When it comes to leaving your home for a child to inherit after you pass on, you can choose to go the route with a will, a trust or a transfer on death deed. You can learn more about wills and probate by clicking here, or about a living trust by clicking here. To get the pros and cons of a transfer on death deed in Utah then read on to see if this is the best choice for you.
What is a Transfer on Death Deed
In 2018 Utah passed the Utah Uniform Transfer on Death Act. The purpose of this law was to legalize the passing of title from one person to the next while avoiding probate. Prior to this law your home could be inherited through probate, a living trust or joint tenancy interest. This new way to pass property from one generation to the next allows the transfer of property upon the death of the owners to named beneficiaries through a simple binding written deed.
Templates for this type of deed can be found online or you can work with a lawyer to set up a transfer on death deed, making the process very simple. Once the deed is signed you must record it with the local county land records office before your death in order for it to be valid. While the process is simple, is this type of inheritance documentation the right avenue for you and your descendants?
Pros of a Transfer on Death Deed in Utah
Your Assets Are Protected
With this special deed the beneficiaries have no legal right to your property until death. You don’t even have to notify the beneficiary that they will be inheriting the property (thought that’s usually always a good idea) and it will only go into affect at the current owners death. If the potential inheritor passes before they can inherit then you can also name an alternate beneficiary who can inherit as the second choice. Because the TOD deed does not make a gift of the property, there is no concern about paying a federal gift tax either.
You Have Flexibility
If you change your mind about who you choose to inherit your property then the deed can be revoked, you aren’t locked in. You can simply create a new TOD deed and leave the property to someone else instead.
No Probate Period
Perhaps the most compelling reason for a Transfer on Death Deed is that at your death the ownership of your property passes immediately AND automatically to the inheritors. There is no lengthy probate process involving the courts and executors. While the beneficiary will need to fill out some paperwork and provide your death certificate, this process is much simpler for passing on property than wills and probate.
Cons of a Transfer on Death Deed in Utah
One Year Before Selling
In the state of Utah a beneficiary must wait one year following the death of an owner before they are able to sell the property. If the person inheriting is left with an unpaid mortgage, they cannot deal with the property or would just like to sell it right away, they won’t have that freedom to do so. The only way to get around the one year wait period is for the beneficiary to file a probate action, which defeats the purpose of having a TOD deed in the first place.
Title Insurance Doesn’t Inherit
A TOD deed does not include passing on the title insurance coverage or other warranties on the property. In a trust these stay in affect as they pass on to the beneficiary, but in a TOD deed the inheritor has to work out their own title insurance policy which is an added expense.
Multiple Heirs Means Multiple Owners
If you have several children that you want to leave the property to then a transfer on death deed may not be your best choice. With a TOD deed the multiple beneficiaries may not agree on what to do with the property and if you choose one beneficiary there is no guarantee they will honor your request to sell the property and split the profits between the siblings. With a will and probate process your last wishes are honored, with a TOD deed the new owner can basically do whatever they want with the property upon your death.
Lack of Control
In line with our last point, if you pass and your spouse who is on title with you automatically inherits the property then they can choose to change the Time of Death Deed after your passing to assign someone else to inherit. While a TOD deed is fast acting and simple the drawbacks include the lack of clarity and control of a will or trust.
So What is the Best Way to Leave a Property Upon Death?
Only you can answer that question, and thankfully in Utah we have a lot of options for transferring property upon our passing so you can choose a will, trust or transfer on death deed for your situation. If you’ve inherited a property that came to you through a TOD deed and you would like to sell the property and move on then you can contact Gary with Gary Buys Houses. Gary is a trusted investor in the state of Utah and he purchases homes from beneficiaries like you who would want to cash out quickly on the property and not deal with the headache of owning, listing and selling a second property. Click here to learn more about Gary and how his fast cash offer works.