| What is a TODD? Read on:
READER QUESTION:
I am confused as to whether or not a “TODD” is all you need sometimes. When should it be used, and what does it do in relation to estate planning?
MY RESPONSE:
A TODD is a TRANSFER ON DEATH DEED. This is a new deed to your house where you put a beneficiary on the deed to avoid probate. The deed remains 100% owned by you but passes automatically upon your death, without probate. The deed would be prepared now and filed with the county clerk, just like any other deed.
Sounds great, right? However, for the most part, my advice is not to fall into the trap of an easy out. Suppose you have 3 children that you place on the deed as beneficiaries, and each child has children of their own. If you and one of those children die together (or the same child predeceases you), who inherits the house? Who do you want to inherit the house?
Most of my clients would want the deceased child’s children to inherit
the house, perhaps in a trust, until they reach a more mature age
(25? 35? 90? 😊). However, a TODD deed would automatically pass the house to the other two children, disinheriting the grandchildren of your deceased child. Too many things could go wrong, so we do not do these TODDs very often.
Instead, we create a trust (revocable or irrevocable) IF avoiding probate is a priority (which it doesn’t have to be). A trust would control the ownership upon the death of you and a child and provide for your grandchildren appropriately.
On the other hand, if you only have one child and that child died, then a TODD might be a simple and practical solution (depending upon the age and maturity of the grandchild). There is a lot to talk about here.
I hope this helps! |
