By, Elizabeth DePatie, Elder & Disability Law Clinic Student, Fall 2021
How do you ensure that your property will pass to the appropriate party after your death? Years of people’s lives are dedicated to acquiring title over invaluable property such as homes, cars, and even intangible items such as stocks and bonds. Planning the succession of your estate early, particularly the method in which certain tangible items will be inherited, is essential to ensuring that your property is handled according to your wishes.
Before diving into the ways in which property can be inherited after death, it is important to understand two key terms: probate and estate administration. Probate refers to the process of recording a will in the appropriate Clerk’s office as well as qualifying a person as executor or administrator of an estate.[i] Estate administration occurs with or without a will and is the process by which property is distributed by an executor or administrator after a person’s death.[ii] The majority of inheritance procedures in Virginia require the owner and/or their beneficiaries to navigate these systems. Some of the most common types of inheritance include a will, creating a trust, or entering a form of joint ownership.[iii] In 2013 the Virginia Legislature created another method with the adoption of the “Transfer on Death” deed.[iv] This deed allows for property owners to transfer their property without the need for probate or estate administration[v], instead the property transfers directly to the named beneficiary upon the current owner’s death.[vi]
The main advantage of the Transfer on Death deed is the ease by which it is created and the cost effectiveness. The deed does not require the beneficiary to go through the expensive probate cost and allows the new owner to avoid state and locality recordation taxes.[vii] Further, the deed is relatively simple to create.[viii] Once the dead has been created, and filed, it can be destroyed at any point with the simple filing of another Transfer on Death deed. Further, it does not create any property rights for the beneficiary until the current owner dies.[ix] This means that the owner is not limited in selling or otherwise transferring the property, and any creditors the beneficiary may have will not gain access to the property.[x]
While the Transfer on Death deed may seem simple, it is this same simplicity that can lead to complications for owners. Without an experienced estate planner or title company to help guide a person through the process, it is easy to miss essential steps in appropriately recording or, in some instances, destroying a transfer on death deed. These deeds must be filed in the appropriate Clerk’s office to be valid, which can be difficult to determine in Virginia’s city and county systems. Additionally, the owner must appropriately designate both beneficiaries and alternate beneficiaries and ensure that they are including the properties legal description.[xi] Furthermore, it is important that people realize that a Transfer on Death deed will preempt a properties designation in a will.[xii] If a person wishes to revoke a Transfer on Death deed they must go through the proper channels or file a new Transfer on Death deed with their preferred beneficiary.
The Transfer on Death deed allows for a much easier inheritance process for Virginians and lowers the cost of estate planning by providing a simple, direct way to transfer property that an individual can easily undertake on their own. However, it is important that those going through the estate planning process fully understand the requirements of both creating and revoking a Transfer on Death deed and explore all their options before committing to a single inheritance pathway, especially when it comes to valuable items such as their personal home. Estate planning is a complex, and sometimes uncomfortable, process but it is important to take proactive steps to ensure that the estate you have spent your life building is distributed according to your wishes.
[i] The Wills, Trusts & Estates Section of The Virginia Bar Association, A Guide to the Administration of Decedents’ Estates in Virginia, Virginia Bar Association, (2015), https://www.vba.org/page/guide_estates#terms
[iii] Chris Thompson, Inheritance Laws in Virginia, Smart Asset, (Sept. 11, 2019), https://smartasset.com/estate-planning/virginia-inheritance-laws
[iv] Va. Code Ann. § 64.2–624
[v] ARTICLE: TRANSFER ON DEATH DEEDS: IT IS TIME TO ESTABLISH THE RULES OF THE GAME, 70 Fla. L. Rev. 469
[vi] Va. Code Ann. § 64.2–632(A)
[vii] Valerie Keene, Avoiding Probate In Virginia: How to Save Your Family Time, Money, and Hassle, NOLO, https://www.nolo.com/legal-encyclopedia/virginia-avoiding-probate-31846.html
[viii] See Va. Code Ann. § 64.2–635
[ix] See https://dominionlawgroup.net/virginias-transfer-on-death-deed/
[x] Valerie Keene, Avoiding Probate In Virginia: How to Save Your Family Time, Money, and Hassle, NOLO, https://www.nolo.com/legal-encyclopedia/virginia-avoiding-probate-31846.html
[xi] See Va. Code Ann. § 64.2–635