Greater Simplicity for All

Government and simplicity—two words that seem almost opposites today, but following the recent legislative session in Indiana, the opportunity for simplicity is exactly what real estate owning Hoosiers received.

Frequently, we meet with clients who express an interest in “adding” their children to their real estate.  For a variety of reasons, we counsel our clients not to add a child to the ownership of his or her real estate.  In the past, we advised our clients to transfer the remainder interest in their real estate to their children while reserving a life estate.  This method, however, carried some drawbacks—the parent had to complete a gift tax return, if the real estate was ever sold, the sales proceeds had to be allocated between the client and the child, and the real estate was potentially subject to claims of the child’s creditors, not to mention the problems associated with the divorce of a child.

As of July 1, 2009, by placing “transfer on death” or TOD instructions on a deed, clients have the ability to name a beneficiary of their real estate just like they can their life insurance policies, annuities, and bank accounts.  In order to take advantage of this new opportunity, a new deed is prepared, transferred, and recorded that purports to transfer the real estate to the existing owner, transfer on death to the intended beneficiaries.  The beneficiary has no rights to the real estate whatsoever until such time as the owner dies, at which time an affidavit is required to notify the county auditor of the owner’s death.  The owner is free to change the beneficiary as he or she chooses or do away with a beneficiary entirely. 

While the ultimate transfer is still subject to Indiana inheritance tax, the opportunity to avoid probate just got a little easier.

Timothy K. Babcock
August 2009

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