Planning your estate gives you control over what happens to your property and also allows you to provide support for your loved ones when you can no longer physically be with them. What happens to your home will matter to the people who live with you and to those who expect to inherit from your estate after your death.
One solution that adults in New Jersey employ when addressing real estate in their estate plan is to draft a transfer-on-death (TOD) deed. As you may be able to infer from the name, a TOD deed can only take effect when the owner on record for a property dies.
Would adding one of these deeds to your New Jersey estate plan be the proper solution for your home?
There are benefits and risks to a transfer-on-death deed
The most obvious benefit of a TOD deed is that it allows for the quick transfer of real property without the involvement of the New Jersey probate courts. The recipient of the property can store the deed themselves or receive it from the lawyer who drafted it or the executor of the estate. When they record it, they won’t have to worry about estate taxes or about challenges against the testamentary documents.
However, there are some concerns with using a TOD deed. One is that someone could lose the deed before the testator dies and not realize it until after they do, resulting in someone having no documents in place to address their home. The other concern is that a transfer outside of probate could potentially trigger capital gains taxes, especially if the person who receives the home decides to sell it.
What are alternative solutions to a transfer-on-death deed?
New Jersey does not recognize ladybird or enhanced life estate deeds. However, you can potentially create a trust as a way to control ownership of your property and also who can live there.
A trust can give somebody residential possession rights without the right to use the home as collateral for a loan or sell it. A trust could allow a spouse to remain in your home until their death, at which time ownership would fully pass to your beneficiaries. There could be other solutions that would work for your real property in your New Jersey estate as well.
Identifying your most valuable property and the possible complications that could arise during its transfer will help you create the most effective estate plan.