| Section | Quick Takeaway |
|---|---|
| What is a TOD Deed? | A legal document that allows property owners to name a beneficiary to receive real estate upon death, bypassing probate. |
| Governing Law | Wisconsin Statute Section 705.15 governs TOD deeds. |
| Benefits | Avoids probate, simple, flexible, cost-effective, tax benefits (avoids gift tax, step-up in basis). |
| Limitations | Creditors can claim against TOD property, requires spousal consent for marital property, not suitable for complex estates or frequent beneficiary changes. |
| Ideal Fit | Property owners with minimal assets, elderly or terminally ill individuals, or those wanting a quick transfer. |
| Process | Consult attorney → Draft, sign, and notarize the TOD deed → Record with county Register of Deeds while the owner is alive → Beneficiary gains interest after the owner’s death. |
| Cost Comparison | More affordable than setting up a trust. |
| Tax Implications | TOD deeds avoid gift taxes and allow beneficiaries to receive a step-up in basis, reducing capital gains taxes on future sales. |
| Who Should Avoid TOD Deeds? | Individuals with complex estates, multiple beneficiaries, insolvency risks, or those who need frequent changes in beneficiaries should consider other estate planning tools like trusts. |
Overview for Wisconsin Transfer on Death Deeds lawyer:
Planning for your death can seem like an overwhelming and time-consuming task. However, with Wisconsin’s powerful use of Transfer on Death (TOD) Deeds, you can take care of your real property in a snap.
A TOD deed is an effective tool used for estate planning that allows property to be passed on smoothly upon your death. Specifically, a TOD is a type of deed that allows property owners to pick a beneficiary to receive their real estate upon their death. This ensures an automatic process, without the need for probate, which can save time and money.
TOD deeds are governed by Wisconsin Statute Section 705.15. This statute allows a property owner to designate one or more beneficiaries to receive property immediately upon their death without the need for going to probate court.
What are the benefits of using a TOD deed?
A TOD deed helps avoid a probate lawyer, an expensive, time-consuming, and often stressful process. Typical probate procedures can take up to twelve to eighteen months, while a TOD deed happens automatically upon the property owner’s death.
A TOD deed is simple and flexible as well. An estate planning attorney can help property owners fill out the TOD deed, sign it in the presence of a notary, and then record the deed with the county register of deeds. Additionally, TOD deeds allow for property owners to change the designated beneficiary or revoke the deed at any time, allowing for changes in circumstances that can be unexpected. A property owner can designate multiple beneficiaries and even specify the percentage of property each beneficiary will receive under a TOD deed. Wisconsin law uses TODs to ensure a prompt distribution of property to the beneficiary without delays.
A TOD deed allows the property owner to retain control over the property during their life. Property owners can live in, sell, or otherwise manage their property as they see fit. The deed only takes effect upon their death.
A TOD is typically cost effective, as it is less expensive than a trust.
A TOD also comes with tax benefits, like avoiding gift tax and receiving a step-up in basis. Generally, recording a TOD deed does not trigger any gift tax because no interest passes to the beneficiary until the property owner passes away. Additionally, beneficiaries can receive a step-up in basis for the property. A step-up in basis is a valuable tax tool that reduces capital gains tax if the property is later sold by the beneficiaries.
What are some limitations with a TOD deed?
Although TOD deeds provide many great benefits for both property owners and beneficiaries, there are some limitations. Property transferred by a TOD deed may still be subject to any claims by the owner’s creditors. Furthermore, if the property listed in the TOD deed is marital property, both spouses must agree to the TOD deed. It is best to review this over with a estate planning lawyer to make sure that there are no issues with setting up your TOD deed.
Who is a good fit for a TOD deed?
A TOD is a good fit for individuals who are looking to create a plan for their assets, when their only significant asset is the property they own. TOD deeds are also only applicable to real estate, such as land and buildings. Any personal property or financial assets cannot be included in a TOD deed. Single property owners, or people who own property solely in their name and wish to pass it on, are the easiest scenario for a TOD deed, as it requires only the sole property owner’s consent. TOD deeds are also a good fit for a quick fix, in the event of terminal illness or the elderly. Individuals who want to expedite the transfer of their property upon death are a great fit for a TOD deed as well, as the process is relatively quick.
A TOD deed is not a good fit for those with complex estates, insolvency risks, or changing beneficiary scenarios. Individuals with more complex estates involving multiple beneficiaries and/or significant business interests may require more comprehensive estate planning tools, like a trust. Additionally, a TOD deed does not protect property owners from insolvency or significant creditor claims, so other protective measures may need to be considered. Finally, a TOD deed is not good fit for those property owners who anticipate frequent changes in beneficiaries, as the constant updating of the TOD deed can be cumbersome and expensive.
What is the TOD process?
First, talk to your Wisconsin Estate Planning Attorney to ensure that a TOD deed is a good fit for you and your estate. If your attorney advises you that this is an option for you, the attorney will draft a TOD deed specifying the property details and the designated beneficiary. This deed must be signed, notarized, and recorded with the county Register of Deeds where the property is located. Note that a TOD deed MUST be recorded while the property owner is still alive for it to be effective. Once recorded, the deed typically becomes public record. However, this does not mean that the beneficiary has any immediate ownership of the property. Only upon the death of the property owner will the beneficiary have a property interest.
In conclusion, Transfer on Death Deeds offer a valuable option for estate planning, providing a straightforward way to transfer assets without going through probate. However, they may not be suitable for everyone’s unique circumstances. If you’re considering a TOD deed, it’s essential to consult with your attorney to determine if it aligns with your overall estate planning strategy. Your attorney can help ensure that you make the best decision for your situation and goals.
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Why You Should Avoid Co-Trustees and Similar Remedies
As a settlor, or the person drafting a trust, you will need to make the careful decision of appointing a successor trustee. While you may be the original trustee of your trust, once you pass, your successor trustee will oversee the trust administration. This is often a difficult decision, and people are tempted to designate more than one person as your successor trustee, also known as co-trustees.
Read more here about why a co-trustee may not be the best course of action.
