Legal-Ease: Avoiding probate but owning your house till death

Most people have goals for what they wish to achieve in the next 10 years, five years, five months, that day or even in the next hour. Short-term and long-term goals are a good and healthy way to ensure you stay focused, stay motivated and that you improve your overall productivity. We might not meet our goals every time, but we still can ensure that we are working towards them.

One client goal seen routinely in transactional legal practice is how can you avoid probate’s sometimes lengthy and sometimes expensive process but still own your home until you die. There are multiple ways to ensure your home goes to a desired person or persons without probate.

There are also multiple advantages, when it comes to real estate, for why a owner may desire to own their home until their death. The main reason is to retain possession and to retain control. But additionally, owning a home until a person’s death allows them to keep their homestead exemption (if they qualify). And owning your home (and other real property) until death can give your heirs an adjusted (stepped-up) tax basis, meaning potentially less taxes that will have to be paid upon the post-death sale of real property.

Thus, there are multiple advantages to owning a home (and other real property) until the day you die. But what is the most common tool to achieve the goal of owning the home but avoiding probate?

The most common tool is called a “transfer on death affidavit,” or TOD affidavit. A homeowner can record in the county recorder’s office a TOD affidavit, which states that upon the current owner’s death, the real property shall automatically go to the named beneficiary, which is often kids/entities/etc.

Additionally, TOD affidavits can be changed or canceled by the current owners without beneficiaries’ approval or blessing. This gives the property owner the flexibility as life changes to ultimately change their post-death distribution of the real property, which may mean removing one or more beneficiaries.

A potential downside to TOD affidavits is often that TOD affidavits must name the beneficiary by name, and that beneficiary must survive the current owner to receive the real property. Thus, if the beneficiary dies before the current owner dies, the real property will not automatically go to that beneficiary’s heirs.

Additionally, a TOD affidavit must state the marital status of the current owner. That means if the current owner is married, the TOD affidavit must make a statement by the owner’s spouse stating that the spouse’s dower rights are subordinate to the interest of the transfer on death beneficiary. Spouses typically are on the same page on their post-death distribution. However, if spouses cannot agree to the same post-death distribution of real property, this would make the tool of a TOD affidavit to achieve the goal of owning real property till death, while also avoiding probate, a little harder.

Nichole Y. Shafer is an Ohio-licensed attorney at Schroeder Law LTD in Putnam County. She limits her practice to business, real estate, estate planning and agriculture issues in northwest Ohio. She can be reached at [email protected] or at 419-659-2058. This article is not intended to serve as legal advice, and specific advice should be sought from the licensed attorney of your choice based upon the specific facts and circumstances that you face.