A transfer on death deed is type of deed that only becomes effective after a person has died. It essentially allows Minnesota property owners to put a beneficiary designation on real estate much like they would a bank account or other asset. The transfer on death deed, or TODD, does not alter the property owner’s ability to mortgage, sell, or lease the property and it can be changed as long as the owner is competent.
For many Minnesotans, real estate is their only probate asset, or asset that would be subject to distribution under a will. When all other assets pass by beneficiary designation, it can be convenient and relatively inexpensive way to have real estate pass via a TODD to avoid probate.
However, there are situations when a TODD may not be appropriate. In situations where the real estate will be sold it can be easier to appoint a personal representative or trustee to sell the asset rather than having it pass to individuals who will then need to all get together (with their spouses) to sell the property. This can be particularly true when the real estate is a home. The home will need to be cleaned and made ready to sell. When the beneficiaries do not get along well or are spread out, it can be easier to centralize this process and the expenses through the probate process or a trust.
Often, a transfer on death deed is used as part of trust-based estate planning. Rather than naming individuals as beneficiaries of the real estate, the TODD designates the owner's trust as the beneficiary. The trustee will then have the power to manage or sell the real estate and distribute to the beneficiaries. By using a trust, the owner will also avoid probate and administration of the estate can be a more private matter.
A TODD can be a very useful tool in estate planning, though it is not appropriate for every situation. It is important to remember to prepare a TODD for each county in which the owner has real estate. To determine if a TODD is right for you, contact one of our attorneys at (507) 288-5567 or contact us on our website.
Interested in estate planning and Minnesota real estate law? Sign up for our quarterly newsletter for updates.