Okay, so you and your spouse have two names on the deed to your house. That means when one of you dies, the other inherits the house…right? Not necessarily. In fact, if your deed is more than 10 years old, there is good chance that you are assuming wrong. There are several ways to pass real estate outside of probate in Ohio. Outside of probate means that the real estate passes automatically to the survivor without being subject either to your will or the jurisdiction of the Probate Court. Because the two most common ways of doing this are relatively new in Ohio, it is a good idea that you have a professional check the deed to your house when writing your will or doing any other estate planning activity.
Let’s pretend that Rodney and Rowena Smith have both names on the deed to their house. The deed reads “Rodney Smith and Rowena Smith, Husband and Wife,” and says nothing else. In Ohio, the assumption is that Rodney owns half of the house, and Rowena owns the other half. This is called Tenancy in Common. Draw an imaginary line down the center of the property, and the law assumes Rodney owns half and Rowena the other half. As is statistically indicated, Rodney falls over dead while cutting Rowena’s half of the grass. Rodney’s half of the real estate is subject to his will, and the title has to be cleared by the Probate Court. An estate has to be opened.
But if the deed reads “Rodney Smith and Rowena Smith, Husband and Wife, For Their Joint Lives, Remainder to the Survivor of Them,” the assumption changes. Rodney owns all of the real estate, and so does Rowena. It is all mixed up. When Rodney has his coronary while cutting the grass, Rowena already owns all of the real estate. It passes to her automatically. All she has to do is record an Affidavit of Death with a copy of the Death Certificate at the Recorder’s office, and the title is cleared without having to be processed the Probate Court. This is called Tenancy by the Entireties (Get it? They each own the “entire” property!), or more commonly, Joint and Survivorship Property. Note: THE DEED HAS TO HAVE THE MAGIC WORDS IN ORDER FOR IT TO WORK.
Joint and Survivorship real estate has only been around Ohio since the late 1970’s. Even then, most realtors and closing agents really didn’t pay close attention until the early 1990’s, and it was sketchy at best. Good estate planning practices demand that everyone check the title to their house, and verify that it is in Joint and Survivorship form if that is the intent of the owners. This is especially true if you purchased your house before 1990. If it is not, the problem is easily fixed by re-deeding the real estate to yourselves in the proper form. FOR MARRIED COUPLES, THIS IS PROBABLY THE SINGLE BIGGEST ITEM THEY CAN DO TO ALLEVIATE ESTATE ISSUES OUTSIDE OF A WILL.
While Joint and Survivorship deeds worked well for married couples, it becomes problematic when dealing with children. Let’s say Rodney dies, and Rowena now owns the property through a survivorship deed obtained through good estate planning. Upon her death, Rowena wants the property to go to her ne’er do well son, Rodwini. She decides to put her son’s name on the deed in joint and survivorship form. Good idea? Well….yes and no. When she dies, the property will go Rodwini, but it could cause her problems while she is alive.
The property could become subject to any claims that attach to Rodwini, whether they be bad debts or any other kind of judgment. The creditor may or not prevail, but why worry about it in the first place? Even scarier, Rowena can’t sell the real estate without Rodwini’s signature. And if he is married, Rowena would also have to get Rodwini’s wife’s signature. Yuk, especially if the these folks aren't kissin’ cousins, if you get my drift.
So to solve this conundrum, the legislature of the great State of Ohio, came up with something called a Transfer on Death Deed, and it works like a Transfer on Death bank account. Rowena can re-deed the property to herself as follows: Rowena Smith, Transfer on Death to Rodwini Smith. Rodwini now gets the property when she dies, but he has no interest in it while she alive. If he turns out to be a no good bum, she can change the title to the property at any time without his approval. She is free to do with it as she sees fit.
The downside to TOD deeds is that there is very little law as to how they are supposed to work. The legislation establishing the deed was grossly insufficient in defining just who could be the beneficiary of a TOD deed. For example, if Rowena had a son and a daughter, and put the property in TOD form naming both of her children as beneficiaries, and the daughter dies first, the daughter’s share would revert to the son upon Rowena’s death, and not to the daughter’s children. If it was the intent of Rowena that the daughter’s share should go to the daughter’s children, there would be a problem. The solution is to re-do the deed to account for the daughter’s death, specifically naming the daughter’s children as TOD beneficiares.
