Beneficiary Deed/Transfer-on-Death Deed

[Retire in CO]

I've been looking into frugal options for estate planning. We have payable on death beneficiary designations on all investment/retirement/bank accounts. I am also considering filing a Beneficiary Deed for our home in Colorado to avoid expensive probate/trust fees. I was wondering if anyone has had experience (good or bad) with Beneficiary Deeds.

[Goldielocks]

In canada, only a joint ownership would bypass probate, reverting in its entirety to the remaining owner(s).

I am not sure if a Beneficiary Deed would instead act like a mini will (and still be subject to estate taxes) or not...??
Could it be challenged, like a beneficiary designation to an life insurance contract can be challenged?  e.g., maybe it is not drawn up with the same rigor as a will?

[bobechs]

Who are you planning to leave the property to?

Most couples hold their residence as joint tenants with right of survivorship, so layering deeds-on-death would not do anything but confuse that issue.

But for generational transfer (or even generation skipping,) they are just fine. 

Don't worry about Canada, they do things different up there.

[Retire in CO]

Thanks for your reply.
Our home is currently titled joint tenants with right of survivorship, but if something happened to us both, such as an accident, I would like for the home to pass directly to our daughters without having to go through probate. Our primary residence is in Tennessee so we do not have the option of the beneficiary deed on it, but I was trying to reduce assets that would be required to go through probate. I would just like to simplify as much as possible. I would love for our kids to think "Mom sure handled it, didn't she" rather than "What a mess!"  ;-)

[Goldielocks]

Thanks for your reply.
Our home is currently titled joint tenants with right of survivorship, but if something happened to us both, such as an accident, I would like for the home to pass directly to our daughters without having to go through probate. Our primary residence is in Tennessee so we do not have the option of the beneficiary deed on it, but I was trying to reduce assets that would be required to go through probate. I would just like to simplify as much as possible. I would love for our kids to think "Mom sure handled it, didn't she" rather than "What a mess!"  ;-)

Double check that even if you bypass probate, it would escape inheritance / estate taxes.  I looked on Google, and there are mixed answers.  Good news is that estate taxes only kick in at a very high number.

[Frankies Girl]

You also want to make sure you don't screw up the stepped up cost for any property. For a house, it could be significant, so leaving that to go through probate is likely a better solution (but IANAL so check with a professional).

[Pylortes]

TOD/beneficiary deeds are an excellent way to avoid probate time/costs.  I have never heard of any estate taxes being imposed against them (but I suppose it's a good idea to double check) because they are not considered to be part of the estate.

For your TN property there are a couple of other options if TOD is not available.  You could go ahead and quitclaim to the kids now and retain a life estate- the legal ability to exclusively utilize the property for the rest of your lives. Upon your death the kids would file a copy of the parents death certificates with the Register of Deeds office to get title moved over to them. Or you could quitclaim the property to them now and deliver the original deed to a third party and ask them not to give the deed to the kids for recording until after your death.  This scenario is a little trickier as you have to effectuate a delivery to make a gift valid. After your death your kids would then record the deed.

[mbl]

TOD/beneficiary deeds are an excellent way to avoid probate time/costs. I have never heard of any estate taxes being imposed against them (but I suppose it's a good idea to double check) because they are not considered to be part of the estate.

No...

"Inheriting a POD doesn't exempt the account from estate tax, either. For the vast majority of Americans, though, that's not an issue: as of 2013, only estates worth more than $5.25 million pay estate tax. And even if the deceased had that much money, it's the estate that has to pay the bill, not you. However, the executor can legally tap your inheritance to pay the tax, or the deceased's other assets, if necessary."

OP, you need to consult with an attorney in the states where you own property and have intent to leave to your children.
They can best outline the laws and nuances of inheritance and estate issues.
Please seek the counsel of someone who absolutely knows what they're talking about.

Leaving something to a spouse differs from leaving something to a child.
As you are probably familiar with already.
POD is part of the estate, it just determines how the transfer is done, it doesn't shield assets from any estate tax calculation.

Talk to an estate attorney in CO and TN.

[Retire in CO]

Thank you all for so many helpful posts. I am always impressed by the wealth of knowledge I see on this forum.
When I first came across the beneficiary deed, it looked like a fairly simple solution. Now, I'm studying 1014a of the IRS, all about Colorado Fiduciary taxes, etc...and becoming more stressed and overwhelmed. The more I read, the more I agree with mbl that I need to contact an attorney in Colorado to be sure that we totally understand this approach. Thanks again, everyone! It has helped me feel more knowledgeable and highlighted some questions to ask the attorney. :-)

[Pylortes]

I did a quick double check and it appears the value of the property received by way of a TOD would be subject to the estate tax.  But as mentioned above unless the total estate in question is in excess of $5M it's a moot point which is why it rarely comes up.  And even if you have an estate north of $5M/$10M (if two spouses) the TOD still serves your primary purpose of seamlessly transferring the asset outside of probate. A probate estate does not need to set up to pay the estate tax, estate tax returns must be filed with the IRS and any tax due can be paid from any of the decedents assets which if available is easier paid from more liquid assets rather than real estate that you want to keep in the family.  I agree speaking with a CO attorney would be a good idea, but I think you'll likely find the beneficiary deed idea will more than likely be green lighted.

[Retire in CO]

Thanks Pylortes,

Your insight has been very helpful. I wish the estate tax were a problem...an estate north of $5M/$10M would be a great problem to have! ;-)

I honestly feel like I could handle this and file the form myself. I called the Boulder County trustee and was told that I just bring in the notarized, completed beneficiary deed and pay a small fee to file, but there have been times in the past that short cutting and trying to save has cost me more in the long run.  So, I guess it would be best to have an attorney take care of it so that I know that it's done properly/legally.

[poppan]

I am not sure how old your daughters are. We chose living trust over TOD deed because if both of us die unexpectedly I wanted to provide for my children in a trust (i.e. rather than them getting everything when they reach age 18/21, we want to hold it in trust until they are older). Holding it in trust also provides some protection against creditors and ex-spouses. But mostly we did it because we have minor children.

[Retire in CO]

Hi Poppan,

Our daughters are 30 & 32. I have been considering the living trust. The difference is $1000 for Will, POA, MPOA and living will versus $2750 for revocable living trust. But, according to our attorney, if we have to pay a trustee to manage the trust, it would be ongoing fees each year. I honestly can't think of anyone else that I would trust with that much $$. Evidently, we know a lot of people who are terrible with $$. Our daughters are probably more frugal than just about anyone I know, so I don't really know who I would assign as trustee other than them. And if we did that, would it make sense to set up a living trust with them as trustees?

It has occurred to me that if something happened to us AND one of our daughters (we are together and traveling together quite a bit), without a trust, the grandchildren would inherit $$$ at 18. I can't think of a more horrific scenario! When I mentioned it to my husband, he just smiled and said that I'm again overthinking things and worrying. It's apparently what I do best. ;-)

[poppan]

Ah I see. With grown kids, I think I'm with your husband!