Tuesday, October 21, 2008

What's a TODD?

The Minnesota Legislature recently enacted legislation allowing the use of "Transfer on Death Deeds", or TODD. The Minnesota Legislature enacted Minnesota Statute 507.071, to be effective August 2008, which establishes the nature and use of TODDs. So what is a TODD and what can it do for you?

A Transfer on Death Deed works a little bit like termination on death accounts that many people have at banks.

With a Transfer on Death Deed, prior to the their death a grantor/owner creates a transfer on death deed which lists the real property that will be disposed of on death. The deed is filed with the county where the real property is located. At death, the property automatically belongs to the recipient listed on the deed.... without the need for probate. It's a lot like a life estate, except that a TODD can be revoked by the grantor/owner for any reason. The grantor/owner has the benefit of use of the property for life, transferring the property upon death without probate, and still retains control in determining who gets the property. A TODD works great in situations where it is advisable for a piece of real property to stay out of probate proceedings.

However, a Transfer on Death Deed isn't the magic wand that some people want it to be. Property transferred by a TODD will still likely be used to determine a taxable estate because the owner retains the power to revoke the deed. Additionally, property transferred by a TODD is still subject to any mortgages, liens or judgments that the property was subject to during the life of the owner/grantor. Therefore, a Transfer on Death Deed will not reduce estate tax or prevent recovery of government benefits.

If you think that a TODD may be right for you, contact a licensed Minnesota attorney.