Transfer-on-death deeds are a powerful tool when looking to transfer real estate upon death, without the need of probate. Essentially, these deeds are used to name a successor owner of the real estate after the grantor(s) owner(s) is deceased.

These deeds work well in simple estate plans, where there will not be particular rules or restrictions on the real estate transfer. Also, these are useful in estates that will not be affected by estate tax obligations.

These deeds list the current owner or joint owners and then name who the owner or joint owners want this property to transfer to upon their death(s). When using these deeds, it should be kept in mind that there may be complications if the successor owner precedes the grantor(s) in death and there is not an indication on the deed who should receive the property in their place. In this circumstance, the real estate would be transferred by probate.

Also, there could be issues if the successor owner is receiving some type of government assistance for disability. In these cases, the receipt of the property may cause the recipient to have issues receiving their benefits. Because of these potential issues when using transfer-on-death deeds in your planning, it is important to remember that the grantor(s) owner(s) is able to amend and revoke these documents at any time.

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Beware of insurance lapse

Recently, Minnesota enacted a new part of the law relating to transfer-on-death deeds. This law provides that real estate transferred by this type of deed will continue to be covered by casualty insurance for a period of 30 days after the death of the grantor(s) owner(s) or until the policy lapses, whichever period of time is shorter, so long as the grantor(s) informs the insurance company that the real estate is subject to a transfer-on-death deed, along with the name and contact information of the beneficiary.

It is important to provide this information to the insurance company. Otherwise, the casualty insurance policy will lapse upon the grantor(s) death(s), and the property would not be insured. This means if there was a fire or there was some type of weather-related damage, the property would not be protected by insurance. Further, it is important to notify the beneficiary that they will receive the property and that they will need to secure insurance coverage within 30 days of the grantor(s) death. Having this information will be helpful since there are many important items that need to be cared for in the days following the death of a loved one.

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