In your lifetime, it is likely that your home will be the most valuable part of your estate. As such, you want to make sure that it transfers to your heirs in accordance to your wishes after you pass away. You also may be interested in keeping it out of the probate, a process that can be complicated and expensive for your estate and its heirs. Previously, those planning their estate had few options to keep a home out of probate – create a living the trust for their assets, including their home, or add their heir as a joint owner or remainder person on the deed. While both options help keep the house out of probate, they also come with several distinct disadvantages. However, under Minnesota Statute 507.071, homeowners now have another option – a transfer on death deed.
Benefits of a Transfer on Death Deed
Relatively new in Minnesota (2008) as well as an increasing number of other states, the transfer on death deed allows you to name a singular or multiple beneficiaries who will gain ownership of the home when you pass away. After you pass away, the home will now be owned by these heirs, and thus, not part of your estate.
Transfer on death deeds work similarly to adding an heir as a joint owner of the home, but with one primary benefit – you keep sole ownership until you pass away. With joint ownership, the heir becomes a legal owner of that property while you are still alive. This means you need their permission for actions like refinancing or sale, and the home can also be targeted by the heir’s creditors. However, with transfer on death deeds, their ownership doesn’t go into effect until after you pass, meaning you still hold sole decision-making for the property.
Furthermore, the benefit of a transfer on death deed is that it can easily be revoked. You can revoke a previous transfer of death deed by a revocation filed with your local county recorder’s office. If you change your mind and want to assign another heir to the document, you simply need file a new transfer on death deed with the name of the new beneficiary.
It is also crucial to know that transfer on death deeds trump the wishes left in your will. For example if you named Heir 1 in your will to inherit the house and Heir 2’s name is on the transfer on death deed, Heir 2 will gain the title of the home. This will even trump a spouse who is named in the will (subject to marital rights) if a child’s name is on a transfer on death deed, so careful consideration needs to be given to this estate planning tool.
When Might a Transfer on Death Deed Not Be a Good Idea?
Transfer on death deeds can be excessively useful, but not always right for every situation. They may be problematic if your wishes are for the house to be sold and you name all your children as heirs in the deed. If you have five children, all married, then there would need to be ten people to agree to sell the home. As you can expect, the situation will be complicated.
It is best to use a transfer on death deed for your home over all other options if you can name a singular or small number of people who all get along well to hold ownership.
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Are you starting the estate planning process in Minnesota? We can help! No one ever said estate planning was easy, but the Hero & Jacobsen Law Firm can help walk you through every step of the process. Contact us today to see what we can do for you.