CONTRIBUTED CONTENT — People are constantly seeking ways to avoid the expense and delay of probate. Fortunately, a new Utah law allows family members or friends to avoid probate by making a deed to name who you want to inherit your real estate at your death.

This change can make your real estate pass at your death to named beneficiaries much like life insurance, annuities and individual retirement accounts. 

A “transfer on death” deed must specifically name the people you want to receive your real estate at your death. You cannot leave your real estate to “all of my children,” for example. Rather, you have to name them each individually, such as “John Doe, Jane Doe and Jeff Doe.” 

You are also free to change your transfer on death deed throughout your life. By recording another deed, you can change who is to receive your real estate. And during your lifetime, you can also sell or give your real estate to persons who are different from the beneficiaries named in the transfer on death deed. 

Also, you can mortgage your real estate without involving your named beneficiaries. So a transfer on death deed has no effect on what you do with your real estate during your lifetime. However, for all its benefits, there are several glitches that keep this from being perfect. 

The first is that you can only change or cancel a transfer on death deed by recording another deed at the county recorder’s office. The change has to be recorded. So a will or letter of instruction found in your drawer at your death will not work to change or update who gets your real estate. A last-minute document will not cancel a transfer on death deed. You must prepare and record a new deed to change or cancel a transfer on death deed.

Second is the serious difficulty to make alternate provisions in a transfer on death deed to direct what happens if a beneficiary in your deed dies or becomes incapacitated. For example, a will or trust often has contingent beneficiaries or alternate distribution plans built in if a beneficiary dies or becomes incapacitated. 

Your will might say: “I give my estate in equal shares to my children; if any of my children fail to survive me, I give that deceased child’s share to their then-living issue, per stirpes.” You cannot make that same instruction in a transfer on death deed. So wills and trusts are better suited to making contingency plans for needed changes due to common life events.

Third, if you outlive your named beneficiaries, your real estate will have to go through the court probate process at your death to determine who is to receive your real estate. A trust is better than a transfer on death deed in this regard because real estate held in a properly drafted trust will avoid probate in any event. 

Fourth is that the law is only effective for real estate in Utah. If you own real estate in another state, you will still need a will or trust to dispose of that out-of-state real property. And if you are using a will or trust for real estate in another state, it is most likely not worth the trouble to use a transfer of death deed for your Utah property because your will or trust can take care of all of your real property at the same time.

Finally, sometimes the equity in your real estate is needed to be made part of your estate to pay specific gifts or final bills and expenses. Using a transfer on death deed removes the real estate from your estate, so its equity cannot be used for these other purposes.

However, this may also be seen as a positive in many situations if you want the real estate to pass to your named beneficiaries free of any claim from other family members or creditors. Thought has to be given to make sure there are sufficient assets other than your real estate to pay expenses and for the other gifts stated in your will or trust.

This deed gives you another tool to be used at the right time and under the right circumstances. It certainly is not a one-size-fits-all fix and should be used only after discussing all of your estate planning options with an experienced attorney.

Written by M. SEAN SULLIVAN, founding partner at Brindley Sullivan. 

About M. Sean Sullivan

M. Sean Sullivan is an attorney with 22 years of experience in will, trust and estate planning law, and he has worked with clients from all parts of the United States. His office offers free initial consultations at your convenience, which can be requested online or by calling 435-673-9220.

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