Transferring Real Estate Outside of Probate

TRANSFERRING REAL ESTATE OUTSIDE OF PROBATE

Ohio's Senate Bill 313, which became law on August 29, 2000, provides a simple way for citizens to transfer real estate outside of probate. The transfer on death provision will afford some advantages over other forms of transfer.

PROBATE TRANSFERS

When real estate is titled in the decedent's name alone, it must be transferred through a Probate Court action. If there is a Last Will and Testament, it must be submitted to the Court and all beneficiaries and heirs must be notified. They then have four months to contest the Will. The real estate cannot be transferred until this time has passed. Estate taxes are due nine months from the date of death. The real estate cannot be transferred until the tax return has been filed. Creditors have one year from the date of death to file their claims with the Probate Court. Sometimes the house must be sold to pay these debts.

TRANSFER ON DEATH

Under the new law, the owner of real estate can designate on his deed that the property be transferred on his death (TOD) directly to certain beneficiaries. Alternate beneficiaries can also be named if one of the beneficiaries should die.

The owner of the property continues to possess all rights to the property during his lifetime and can change his mind and name different beneficiaries without even notifying the TOD beneficiary. This arrangement works like a beneficiary designation on a bank account or a life insurance policy.

SURVIVORSHIP

Real estate has been passed by survivorship for many years. A deed listed in two or more names can designate that the property pass on the death of one owners to the surviving owners. The property would ultimately pass to the heirs of the last survivor. This form of deed is often used by married couples.

All survivorship owners have a lifetime interest in the property. All must sign off if the property is sold. The dower rights of the owners' spouses must also be released. The owners have equal interest in the property unless otherwise designated.

LIFE ESTATE

The owner of a Life Estate in land has the right to use the property as long as he or she lives. Those who receive the property upon the death of the life tenant are called remaindermen. The remaindermen have a future interest in the property and cannot use, rent or mortgage it, nor can their creditors attach it until the death of the life tenant.

The value of the share of the life tenant is based on his life expectancy which decreases with age. The full value of the real estate is included in the taxable estate of the life tenant. This affords the remaindermen a step up basis upon his death which allows them to avoid capital gains tax.

To sell the property requires both the life tenant and the remaindermen to sign off. The dower interest of the spouse of any of the parties must also be released. This type of deed is often used in long term care planning.

TRANSFERRING NON-PROBATE REAL ESTATE AT DEATH

To transfer real estate outside of probate, one of the survivors would sign an affidavit (sworn statement), identifying the real estate, the manner in which the property was held, and the date of death of the decedent. A certified copy of the death certificate is attached to the affidavit and it is filed with the county auditor.

This process is far simpler and less expensive than probate. Under the present law, creditors cannot attach assets passed outside probate, but they are subject to Ohio estate tax. Thus to avoid a cloud on the title, an Ohio Estate Tax return must be filed regardless of whether the real estate passes in or out of probate and whether there is any tax due.

There are advantages and disadvantages to each form of ownership. The type you choose depends upon your individual situation and goals. Consult with your attorney to determine the best way to title your real estate. Your decision about real estate titling is only a part of your complete estate plan.

Prepared By: Marta J. Williger Attorney at Law 37 South Main Street, Suite 2 P.O. Box 368 Munroe Falls, Ohio 44262 (330) 686-7777