“The first
thing we do, let's kill all the lawyers.”
-- Dick the
Butcher, Henry the Sixth, Part 2, Act 4, Scene 2
Contrary to what you might
have heard, that oft-quoted line by Will Shakespeare is NOT part of the
statement of legislative intent preceding the text of Washington’s new "Transfer
On Death Deed” act – but the thought may have crossed the lawmakers’ minds. At
least, the non-lawyer lawmakers.
The purpose of the legislation
– officially known as Second Engrossed Substitute House Bill 1117 (see link
below for full text) – is to uncomplicate the settlement of estates where real
estate – basically, the family homestead – is the only asset of value. Executing
a “transfer on death” deed allows a person to pass real property automatically,
without a probate – the court-administered settling of an estate. Bye, bye,
lawyers.
Actually, those of us who
practice in the area of probate and estates aren’t taking it personally. We often
work with clients trying to figure out a “workaround” alternative to doing a
full probate of an estate where there is real property with equity, but little
or no “working capital” to pay for attorney’s fees and other costs. Attorneys
often take on probate cases with the understanding that their fees and upfront
costs, such as filing fees, will be paid when the property is sold. But that
can take time, especially in a down market.
Enter the Transfer on Death Deed,
which operates essentially like the beneficiary designations you may have
filled out for your IRA or 401-K accounts, or for life insurance proceeds. Many
brokerage and other financial accounts are also set up with “transfer-on-death”
provisions that take them out of the probate process. The named beneficiary
produces proof of the asset holder’s death, and his or her proof of ID. The
asset is transferred without resorting to the courts.
The Transfer On Death Deed,
in form, is like any other deed transferring an interest in real property, with
the same formalities required (the most important being acknowledgement -- or signature – by the grantor and
recording with the county auditor). Upon the grantor’s death, the interest in
the property vests immediately in the named beneficiary. The transfer of
equitable title to the property is automatic, unlike bank accounts or life
insurance proceeds, where the physical transfer of the funds is not
accomplished until the procedural requirements are met. Unlike a quitclaim deed
executed during the property owner’s lifetime (often with a life estate
reserved), the Transfer on Death Deed can be undone unilaterally at any time
during the grantor’s lifetime (assuming he or she still has to mental capacity
to do so).
Helping your heirs avoid
having to probate your estate, and knowing you can change the named
beneficiaries – or revoke the deed altogether – are the two main selling points
for Transfer on Death Deeds as a “will substitute.”
But there are some potential
downsides. For one thing, if you carry this whole
“I-don’t-want-anything-to-do-with-shyster-lawyers” bit to an extreme, you could
end up executing and recording a document with legal errors that could nullify
the whole exercise. Failing to provide for what happens if a named beneficiary
predeceases you could be one sin of omission that consulting with an estate
planning attorney would have helped you avoid. Just sayin’ …
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There is also the issue of
novelty. This is a brand new statute, at least in Washington; it became law on
June 12, 2014. There is no case law yet to deal with ambiguities or omissions
in the statutory language.
We often fear what we don’t
know. Third parties – in the form of buyers, lenders and title companies – with
no familiarity with the new statute may balk at purchasing, lending or insuring
title on the property in the absence of the tried-and-true probate proceeding
and the court’s official stamp of approval on the transfer. The sky has not
fallen in the 20 other states – plus the District of Columbia – that previously
enacted Transfer on Death Deed statutes. But there’s always that bit of
trepidation that comes with being out front on anything. What do they say about
pioneers? Those are the guys with the arrows in their backs.
But on the whole, the
introduction of the Transfer on Death Deed should help streamline the process
of passing real estate to heirs in cases where there is no other reason to open
up a probate. It should save families money and speed up the settlement of the
decedent’s affairs – all good things,
And don’t feel sorry for us
probate lawyers.
There are always other
practice areas we can move into if business slows down too much.
Say, is that a siren I hear?
To see the complete text of the new statute, codified as
Chapter 75, Title 64, Revisded Code of Washington, go to:
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