What is a Transfer on Death Deed? (TODD)
A Transfer on Death Deed, or TODD for short, is a type of deed that is only effective upon the grantor’s death. It is a tool used to avoid probate proceedings. This type of deed is allowed under Minnesota law and can be found under chapter 507 of our statutes. You can read the law if you are into that sort of thing; otherwise, read on to get the nitty-gritty!
Let’s define a few confusing terms before moving forward; that way, everything will make more sense.
Grantor: This is the person giving the property to another when they die.
Grantee: or beneficiary: This is the person who will get the property after the grantor’s death.
Recording: By this, I mean filing the deed with the county recorder’s office.
Real Property: Land, buildings, or houses. Not your vintage record collection.
Probate: The act of winding up an estate after someone’s death. See my article here for more.
Like a payable on death provision of a bank account, the property is transferred to the new owner called the grantee beneficiary.
In certain instances, this can be a beneficial estate planning tool for Minnesota residents.
How it Works
A Transfer on Death Deed can be a legal DIY project if you feel so compelled. It begins by filling out a form available from the department of commerce. The form should be filled out, signed, notarized, and recorded while you are alive. It must be recorded in a county in which at least part of the property is located. Otherwise, it will be deemed invalid.
The Transfer on Death Deed can be canceled anytime before the grantor dies. Obviously, you can’t cancel it if you are dead! A grantor can revoke the deed anytime for any reason. They don’t need anyone’s permission to do it. However, you have to record the revocation where the property is located.
Selling the property will invalidate the TODD. Any new recording will take precedence, and the Transfer on Death Deed will not work. Also, if the grantee dies before the grantor, the deed becomes void and may be subject to probate.
While the TODD avoids probate, it does not avoid creditors. The property transfers to the new owner subject to all assignments, contracts, deeds to trust, judgments, tax liens, mortgages, any claim or lien by a state and county agency, and other legal nonsense. This includes any medical assistance claims against the property. Basically, if there is a problem with the property, it’s now the grantee’s problem. This is why a beneficiary can “say no” to the property. Often, they may not want to deal with any messy legal issues.
When to use a Transfer on Death Deed?
TODDs are helpful when real property is the only asset owned by the grantor subject to probate. Meaning, there are no other joint owners of the property, and the estate does not need tax planning.
The benefit is that the grantor does not have to make the grantee a joint property owner. They remain in complete control of the asset and can revoke it anytime and still avoid probate. For reasons to avoid probate, see my article on probate.
What are the Drawbacks of a Transfer on Death Deed?
A TODD may not work for your estate plan, so careful consideration is needed. It is best to contact an attorney to see if it is right for you. It is often not the right move where the property is jointly owned because consent from each owner is necessary, including your spouse.
Minnesota has an easy conveyance form online, but it can be a little tricky to fill out property. Mistakes in preparation or recording can cause problems down the road. For example, the form asks for “the following described real property.” Most people might put the address in that box; however, it requires a legal description. If the wrong legal description is in that box, it will cause problems if the grantee wishes to sell the property. Legal descriptions can be a bit complex and easy to mess up.
Finally, it may not be suitable if there are several beneficiaries. The problem is that all the beneficiaries and their spouses have to sign paperwork to sell the property, and it might be pretty tricky to get everyone to agree.
Wrapping it up: Transfer on Death Deeds in Minnesota.
A transfer on death deed can be a helpful estate planning tool in certain situations; however, it’s not right for everyone. Problems arise with property liens, Medical Assistance, multiple owners, and too many beneficiaries. Furthermore, the paperwork and other formalities may turn something simple into a legal headache.
As discussed, it would be a good idea to talk to an estate planning attorney to see if this is the right tool for you. If you would like to discuss Transfer on Death Deeds in Minnesota, please give us a call at (612) 208-7780 or visit the contact page to get in touch with an Estate Planning Attorney.
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