Creating an estate plan provides protection for those who survive when someone dies. An estate plan allows an individual to leave a meaningful legacy and to provide practical support for their loved ones even after they pass away.
Larger assets typically require more consideration than personal assets with minimal resale value. For many adults in Maryland, the homes where they live are their most valuable resources. As the most valuable individual asset owned by a person, real property is potentially vulnerable to claims by creditors and plaintiffs filing lawsuits against individuals.
Homeowners who want to preserve their property and provide for their loved ones may try to keep their homes out of probate court after they die. A transfer-on-death (TOD) deed could be a valuable tool for people who want to address the ownership of their homes while keeping the property out of the probate courts.
What do Maryland residents need to know about these deeds?
What does a transfer-on-death deed do?
As the name implies, a Maryland transfer-on-death deed makes arrangements for the transfer of real property ownership from the current owner to a specific beneficiary after the owner dies. The selected beneficiary can submit the deed, along with documentation of the owner’s passing, to assume control over the property. This process occurs outside of the probate courts and prevents the home from becoming part of the estate of the deceased individual.
What does the law permit in Maryland?
Currently, state statutes do not allow for transfer-on-death deeds. Lawmakers have introduced a bill, titled HB 625, that could make significant changes to the existing statutes in Maryland. If lawmakers pass the bill and the governor signs it into law, residents of Maryland can then use TOD deeds as part of a broader estate plan.
Currently, other assets are eligible for TOD designations. For example, people with well-funded bank accounts can use payable-on-death (POD) designations filed with their financial institutions to allow specific beneficiaries to assume control over their accounts after their passing.
Companies that manage investment accounts often allow for TOD designations that facilitate the rapid transfer of resources to a selected beneficiary after the current account holder’s passing. There are even ways for those with vehicles to arrange for their registrations to transfer to a new owner after the current owner’s death.
The ability to make similar arrangements for real property during the Maryland estate planning process could help people protect their resources from creditors, limit probate conflicts and diminish the potential of real property triggering estate taxes. Currently, real property in Maryland is subject to the state probate process, which can lead to delays in transfers and a loss of value in some cases.
What other options do people have?
Real estate is at risk of creditor activity even after an owner passes. In fact, the Medicaid estate recovery program can even potentially make a claim against the property. Additionally, the value of the home can increase the likelihood of estate taxes.
Those who want to address their real property effectively and do not want to wait for lawmakers to change the law have several options available to them. They can transfer ownership of the property to a living trust. This arrangement helps protect the home from creditor claims and probate proceedings. The current owner can allow selected individuals to live at the home indefinitely and can arrange for ownership transfers to occur in specific circumstances.
Other times, if the intended future owner already lives in the home, adding them to the title for the property by executing a deed designating them as a joint tenant with rights of survivorship can be an effective strategy. Such arrangements allow for one party’s interest to automatically transfer to a co-tenant after their passing. Each of these solutions can be beneficial for those seeking probate alternatives in Maryland.
Tracking significant changes to Maryland estate planning statutes can be beneficial for those with large resources they aspire to protect. A thorough estate plan can help people minimize probate complications and preserve their most valuable resources for specific beneficiaries.