Wisconsin’s Transfer on Death Deed: An Estate Planning Device

What is a TOD Deed?

Wisconsin Statutes § 705.15, entitled Non-probate Transfer of Real Property on Death (the “Statute”), effective April 11, 2006 for deaths after that date, provides a method for transferring real estate upon an owner’s death to designated beneficiaries, without probate or a trust, through the recording of a form designated as a TOD Deed (“TODD”).

How can I use a TOD Deed?

The Statute applies to a transfer on death of an interest in either residential or non-residential real estate, regardless of the size, type, value, use or extent of the improvements of the real estate, by means of a TODD made on or after April 11, 2006, by an owner who subsequently passes away. The transfer under the TODD is triggered by the death of the owner. Only a natural person can create a TODD. Because there is no limit on the type or use of the real estate, the TODD can be utilized on commercial, residential, forest or agricultural real estate, improved or unimproved, including condominiums.

The TODD does not affect ownership of the real estate until the owner’s death. If no beneficiary or alternative beneficiary who is named in the TODD survives the owner, the real estate passes on the death of the owner to the estate of the deceased owner or the estate of the last to die of multiple owners.

Who can be designated a TOD beneficiary?

The Statute allows an owner, a natural person or persons, who own the real estate either solely, as spouses, as survivorship marital property or as joint tenants with right of survivorship, to designate one or more beneficiaries who will receive the owner’s interest in the property on the owner’s death, bypassing probate of the owner’s estate. A beneficiary can be any person, or any legal entity capable of owning real estate. In most instances, the beneficiary will be a living person or a trust, either revocable or irrevocable, frequently one established by the owner. The TODD beneficiary does not need to be notified of the TODD designation prior to the owner’s death.

TOD Deed “Musts”

A TOD Deed:

• Must substantially contain the essential elements and formalities for the recording with the Register of Deeds of a conveyance of real estate; most lawyers utilize a one-page preprinted Wisconsin State Bar form;

• Must state that the transfer to the designated beneficiary is to occur at the owner’s death, by expressly including the words “pay on death” “TOD” or “POD” after the name of the owner or owners and before the names of the beneficiary or beneficiaries;

• Must be recorded before the owner’s death in the public records in the office of the Register of Deeds of the county where the real estate is located;

• Must be signed by the owner in the presence of a notary public who acknowledges the owner’s signing.

Can I revoke a TOD Deed or change it, and if so, how?

Yes, a TODD is revocable at any time prior to the owner’s death. The revocation is made by the owner or owners making and recording a new TODD that designates a different beneficiary or no beneficiary. The change must be recorded with the Register of Deeds. The originally named beneficiaries do not need to be notified of or consent to any changes in beneficiaries. For the TODD newly named beneficiaries, no interest in the real estate arises until after the owner’s death.

What happens on the death of the owner?

Upon the death of the owner, the deceased owner’s interest is terminated and transferred to the beneficiary as of the date of death. The beneficiary files with the Register of Deeds a sworn to one page form HT-110 and TOD-110 Termination of Decedent’s Interest, available from the Register of Deeds, along with a copy of the owner’s death certificate, the last year’s prior real estate tax bill, a copy of the TODD, a copy of the deed granting the owner his/her interest and a Wisconsin Real Estate Transfer Return. By filing that form and required documents, a beneficiary states under oath that he/she is the named beneficiary under the TODD and that the owner is deceased. Although the transfer on death to the TODD beneficiary may be confirmed by a final judgment filed in a formal probate proceeding by the Circuit Court, or a confirmation of interest in property filed with the Register of Probate in an informal probate proceeding in Circuit Court, because of its simplicity and low cost, the most prevalent method of evidencing the death of the owner and transfer of interest to the beneficiary is the filing of a form HT-110 and TOD-110 with the Register of Deeds in the county where the real estate is located.

Pros and Cons of a TOD Deed:

PROS:

• Using a TODD is an alternative to a will, revocable or irrevocable trust, as the TODD allows an owner to name a beneficiary and avoid probate.

