EZ Conveyance

I’ve said it so many times that I can almost hear myself talk. Owners should visit their attorney and ensure their property is either in trust or held in tenancy that avoids probate. Traditionally, real property (real estate) is either conveyed automatically to the remaining spouse, by will or through a trust instrument. Many don’t realize that just because a will designates beneficiaries, transfer is not automatic. The will must go through probate which can be lengthy and expensive. A trust, on the other hand, does not require probate but carries an expense to create it.

Probate vs. Trust

In my business, we often wonder why disposing of real property at death can’t be easier. Picture this, Granny has $10,000 in her checking account. She has an IRA worth a tidy sum along with a hefty paid up whole life policy. She also has a Nanawale lot worth about $2500. Granny has beneficiaries designated for her monetary accounts. These can be transferred rather painlessly. Without a will or trust, her poor Nanawale lot will likely sit for years while real property taxes and association fees accumulate. Even with a will, the cost of probate added to the selling costs could eclipse the property value.

Transfer on Death

Not long ago, the Hawaii State Legislature created a simpler path. It applies the same basic beneficiary principles used to distribute Granny’s monetary balances. Called “transfer on death” (TOD), this deed allows for a beneficiary designation prior to death. It looks like a traditional deed except that it does not take effect until death of the owner/grantor. These deeds are recorded but revocable at any time. The ownership rights and responsibilities of the owner/grantor remain intact. They can still mortgage the property, use, improve and even sell the property. The death of the owner/grantor, however, does not extinguish any mortgage or lien.

Once the TOD deed becomes effective, the grantee (new owner) becomes legally and financially responsible. Any financial obligations pass to them. The property may need to be sold to settle these bills. It’s great for a parent wanting to transfer property to their children. Title, however, normally imposes a 6 month waiting period prior to a transfer by the beneficiary. Even so, it would make my life easier to see a “TOD” deed in place for out of state owners and for lots worth less than say, $10,000. Anyone interested in discovering if this simple tool fits their needs should contact an attorney specializing in Estate Planning.