By Tim Halbach

Estate planning and transferring assets upon death are much more complicated than they might seem. 

When someone dies, where those assets transfer depends on the circumstances. Was the asset jointly owned with another person, such as a spouse? Does it have a beneficiary designation, such as on a life insurance policy or retirement account? Does the person have a will? Does the person have a trust or something known as a marital property agreement?

In this article, I will focus on Transfer on Death deeds in Wisconsin. A TOD deed is a deed you sign while you are alive that designates where real estate is conveyed upon your death. The deed must be recorded in the register of deeds office in the county where the real estate is located before you die. Upon your death, the people receiving that real estate file a form called a Termination of Decedent’s Interest, along with a certified copy of the deceased person’s death certificate and a tax bill; upon filing, the real estate is owned by those people. The transfer avoids probate and does not require the supervision of the court. 

Besides avoiding probate, a TOD deed has the benefit of not changing the current ownership. As such, your tax bill and the plat book still show you as the owner. It also does not prevent you from later refinancing your property or otherwise selling or gifting your property.

You could also have a TOD deed that provides that upon your death, the property transfers to a trust, such as a revocable living trust, which is a common estate planning tool. You can also easily amend or terminate the TOD deed by filing a new one, even after your spouse dies.

If you have a mortgage on the property when you die, the mortgage stays on the property and automatically becomes the responsibility of the people receiving the property.

That said, there can be negatives to using a TOD deed. For example, if a husband and wife own a house or farmland together, and they want to leave that asset to their children upon their deaths, they would have to both sign the TOD deed and record it. If one or more of the people you are transferring the real estate to dies before you, the law provides that the share that deceased person would have received passes to his or her issue, which means his or her biological or adopted children. If that person is under the age of 18, his or her guardian would then be in charge of that property until that child turns 18. 

As a result of a recent change in the law, a TOD deed can state that you leave the real estate to Person A, but if he or she dies before you, then you it goes to Person B. To avoid the issue of having a child inherit the real estate, instead of naming Person B, you could name a trust for the benefit of a minor as the alternate beneficiary.

As described, TOD deeds work in a similar manner as a beneficiary designation on a life insurance policy or retirement account. In both instances, it does not matter what your will or marital property agreement states. If your estate planning attorney is not discussing TOD deeds with you, then you are missing out on a simple and significant estate planning tool that will save your heirs time and money upon your death.