by: C. Arthur Robinson, II

We are now in an environment where we have far greater options when transferring property than was the case thirty years ago.  In addition to the traditional probate process, either with or without a Will to heirs, we currently have a variety of mechanisms which, depending on the asset class involved, may work more efficiently to transfer property.  For virtually every sort of property, it is possible, by virtue of changes in ownership or beneficiary designations, to use a trust to efficiently transfer property. Bigstock Homeownership 12270

In addition, a number of other mechanisms are available now which are relatively new developments.  As expected, each of these mechanisms has consequences that need to understood by a property owner before being employed.

Virtually everyone is familiar with beneficiary designations for retirement accounts.  It is possible now to provide for takers by operation of law who are designated as beneficiaries or as takers-on-death for virtually any property.  It is possible to designate virtua lly all bank and financial accounts as pay-on-death to one or more individuals.  In addition, the analog for real estate which previously was only available in the form of a life estate can now be done through a transfer-on-death deed.

The transfer-on-death deed avoids many of the problems that a life estate and remainder interest created.  Specifically, in such life estate transfers, a portion of the property is actually transferred away at the time of the conveyance which can have gift tax consequences and also creates a vested interest on the part of the transferee which thereafter restricts the degree of freedom the original property owner would have.

A transfer-on-death deed avoids all of these negative consequences.  This type of deed creates an interest which is non-vested until the death of the grantor.  That is, without the permission of the individual designated as the taker on death, property may be sold or transferred by its owner without permission or agreement.

In addition, there are no gift tax consequences to creating such an interest.  Therefore, we have available mechanisms that, when use creatively, can result in the efficient transfer of property and require little, if any, intervention upon the death of an individual.

However, there is a significant caveat associated with any of these techniques.  Specifically, in order to use alternatives other than a Will and a Trust which should be updated on a regular basis, if assets are going to pass under one of these designations (either to a third-party beneficiary or otherwise by operation of law) it is important to pay very close attention to the beneficiary designations.  What may be appropriate and in comportment with the intentions of an individual at a given time may or may not produce results consistent with the most recent intention of a deceased individual or be sensible or efficient from the standpoint of appropriate estate planning.

To the extent that use of these designations represents a piecemeal approach on an asset by asset basis, in situations where there is significant property or substantial complexity of assets, these techniques can present more problems than they solve.  In summary, all of the techniques mentioned in the article have their place and can be used effectively for estate planning.  Selecting the appropriate technique is very much a question of the facts and circumstances for a given individual, the complexity of their family situation, the extent to which they wish to have control either now or in the future, and a host of other factors to be considered when deciding how to use these techniques, if at all.

We at Wolcott Rivers Gates are familiar with all of these issues and are in a position to advise you so that your plan accomplishes your objectives and is efficient in doing so.  Please call us if we can be of assistance to you.