In summary, the two most common ways to pass real estate outside of the Probate Court, directly to the intended beneficiaries, are through either a Joint and Survivorship Deed, or a Transfer on Death Deed. Review your deed. Most importantly, consult with a professional to determine whether or not either of these forms of ownership would beneficial to you.
Let’s pretend that Rodney and Rowena Smith have both names on the deed to their house. The deed reads “Rodney Smith and Rowena Smith, Husband and Wife,” and says nothing else. In Ohio, the assumption is that Rodney owns half of the house, and Rowena owns the other half. This is called Tenancy in Common. Draw an imaginary line down the center of the property, and the law assumes Rodney owns half and Rowena the other half. As is statistically indicated, Rodney falls over dead while cutting Rowena’s half of the grass. Rodney’s half of the real estate is subject to his will, and the title has to be cleared by the Probate Court. An estate has to be opened.
But if the deed reads “Rodney Smith and Rowena Smith, Husband and Wife, For Their Joint Lives, Remainder to the Survivor of Them,” the assumption changes. Rodney owns all of the real estate, and so does Rowena. It is all mixed up. When Rodney has his coronary while cutting the grass, Rowena already owns all of the real estate. It passes to her automatically. All she has to do is record an Affidavit of Death with a copy of the Death Certificate at the Recorder’s office, and the title is cleared without having to be processed the Probate Court. This is called Tenancy by the Entireties (Get it? They each own the “entire” property!), or more commonly, Joint and Survivorship Property. Note: THE DEED HAS TO HAVE THE MAGIC WORDS IN ORDER FOR IT TO WORK.
Joint and Survivorship real estate has only been around Ohio since the late 1970’s. Even then, most realtors and closing agents really didn’t pay close attention until the early 1990’s, and it was sketchy at best. Good estate planning practices demand that everyone check the title to their house, and verify that it is in Joint and Survivorship form if that is the intent of the owners. This is especially true if you purchased your house before 1990. If it is not, the problem is easily fixed by re-deeding the real estate to yourselves in the proper form. FOR MARRIED COUPLES, THIS IS PROBABLY THE SINGLE BIGGEST ITEM THEY CAN DO TO ALLEVIATE ESTATE ISSUES OUTSIDE OF A WILL.
While Joint and Survivorship deeds worked well for married couples, it becomes problematic when dealing with children. Let’s say Rodney dies, and Rowena now owns the property through a survivorship deed obtained through good estate planning. Upon her death, Rowena wants the property to go to her ne’er do well son, Rodwini. She decides to put her son’s name on the deed in joint and survivorship form. Good idea? Well….yes and no. When she dies, the property will go Rodwini, but it could cause her problems while she is alive.
The property could become subject to any claims that attach to Rodwini, whether they be bad debts or any other kind of judgment. The creditor may or not prevail, but why worry about it in the first place? Even scarier, Rowena can’t sell the real estate without Rodwini’s signature. And if he is married, Rowena would also have to get Rodwini’s wife’s signature. Yuk, especially if the these folks aren't kissin’ cousins, if you get my drift.
So to solve this conundrum, the legislature of the great State of Ohio, came up with something called a Transfer on Death Deed, and it works like a Transfer on Death bank account. Rowena can re-deed the property to herself as follows: Rowena Smith, Transfer on Death to Rodwini Smith. Rodwini now gets the property when she dies, but he has no interest in it while she alive. If he turns out to be a no good bum, she can change the title to the property at any time without his approval. She is free to do with it as she sees fit.
The downside to TOD deeds is that there is very little law as to how they are supposed to work. The legislation establishing the deed was grossly insufficient in defining just who could be the beneficiary of a TOD deed. For example, if Rowena had a son and a daughter, and put the property in TOD form naming both of her children as beneficiaries, and the daughter dies first, the daughter’s share would revert to the son upon Rowena’s death, and not to the daughter’s children. If it was the intent of Rowena that the daughter’s share should go to the daughter’s children, there would be a problem. The solution is to re-do the deed to account for the daughter’s death, specifically naming the daughter’s children as TOD beneficiares.
In summary, the two most common ways to pass real estate outside of the Probate Court, directly to the intended beneficiaries, are through either a Joint and Survivorship Deed, or a Transfer on Death Deed. Review your deed. Most importantly, consult with a professional to determine whether or not either of these forms of ownership would beneficial to you.
No comments:
Post a Comment