estate planningLast May, the Utah Uniform Transfer on Death Act became effective. The basic purpose of the law is to allow Utah residents to pass title from one person to the next while avoiding probate. Before enacting House Bill 199, property in Utah could only pass from one generation to the next through a number of methods. These methods include probate, trust planning, and joint tenancy interests. Probate involves a court process where a judge order that a person may represent a deceased person’s estate. The appointed representative can then sell the deceased person’s property. Trusts, on the other hand, own property independently of the deceased person. When the original person who established the trust dies, a second person assumes the role as trustee of the trust. The “successor” trustee may then sell the property. Last o fall, some people list a child or loved one as joint tenants on property just before death. This last method is generally not recommended and it comes with its own set of problems and complications.

Now there is another way to pass property from one generation to the next. A transfer on death deed conveys real property upon the death of the original owners to a set of named beneficiaries. These type of deeds represent an opportunity for people who want to avoid the complexities of probate or trust administration. However, the transfer on death deed has its own set of problems as well. I’ve listed some of these below:

1. For families with multiple heirs—such as large families with several children—the transfer on death deed create multiple owners who may not agree about what they should do with the property. A property owner may try to circumvent this problem by listing a single beneficiary (such as a trusted son or daughter) who is responsible for selling the property and giving the proceeds to his brothers and sisters. However, that beneficiary has no legal obligation to fulfill this request after the owner is dead. Moreover, if he or she complies with the owner’s wishes, the government may impose a gift tax on the proceeds transferred to the beneficiary’s siblings.

2. The Transfer on death deed doesn’t provide for the property owner’s descendants if a beneficiary listed in the deed dies before the owner. In other words, if your son or daughter dies before you, his or her grandchildren do not take an inheritance. This is typically not the case with probate or trust administration.

3. The transfer on death deed doesn’t stop a spouse from changing his or her mind and assigning new beneficiaries once his or her spouse is dead. This is a problem that can often be avoided with good estate planning.

4. The transfer on death deed does not contemplate a number of problems that are usually part of a good estate plan. What if proceeds from the real property should be distributed gradually, over several years because a beneficiary is disabled, irresponsible with money, or addicted to drugs? What if the family needs to do some type of tax planning or charitable gifting?

There are a number of other reasons why a good estate plan is usually superior to a transfer on death deed. However, individuals should know and understand that an additional estate planning tool is available. The attorneys at Howard, Lewis, and Petersen can determine what type of estate planning tools might best help you reach your goals.

Posted August 31st, 2018