When I began writing this column, I started with a discussion about estate planning, which had not been my area of expertise. But, having inherited a safe full of wills and other documents prepared by lawyers whom I worked with for more than 45 years, I regularly get calls asking for help either updating them, or managing the probate process. It has helped me learn more about this area of law, and to be alert to new developments that can be helpful to my clients and friends.
I’ve come to enjoy it, because it is a chance to learn more about people who knew my father or his colleagues and share stories and memories. It is especially meaningful when I am working with someone who has lived in New Boston for a long time, and we can talk about the “old days.”
One of the goals of estate planning is to simplify the transfer of property after death, which usually means avoiding probate court. That process often NEW BOSTON LEGAL involves real estate, which is the most important asset for many people. Property owners want to make sure their cherished home or other real estate goes to the right person, but not until they can no longer use and enjoy it. Although a traditional will accomplishes those goals, it also requires probate court involvement, thus delaying and adding cost to the process of using or selling the property.
Transferring property to a trust can simplify the process, but it still requires the involvement of a trustee, and complications can arise that add expense and time. Until recently, the only way of ensuring that property is transferred quickly was for the owner to deed it before death. Most people view this as risky, requiring them to give up control and, if the relationship with the beneficiary deteriorates, potentially making them homeless or financially at risk.
One way of retaining some control is to reserve a life estate, but it still creates an uncomfortable situation where the resident is not the “owner.” A potential conflict could arise if the new owner (the beneficiary) wants to make renovations to the property that the current resident (the original owner who still lives there) opposes. Having transferred the property, an action which cannot be reversed, the former owner has no right to prevent them.
As of July 1, 2024, New Hampshire homeowners have a new tool which avoids these problems called the Transfer on Death (TOD) deed. With the enactment of the Uniform Real Property Transfer on Death Act, property owners can now transfer real estate directly to a named beneficiary upon death, bypassing the probate process, but allowing the property owner to retain all the benefits of ownership while still living.
The property owner signs a real estate deed to the beneficiary and records it with the county’s Registry of Deeds. However, it does not take effect until the owner’s death. The owner can sell, transfer, or even revoke the TOD deed at any time without the beneficiary’s consent or knowledge. The beneficiary has no ownership rights until the owner’s death.
While this deed offers simplicity and affordability, there are some potential downsides compared to other estate planning options. One major limitation is that a TOD deed only addresses the transfer of real property. If the owner has multiple assets, such as bank accounts or investments, additional estate planning tools may be needed to ensure all assets are properly managed. In contrast, a trust can manage a broader range of assets under one comprehensive plan.
Additionally, TOD deeds do not provide protection from creditors or estate taxes that a trust can offer. Trusts can also account for complex family dynamics, allowing for more detailed conditions on how and when beneficiaries receive assets.
For example, if the beneficiary is a minor, a trust can establish guardianship and direct the guardian to control the property until the beneficiary reaches a certain age. If privacy is a concern, a trust may be preferable, as the transfer of assets through a trust generally avoids public record, while a TOD deed is a recorded document that becomes part of the public file.
Once the transferor passes away, the beneficiary automatically inherits the property, but there are important considerations. The property is still subject to any mortgages, liens, encumbrances, or other claims that existed at the time of the owner’s death. Additionally, there’s a period during which creditors can make claims against the estate, which could impact the title.
Still, a TOD deed can be a simple, cost-effective way for homeowners in New Hampshire to ensure that their property passes to their loved ones, while avoiding the hassle of probate. The TOD deed also provides flexibility for the homeowner during their lifetime, without the limitations of a life estate deed.
