This guide describes a newer type of beneficiary designation in Virginia -- one for your real estate!
Trying to Avoid Probate
There are multiple ways to attempt to avoid probate including the use of beneficiary designations on life insurance policies, retirement accounts, and other similar accounts. Other ways to avoid probate are through joint ownership, however, joint ownership may not be the best approach in some situations (particularly between a parent and a child). Probably the most effective and smoothest way to avoid probate and to make sure your estate is handled properly is through the use of a Revocable Living Trust.
A New Approach - How a Transfer on Death Deed Works
In 2013, a new approach to avoid probate of real estate was enacted. Virginia enacted the Virginia Uniform Real Property Transfer on Death Act. Under this act, a person may record a Transfer on Death Deed with land records that names a beneficiary for their real estate. The beneficiary can be an individual, including the trustee of a revocable living trust. The transfer does not occur until the owner of the property has passed away. The Transfer on Death Deed has to be recorded prior to the person's death in order for the Transfer on Death Deed to work.
Revoking a Transfer on Death Deed
he Transfer on Death Deed is completely revocable during the owner's lifetime. The owner maintains the property in his or her personal name while he or she is alive. Thus, the owner can still take out liens against the property or sell the property during his or her lifetime. If the property is sold and the owner no longer owns the property upon his or her death, it is as if the Transfer on Death Deed never existed. The owner can also revoke the Transfer on Death Deed by recording a Revocation or by recording a new Transfer on Death Deed that names different beneficiaries.
Mortgages on the Property
Any mortgage on the property would remain with the property and pass to the beneficiaries upon the owner's death (this is usually the case with any real estate passed through a Will or other estate planning document as well ). Additionally, the beneficiary under the Deed is still subject to claims of creditors of the estate if the creditors have not been paid by other assets of the estate.
When to Possibly Use a Transfer on Death Deed
A Transfer on Death Deed is an option for some estate plans in order to attempt to avoid probate. One possible use for the Transfer on Death Deed is to use it as part of an estate plan incorporating a Revocable Living Trust. This way the owner's real estate can remain in his or her personal name during their lifetime and then be transferred to their Trust at their death through the use of a Transfer on Death Deed. This may not be the best option if it is more ideal to have the real estate in the Trust during the owner's lifetime. It depends on the circumstances of the individual.
When to Possibly Not Use a Transfer on Death Deed
A time where a Transfer on Death Deed may be impractical is where the owner wants to leave his or her estate to multiple beneficiaries. Creating a Transfer on Death Deed and naming multiple beneficiaries may be a bad idea if the beneficiaries do not get along and would not work together in maintaining the property or selling the property. Thus, leaving the property to flow through probate under a Will or through a Revocable Living Trust may be a better option in that scenario because then only the Executor or the Trustee will be the person handling the sale or maintenance of the property until transfer of proceeds to the beneficiaries.
Every person's situation is different and the best thing to do is to sit down with an estate planning attorney to go over your estate and your goals to figure out the best plan for you.
This legal guide is only for informational purposes. Please remember this is not intended as legal advice and does not create an attorney-client relationship. Every case is special and more information would be needed to provide you the best legal advice possible.
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