Transfer on Death Deed Act

By Elizabeth Sevcik

In 2012, the Nebraska Legislature enacted the Nebraska Uniform Real Property Transfer on Death Act, Neb. Rev. Stat. §§ 76-3401-76-3423 (the “Act”). The Act allows an individual to transfer property located in Nebraska to one or more beneficiaries effective at the transferor’s death through the use of a special deed referred to as a “Transfer on Death Deed.”

What is a Transfer on Death Deed?

A Transfer on Death Deed is similar to other types of deeds in that it effects a transfer of real property from the owner(s) to the person(s) named in the deed. However, a Transfer on Death Deed does not take effect until the transferor’s death. The property continues to be owned by the transferor during his or her life and it can be revoked by the transferor at any time prior to death.

A Transfer on Death Deed can be used with agricultural property and may designate the disposition of growing crops to the transferor’s estate or to one or more beneficiaries. If no designation is made, the growing crops pass to the transferor’s estate.

Only an individual can be a transferor and make a Transfer on Death Deed.  However, the beneficiary may be, among other things, an individual, a trustee of a trust, an estate or any legal entity.

Why Use a Transfer on Death Deed?

A Transfer on Death Deed allows real property to be transferred to the beneficiary named therein without the necessity of probate or appointment of a personal representative. The beneficiary takes title to the property described therein upon the transferor’s death by filing with the appropriate Register of Deeds a certified copy of the transferor’s death certificate with a cover sheet indicating the title of the document, the previously recorded document data, and the grantor, surviving grantee, and legal description of the property being transferred. A Real Estate Transfer Statement (Form 521) must also accompany the death certificate.

Using a Transfer on Death Deed in lieu of other types of transfers may be beneficial for a number of reasons. A Transfer on Death Deed does not affect the interests or rights of the transferor as an owner during his or her life, including the right of the transferor to transfer, encumber or mortgage the property.  And, during the life of the transferor, the transferor’s property is not subject to the claims of any creditors of a beneficiary designated therein.

Transfer on Death Deeds can be used as part of a larger estate plan including wills and/or trusts as well.  The benefits and/or disadvantages of using a Transfer on Death Deed can vary depending on the circumstances and legal counsel should be consulted to assess your specific needs.

What if the Transferor Changes His Mind?

If the transferor changes his mind, he can revoke the Transfer on Death Deed. However, care must be taken to ensure that the revocation of the Transfer on Death Deed conforms to the requirements of the Act including all formal execution requirements and recording within the prescribed period.

What Else Should I know?

To be valid, a Transfer on Death Deed must be properly executed and recorded, and must otherwise conform to the requirements of the Act. A Transfer on Death Deed must be signed by the transferor the presence of and attested to in writing by at least two “disinterested witnesses” (as defined by the Act), all of which must occur before a notary public. The Transfer on Death Deed must be recorded in the county where the property is located within thirty days after execution and before the transferor’s death.

The Transfer on Death Deed must contain all the essential elements and formalities of a properly recordable inter vivos deed, except that it must state that the transfer is to occur at the transferor’s death. The Act also requires certain other language in the Transfer on Death Deed, including prescribed language relating to the capacity of the transferor and attestation of the witnesses, and three separate “warnings” set forth in the Act.

The three warnings are intended to advise the transferor or beneficiary, as applicable, of certain limitations on the Transfer on Death Deed.  One warning advises that the property transferred by a Transfer on Death Deed is still subject to inheritance tax to the extent it would have been if owned by the transferor at death.  Thus, a Transfer on Death Deed does not avoid inheritance taxes (assuming they apply to begin with).  Failure to pay inheritance taxes in a timely manner is punishable by penalties and interest.

The remaining two warnings included on a Transfer on Death Deed relate to the Department of Health and Human Services’s ability to require the transferor, the transferor’s spouse or both to revoke a the deed to qualify or remain qualified for Medicaid, and to the potential personal liability of the beneficiary, to the extent of the value of the property transferred to the beneficiary, for certain statutory allowances, administrative expense, and claims against the estate, including Medicaid reimbursement, if the assets of the transferor’s estate are insufficient to cover such amounts.

Also, a beneficiary will take the property subject to, among other things, conveyances, encumbrances, mortgages, liens and other interests to which the property is subject at the transferor’s death.

A Transfer on Death Deed can be used even if there is more than one owner of the property, and can be used even if not all of the owners are joining in the transfer. Further, a Transfer on Death Deed can designate multiple beneficiaries. However, the effect of the Transfer on Death Deed in these circumstances varies depending on the Act and the language used in the Transfer on Death Deed and legal counsel should be consulted to ensure the Transfer on Death Deed will achieve your objective.

While a Transfer on Death Deed does not need to be prepared by an attorney, it is advisable that you consult an attorney in the preparation of a Transfer on Death Deed (or revocation thereof) to ensure compliance with the Act and the effectiveness of the deed. The experienced attorneys at Croker Huck can assist you with a Transfer on Death Deed and your other estate planning and real estate needs.

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