The homeowner uses a TODD to designate who should inherit a specific parcel of real estate after the homeowner’s death. The TODD must be recorded with the county recorder (or registrar of titles, as the case may be) in the Minnesota county where the property is located prior to the death of the homeowner.
Here are some pros and cons to TODDs:
Pro: Minnesota’s TODD may avoid probate related to real estate upon the death of the property owner. Why? Under Minnesota law, the estate of anyone owning Minnesota real estate in his or her name alone at death must undergo a probate action. However, Minnesota provides an exception to requiring probate for real estate owned in the deceased’s name alone if there’s a TODD. Skipping probate typically saves time, money and hassle.
Pro: The homeowner continues to own the property, and has complete control over the property, until his or her death.
Pro: The homeowner can revoke the TODD if the homeowner later decides to sell the property, or decides to select another beneficiary.
Pro: A TODD allows parents to delay the transfer of their property to their children until both parents are deceased.
Con: Probate may be necessary anyway if a beneficiary named in the TODD dies before the homeowner, and the homeowner did not create a new TODD before the homeowner also died.
Con: If the property is destined for sale after the homeowner’s death, there may be the proverbial too-many-cooks-in-the-kitchen problem when the property is inherited by more than 2 or, maybe, 3 children. Why? All of the new owners designated by the TODD 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. Moreover, when a buyer is found, Minnesota requires that all of the beneficiary owners, plus their respective spouses, must sign the sale documents. All of this takes substantial cooperation and coordination that may be difficult to achieve when there are several beneficiary owners of the property.
(Alternatively, if the real estate is subject to probate, only the personal representative needs to deal with the sale issues and to sign the paperwork. Similarly, if the real estate is held in a Revocable Living Trust, only the trustee needs to handle the sale and sign the paperwork. After the property is sold, the personal representative or trustee, as the case may be, distributes the net proceeds from the sale to the deceased’s beneficiaries. In other words, the beneficiaries inherit cash from the property sale, rather than real property.)
Given the pros and cons, the consideration of whether to include a TODD in an estate plan should be discussed with an estate planning lawyer. The lawyer can provide guidance related to the particulars of the homeowner’s situation and goals.
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Bonnie Wittenburg, Wittenburg Law Office, PLLC, 601 Carlson Parkway, Suite 1050, Minnetonka, MN 55305 952-649-9771 firstname.lastname@example.org www.bwittenburglaw.com