Here are three simple tools that help you pass on assets at death without the necessity of probate, saving all parties money, time, and stress.1. “Lady Bird” Deed or “Transfer on Death” Deed
A. A “Lady Bird” deed is a form of deed in which the owner or owners of a property convey the property to named beneficiaries on their death but retain broad powers to deal with the property during their life. It’s also known as an Enhanced Life Estate Deed. The “life estate holder” can sell, mortgage, rent, and even revoke the deed without consent or joinder of the named “remainder” beneficiaries.
This is a useful tool to avoid probate, especially if the only significant asset in an estate would be the real property involved. It also is a strong Medicaid planning tool as such a deed takes all but the life estate value the property out of the transferor’s “estate” for calculating Medicaid eligibility and protects the property from enforcement of a Medicaid lien on the death of the Medicaid recipient.
B. A “Transfer on Death” Deed is a fairly new creation by the Texas Legislature that is similar to the “Lady Bird” Deed. However, the retained powers of the transferor are not as broad. If the transferor wanted to change who will be the beneficiaries on his or her death or to revoke the transfer, the beneficiaries would have to consent in writing also. This is not true with the “Lady Bird” Deed. Another big difference from the Lady Bird Deed is that these beneficiaries take subject to all liens and claims, including Medicaid recovery lien, potentially, on the death of the life estate holder.
You should hire an attorney to assist you with properly drafting these deeds.
Both of these deeds give the remaindermen a stepped-up basis in the property on the death of the life estate holder, just as with inherited property.
2. Joint Tenancy With Right of Survivorship Ownership
Many assets, such as bank accounts, investment accounts, CD’s, IRA’s, and even vehicles, can be placed in ownership with another or other persons as joint tenants with right of survivorship. This means that they jointly own the asset during life, and on the death of one owner, the asset automatically passes to the survivor or survivors.
A great part of most estates can be disposed of quickly and easily by making arrangements for the asset to be held in this form prior to the owner’s death. The asset passes automatically upon presentation of the death certificate of the deceased owner. It’s that simple!
Although simple, and something you can do on your own, it’s always safer to review these arrangements with an experienced attorney to be sure they accomplish your wishes.
3. Beneficiary or Payable on Death Designation
This tool also functions to allow passage of an asset upon presentation of a death certificate of the owner to the holder of the asset. There is no joint ownership prior to death required. Almost all liquid assets such as bank accounts, investment accounts, and the like can be set up with the beneficiary or payable on death designations. It is a good idea to have alternate beneficiaries designated just in case the primary beneficiary predeceases the owner. You should periodically review such designations to make sure they match with your current family structure and desires.
Again, this tool is simple, and something you can do on your own, but it’s wise to review these arrangements with a knowledgeable attorney.
If you would like to implement one or more of these tools into your estate plan, or need to start an estate plan from scratch, contact Adair M. Buckner today for a free initial consultation*.
*(The free consultation does not cover actual review of documents or giving legal advice on a specific situation.)