Avoiding Probate with Minnesota’s Transfer on Death Deed

iStock_000004014203SmallMinnesota’s Transfer on Death Deed (TODD) for real estate is a popular way for Minnesota families to try to avoid probate upon the death of the property owner.

Probate in Minnesota isn’t the onerous process that it is in some states, but probate takes time and costs money regardless. Thus, many Minnesotans try to avoid probate.

Probate is triggered in Minnesota when the deceased: (1) owns real estate in his or her name alone, or (2) owns $75,000 or more in probate assets in his or her name alone. This blog focuses solely on the first trigger – ownership of real estate.

If the TODD is executed correctly, the deceased’s ownership of real estate at death avoids probate under the first trigger.

TODDs work best when the property owner has a simple distribution plan in mind for the owner’s real property at death, such as distribution to 1 or maybe 2 children.

If the property is to be sold – as is often the case – there is the proverbial too-many-cooks-in-the-kitchen problem when the property is inherited by more than 1 or 2 children.

When there are more than 1 or 2 children involved, it is this blogger’s opinion that it might be better to avoid a TODD. Why? With a TODD, the children inherit the property directly. The children owners then have to agree on when to sell the property, how much to sell it for, and how any updating of the property prior to sale is to occur and be financed. Then, when a buyer is found, Minnesota requires that all of the children owners, plus their respective spouses, must sign off on the deal.  All of this takes substantial cooperation and coordination that may be difficult to achieve when there are several children or other beneficiaries of the property.

Alternatively, when the property is to be inherited by more than 2 persons, it may be best for the real estate to be transferred through a probate action or to be owned by the property owner’s trust. Why? The number of decision-makers is cut dramatically. Any sale of real property during a probate action is handled solely by the personal representative named in the deceased’s Will. Similarly, if the real property is held in the deceased’s trust, any sale of the real property is handled solely by the trustee of the deceased’s trust. The personal representative or trustee, as the case may be, then distributes the sale proceeds to the deceased’s beneficiaries. In other words, the beneficiaries inherit cash from the property sale, rather than real property.

Importantly, a TODD must be recorded prior to the property owner’s death to be effective. The intended beneficiary of the property has no rights in the property until the property owner dies. Therefore, if the property owner later wants to change beneficiaries, the property owner can revoke the existing TODD and create a new one. Or, if the property owner later decides to sell the property, the TODD can be revoked, and the property owner can keep the proceeds from the sale.

Minnesota authorized the use of TODDs starting in 2008. If you have an estate plan that was created prior to 2008, it would be a good idea to check with an estate planning lawyer to see if a TODD would be helpful in your situation. The wording of a TODD must be carefully considered or it may not work as intended.

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Disclaimer: This Blog is for informational purposes only and is not to be construed as legal advice. If you have questions, please seek the advice of an attorney licensed to practice law in the state where you live. Wittenburg Law does not expressly or implicitly warrant the accuracy or reliability of any of the Blog’s contents. An attorney-client relationship is not formed by reading this Blog. If you are interested in Wittenburg Law’s representation of you, you must contact Wittenburg Law for a determination of whether your matter is one for which Wittenburg Law is willing and able to accept representation of you.

Bonnie Wittenburg, Wittenburg Law Office, PLLC, 601 Carlson Parkway, Suite 1050, Minnetonka, MN 55305         952-649-9771     bonnie@bwittenburglaw.com   www.bwittenburglaw.com