What's a TOD Designation or Transfer on Death Designation?

A WISCONSIN ATTORNEY'S GUIDE TO TRANSFER ON DEATH (TOD) DEEDS

This guide provides information about Transfer on Death (TOD) Deeds, also known as Transfer on Death Designations, for real property in Wisconsin. As a Wisconsin attorney, I aim to clarify what a TOD Deed is, its purpose, who might benefit from using one, the advantages of doing so, and the general process involved.

What is a TOD Deed or Transfer on Death Designation?

In Wisconsin, a Transfer on Death (TOD) Deed is a legal instrument authorized by Wisconsin Statutes § 705.15. It allows the owner(s) of real property to name one or more beneficiaries who will automatically receive title to the property upon the owner's death, without the need for the property to go through the formal probate process. Think of it as a beneficiary designation for your real estate, similar to how you might designate a beneficiary for a bank account or life insurance policy.

Purpose of a TOD Deed

The primary purpose of a TOD Deed is to provide a more efficient and less costly way to transfer real property to intended beneficiaries upon the owner's death. By avoiding probate for this specific asset, the transfer can often be quicker and less burdensome for the beneficiaries, potentially saving them time, legal fees, and administrative hassles associated with probate.

Who Should Consider Using a TOD Deed?

A TOD Deed can be a useful estate planning tool for various individuals in Wisconsin, including:

• Individuals with modest estates: For those whose primary asset is their home or a small piece of land, a TOD Deed can help ensure a smooth transfer to their loved ones without the complexities of probate.

• Individuals wanting to simplify estate transfer for specific real property: Even those with larger estates might use a TOD Deed for a particular property they want to pass directly to a specific beneficiary.

• Individuals without complex estate planning needs regarding their real estate: If there are no intricate trust arrangements or specific conditions attached to the transfer of the real property, a TOD Deed can be a straightforward solution.

• Individuals wanting to avoid probate fees and delays for their real property: Probate can involve court costs, executor fees, and potential delays. A TOD Deed can help bypass these for the designated property.

However, a TOD Deed might not be suitable for everyone. Consider consulting with an attorney if you have:

• Complex estate planning needs: If you have significant assets, business interests, or want to establish trusts or other sophisticated estate planning arrangements, a comprehensive estate plan involving a will or trust might be more appropriate.

• Concerns about potential creditor claims: While a TOD Deed avoids probate, the property may still be subject to the deceased owner's creditors if the probate estate is insufficient.

• Uncertainty about beneficiaries or desire for contingent beneficiaries with complex distributions: While contingent beneficiaries can be named, more complex distribution scenarios might be better addressed in a will or trust.

• Tax planning concerns: While the transfer itself isn't subject to Wisconsin real estate transfer fees at death, there may be other tax implications to consider.

• Property held in certain types of ownership: Specific rules may apply to property held in joint tenancy or other forms of co-ownership.

Why Use a TOD Deed?

There are several compelling reasons why a Wisconsin resident might choose to use a TOD Deed:

• Avoids Probate for the Real Property: This is the primary benefit, leading to potential savings in time and costs associated with the probate process.

• Retained Control During Lifetime: The owner retains full ownership and control of the property. They can sell it, mortgage it, or change their mind at any time without the beneficiary's consent.

• Simplicity: Creating a TOD Deed is generally less complex and less expensive than establishing a trust.

• Ease of Revocation: A TOD Deed can be revoked by recording a revocation document or by executing a new TOD Deed.

• Potentially Faster Transfer: Upon the owner's death, the beneficiary can typically obtain clear title to the property more quickly than through probate.

• Privacy: Unlike probate, which is a public process, the transfer of property via a TOD Deed is generally a private matter.

The Process of Creating a TOD Deed in Wisconsin

The process of creating a valid TOD Deed in Wisconsin generally involves the following steps:

1. Identify the Property: Clearly identify the legal description of the real property you wish to transfer. This information is typically found on your existing deed.

2. Designate Beneficiary(ies): Clearly name the individual(s) or entity (though entity designations may have limitations, consult an attorney) you want to receive the property upon your death. Include their full legal names and addresses. You can designate multiple beneficiaries and specify how they will take title (e.g., as joint tenants with right of survivorship or tenants in common). You can also name contingent beneficiaries.

3. Draft the TOD Deed: The TOD Deed must be in writing and contain specific language as required by Wisconsin law (see Wisconsin Statutes § 705.103). It must state that the transfer to the designated beneficiary will occur upon the owner's death. It should also include the legal description of the property, the owner's name(s), and the beneficiary(ies)' name(s).

4. Sign the Deed: The owner(s) of the property must sign the TOD Deed in the presence of a notary public.

5. Acknowledge the Deed: The notary public must acknowledge the owner's signature, verifying their identity and that the signing was their free act and deed.

6. Record the Deed: The signed and notarized TOD Deed must be recorded with the Register of Deeds in the county where the property is located before the owner's death. Recording provides public notice of the transfer designation.

Important Considerations

• Legal Advice is Crucial: This guide provides general information only. It is strongly recommended that you consult with a qualified Wisconsin attorney to prepare or review any TOD Deed to ensure it accurately reflects your wishes and complies with all applicable Wisconsin laws. Improperly drafted or executed TOD Deeds may be invalid.

• Impact on Joint Tenancy: If the property is held in joint tenancy with right of survivorship, the death of one joint tenant typically automatically transfers ownership to the surviving joint tenant(s), overriding any TOD Deed executed by the deceased joint tenant alone.

• Medicaid Planning: Transferring property via a TOD Deed might have implications for Medicaid eligibility or estate recovery. Consult with an elder law attorney if this is a concern.

• Taxes: While there is no Wisconsin real estate transfer fee at death for TOD Deeds, other taxes, such as federal estate taxes (if applicable), may still apply.

• Changes in Circumstances: You should review your TOD Deed periodically and update it if your beneficiaries change, you sell the property, or your estate planning goals evolve.

Conclusion

A Transfer on Death Deed can be a valuable tool for simplifying the transfer of real property in Wisconsin. However, it is essential to understand its purpose, benefits, limitations, and the specific legal requirements. Seeking guidance from a Wisconsin attorney will help ensure that your TOD Deed is properly executed and aligns with your overall estate planning objectives.

Disclaimer: This information is for general educational purposes only and does not constitute legal advice. You should consult with a qualified Wisconsin attorney to discuss your specific circumstances and to ensure that any estate planning documents, including TOD Deeds, are properly drafted and executed in accordance with Wisconsin law.