Real Property Transfer on Death Act (SB 815) – Summary from Oregon Estate Planning and Administration Section Newsletter – Volume XXVIII, NO. 3
(New Legislation) – Transfer on Death Deed gives Oregonians another option.
Real Property Transfer on Death Act – State Bill 815
Background- Some individuals look for ways to transfer their property at death without having to go through probate. Oregon law currently provides “pay-on-death” designations for securities (ORS 59.535 – 59.585) and bank accounts (ORS 708A.455 – 708A.515). Prior to this bill there was no way to transfer real property in Oregon with a “pay-on-death” designation. Joint tenancy, tenancy by the entirety and life estate deeds vested in named beneficiaries with unintended property rights are subject to redistribution through divorce, bankruptcy, torts and creditor claims. Also, these transfers could have unintended gift tax consequences and transfer disputes.
Uniform Act- Most of the provisions of SB 815 were taken from the Uniform Real Property Transfer on Death Act, which was reviewed and edited by a workgroup of the OLC. One of the goals of this bill is to provide a reliable and inexpensive probate-avoidance tool to allow a person to execute and record a Transfer-on-Death Deed (“TODD”), which will transfer title to the designated beneficiary when the owner dies. An owner may designate a primary and alternate beneficiary, but all beneficiaries must be specifically named. A class or group cannot be designated as a beneficiary. A TODD is revocable at any time until the owner dies. The owner’s capacity to execute a TODD and to make a will is the same.
Owner Rights While Living- Unlike a deed with right of survivorship provisions, the designated beneficiary does not acquire any interest in the owner’s property until the owner dies. While the owner is alive the TODD does not affect any interest or right of the owner, and it does not create any legal or equitable interest or right for a beneficiary. The TODD does not affect the rights of the owner’s creditors.
Beneficiary Rights After Owner Dies- After the owner dies the property described in the TODD is then transferred to the designated beneficiary, if living, or transferred equally to a group if multiple beneficiaries are designated. The property is transferred subject to all encumbrances, liens and restrictions. It is not known whether lenders will be willing to waive a “due-on-sale” provision in a trust deed and allow a transfer under a TODD.
18-Month Cloud on Title- While a TODD represents an effective way to transfer property without needing a probate, creditors and claimants have 18 months following the owner’s death to set aside the TODD. If the probate or small estate has insufficient property to pay allowed claims and allowances, creditors can recover from the property. Other claimants can set aside the TODD on the grounds of capacity, fraud or undue influence. As a result, the property will be difficult to sell or transfer to a bona fide purchaser for a period of 18 months following the owner’s death.
Former Spouse and Neglectful Parent Set Aside- Sections 20 and 21 of the bill provide that in the event of a property transfer to a parent who willfully deserted or neglected the deceased owner for a 10-year period prior to the owner becoming an adult, the transfer can be set aside if an action is brought within four months after publication of a notice. If a former spouse is designated as a beneficiary and the marriage ends in divorce or annulment, that beneficiary designation is revoked.
Form of Deed and Revocation- The TODD form requirements are contained in Section 16 of the bill, and the requirements for revoking a TODD are found in Section 17 of the bill. It is expected that TODDs will be useful to avoid probate, avoid gift taxes and avoid prematurely creating interests in beneficiaries while the owner is alive. TODDs can serve as a means of transferring real property to a trust upon the death of the owner.
Having a plan in place to tackle current estate planning laws can be a difficult task. Getting an experienced Estate Planning Attorney involved can give you the direction you need to put you family at ease. Contact the estate planning attorneys with the Law Offices of Nay & Friedenberg in Portland, Oregon at (503) 245-0894 to set an appointment.