Understanding Transfer on Death Deeds in Wisconsin: A Probate-Avoidance Tool for Real Estate
When it comes to estate planning, many people seek strategies to avoid probate—a court-supervised process of distributing assets after death. One such tool, specific to real estate, is a Transfer on Death (TOD) Deed. This option, available in Wisconsin, offers a straightforward way to pass real estate to beneficiaries while bypassing probate. However, while TOD deeds have their advantages, they are not without potential pitfalls. Let’s explore how they work, their benefits, and the challenges they may present.
What is a Transfer on Death Deed?
A Transfer on Death Deed allows you to name a beneficiary or beneficiaries who will receive your real estate upon your death. During your lifetime, the deed has no effect on your ownership—you remain the sole owner, with full rights to sell, mortgage, or otherwise dispose of the property. Importantly, the deed is revocable at any time prior to your death, giving you flexibility to change your mind about who will inherit the property.
Key Benefits of a TOD Deed
- Avoids Probate
The most significant benefit of a TOD deed is its ability to avoid probate for the designated property. Upon your death, ownership transfers directly to the named beneficiaries without the need for court intervention. This can save time, money, and administrative hassle. - Flexibility During Life
Unlike irrevocable transfers, a TOD deed does not interfere with your ability to use or sell the property during your lifetime. If you sell the real estate, the TOD designation simply becomes void—it only applies to property you still own at the time of your death. - Ease of Execution and Revocation
Creating or revoking a TOD deed is relatively simple. You can revoke the deed by filing a new deed or a revocation document with the county Register of Deeds. This makes it an appealing option for those seeking straightforward estate planning solutions.
TOD Deeds and Medicaid Estate Recovery
One common misconception is that using a TOD deed protects your home from Medicaid estate recovery. This is not true.
Medicaid estate recovery is a process where the state seeks reimbursement for Medicaid benefits paid on behalf of a deceased individual. In Wisconsin, the state has the right to recover from the estate of a Medicaid recipient, including property that transfers via a TOD deed.
Although a TOD deed bypasses probate, it does not shield your property from Medicaid estate recovery. If Medicaid benefits were used for your care, your named beneficiaries could still face liens or claims on the property after your death. If Medicaid planning is a concern, additional strategies, such as irrevocable trusts, may be more appropriate.
Potential Pitfalls of TOD Deeds
While TOD deeds are attractive for their simplicity, they may lead to complications, especially in certain situations:
- Problems Among Multiple Beneficiaries
When a TOD deed names multiple beneficiaries, issues can arise if disagreements occur about what to do with the property. For example, if one beneficiary wishes to sell the property while another wishes to keep it, disputes can delay or complicate resolution. Co-ownership can also result in challenges related to property management, maintenance, and liability. - Lack of Centralized Authority
Unlike probate administration, where a court-appointed personal representative has authority to sell or distribute property, a TOD deed places the burden of decision-making on the beneficiaries. Without a single decision-maker, disputes or delays in selling the property can be more common. - Unintended Consequences
A TOD deed bypasses probate, but it does not address other aspects of estate planning, such as paying debts, taxes, or balancing inheritances among heirs. If the real estate is the primary asset, it could create inequities among beneficiaries.
Is a TOD Deed Right for You?
A Transfer on Death Deed can be an excellent tool for simplifying the transfer of real estate and avoiding probate. However, it’s important to consider potential challenges, especially when naming multiple beneficiaries or if Medicaid estate recovery is a concern. In some cases, using a TOD deed in conjunction with a well-drafted estate plan may be the best approach to ensure your wishes are carried out while minimizing family conflict.
If you have questions about whether a Transfer on Death Deed is right for you, or if you’d like to explore other estate planning strategies, contact an experienced attorney today. Proper planning ensures that your legacy is preserved and distributed in the way you intend.