• Naming a trust established by the owner as a TODD beneficiary may provide an estate planning alternative to transferring the real estate into the trust prior to the owner’s death. Such deferral of transferring the property to the trust may make management, including sale of the real estate, less cumbersome while the owner is alive and still allows the owner’s trust to control all of the assets of the owner’s estate, upon the owner’s death, without probate.

CONS:

• If the owner failed to take the TODD into consideration when crafting the owner’s overall estate plan, this could result in more assets transferring to the TODD beneficiary than intended and could also result in other beneficiaries of the estate being responsible to pay estate taxes on the TODD asset.

• Designating multiple beneficiaries via TODD, although allowed, is not recommended for a number of reasons. TODD beneficiaries must unanimously agree on decisions concerning the real estate, such as whether to sell the real property. Upon a deadlock among the TODD beneficiary owners, a partition action, an expensive, cumbersome, unpredictable, inefficient and non-exact legal remedy, may be necessary to resolve the deadlock.

• Also, although the Statute allows for the unspecified, generically referenced children and/or grandchildren of a deceased named as a TODD beneficiary to take as a primary or as an alternate beneficiary or beneficiaries by a general reference, such as “my issue per stirpes”, none of those generic designations are recommended. The statute does not provide a way for the Register of Deeds or anyone else searching title to determine who such generic, not specifically named beneficiaries are. The Register of Deeds accepts as true the information on the Termination of Decedent’s Interest form. This may create post-death uncertainty in a chain of title and may provide an opportunity for wrong doing.

• The TODD once recorded with the Register of Deeds is not a secret or confidential document, exposing the owner’s wishes to the public, including the beneficiary, both before and after his/her death. The lack of secrecy may make an owner psychologically reluctant to change a TODD once it is recorded, even though he/she is legally able to change it. If secrecy is desired by the owner, a trust can achieve that result, at least until the control of the property is transferred after death, and longer if title to the real estate remains, after death, in trust for the benefit of the beneficiary.

TODD Best Practices

• Although not required by law, the owner making the TODD designation should notify the TODD beneficiary that he/she is naming him/her as a TODD beneficiary transferring the property to him/her on the owner’s death.

• Although not required by law, the TODD beneficiary should keep in touch with the owner and the owner’s family, or regularly monitor the death notices so the TODD beneficiary is promptly aware of the owner’s death.

• The TODD beneficiary should act quickly after death to file the form HT-110 and TOD-110 with the Register of Deeds.

Failure of the TODD beneficiary to be aware of his/her beneficiary designation or the owner’s death, or to act quickly after death, may provide an opportunity for an unscrupulous or unknowledgeable personal representative to transfer the real estate, or an interest in the real estate, to a third party bonafide purchaser for value without notice to the beneficiary. In such case, the TODD beneficiary may lose his/her rights to the real estate and its proceeds of sale, and the deceased owner’s wishes for the real estate and his/her beneficiary would not be fulfilled.

Conclusion

In a great many common everyday situations, the transfer on death will provide a simple, effective way to transfer real estate on the death of the owner. An attorney should be consulted in all estate planning decisions to consider if a TODD is appropriate for the owner’s overall estate plan and wishes.

This article is limited to a Wisconsin legal analysis of the transfer on death application to real estate, as an asset class. Wisconsin law provides for non-probate transfer on death of several other non-real estate assets, including, but not limited to, money, insurance policy, contract of employment, bond, mortgage, promissory note, certified or uncertified security, account agreement, custodial account, deposit agreement, compensation plan, pension plan, individual retirement plan, employee benefit plan, trust, conveyance and deed of trust. See Chapter 705 of the Wisconsin Statutes. This article does not discuss any of those other non-probate transfer on death alternatives.

For an article on the law of Illinois on this topic read Transfer on Death Instrument: A Tool for Estate Planning.

This document is intended for informational purposes only and is not legal advice or a substitute for consultation with a licensed legal professional in a particular case or circumstance.