four children as Grantees, after the Grantor’s death, potentially the consent of 8 people would be necessary to sell the property. Under these circumstances it may be better to allow the property to go through Probate where only one person’s (the Personal Representative) signature would be necessary. However, given the right situation, a TODD may be a good alternative to Probate. Upon the death of the Grantor, the Grantee(s) merely sign and file an Affidavit along with a certified copy of the Death Certificate, and the title to the real estate will be transferred to the Grantee(s) on the county records.

Joint Tenancy. This form of property ownership involves two or more owners where the ownership document or other pertinent documents clearly show that the parties who own the property intend that the share of a decedent is to pass to the other owner(s) at the time the decedent dies. This type of property is not subject to the provision of a decedent’s Last Will and Testament (Will) or the laws of intestacy. It can be used in connection with bank accounts, investment accounts, real estate and other property.

The principle distinction between a TODD and a Joint Tenancy Deed is that a TODD conveys no current interest in the real estate. A TODD can be revoked or changed at any time prior to death without the consent of the Grantee. Joint tenancy is most often used for married couples or life partners who desire to be equal owners while alive and intend that the survivor obtain title to the property upon the death of the other joint tenant. For real estate, title is transferred on the county records by the surviving joint tenant signing and filing an Affidavit of Survivorship along with a certified copy of the Death Certificate.

Revocable Living Trust. This is a trust that is created during a person’s lifetime. Generally, the person that creates the trust (the “Settlor”) transfers assets into the name of the trust. The Settlor serves as the initial trustee, the person that is in charge of the trust, and names a successor trustee to administer the trust upon the Settlor’s disability or death. Assets that are placed in the revocable living trust will avoid Probate. A revocable living trust may contain tax-planning clauses or special provisions for the financial care of the Settlor’s spouse or children.

A revocable living trust is especially useful when a person owns property in multiple states; for example, a homestead in Minnesota, a cabin in Wisconsin, and a winter home in Arizona. By placing the title to all of the real estate in the name of the trust, Probate can be avoided in multiple states. If structured and funded properly, Probate can be completely avoided. The drafting and funding of a revocable living trust can be complicated and fairly expensive. This is not something that you should “do at home.” A professional “driver” is strongly advised. Seek the advice of a lawyer if you are interested in a revocable living trust.

Other Trusts. Numerous other trusts are available for estate planning purposes. The following are two examples: (1) Irrevocable Life Insurance Trust. This is a trust designed to hold life insurance as its primary asset and pay life insurance death benefits to the trust beneficiary tax-free. (2) Supplemental Needs Trust. This is a trust intended to provide a disabled trust beneficiary with supplemental benefits without disqualifying the disabled individual from receiving benefits from state or federal government programs. Like a revocable living trust, these and other trusts are complex legal documents requiring competent legal advice to properly implement.

Limited Liability Company (LLC). This often times is an alternative to a revocable living trust. It works well to hold title to the family cabin whether the cabin is located in Minnesota or another state. Title is transferred to the LLC. The ownership of the LLC is transferred to the children at death, or, over time during your life. A company management structure is established within the LLC. Restrictions are put on the sale of the LLC ownership interest(s) so that the property always remains in the family. There is no need to conduct Probate in another state since the LLC is considered to be a Minnesota asset and therefore subject to Probate only in Minnesota.

Designation of Standby or Temporary Custodian. This is a document that, in effect, nominates a guardian for minor children on a temporary basis. Your Will may contain a nomination of a guardian on a permanent basis. However, until the Will is probated, the Designation of a Standby or Temporary Custodian allows someone to meet the legal needs of minor children, whether it be in connection with their school or medical needs. This document also works well in the event of an emergency or temporary period of incapacitation.

If you should need more information regarding any of the matters discussed on this page, or other related estate planning issues, please contact the Gabriel Law Office, PLLC with your questions. Let us make sure that legal issues are not an issue for you and your loved ones.

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