Transfer on Death Deeds (TODDs) are an estate planning tool that allows a property owner to name a beneficiary who will automatically inherit real estate upon the owner’s death, bypassing the probate process. While many states permit TODDs, they are not legally valid for real estate in New Jersey. This article will explain the alternatives available to New Jersey residents for transferring property upon death.
What is a Transfer on Death Deed?
A Transfer on Death Deed is a legal document allowing a property owner to designate a beneficiary to inherit their real estate directly upon death. The purpose is to avoid the probate process, the court-supervised procedure for distributing a deceased person’s assets. With a TODD, the property transfer is automatic, which can save beneficiaries significant time and money.
During the owner’s lifetime, they retain complete control over the property, meaning they can sell, mortgage, or rent it without the beneficiary’s consent. The owner also has the right to change or revoke the TODD at any time. The beneficiary has no legal rights to the property while the owner is alive, and the deed only becomes effective upon the owner’s death.
Transfer on Death Deeds and New Jersey Law
New Jersey law does not recognize or permit the use of Transfer on Death Deeds for real property. Because no state statute authorizes this method, property owners in New Jersey cannot use a TODD to pass their homes or land to a beneficiary outside of probate. While many other states have adopted legislation to allow TODDs, New Jersey has not.
While TODDs are not an option for real estate, New Jersey law provides similar mechanisms for other assets. You can designate beneficiaries for bank accounts using a “Payable on Death” (POD) designation under the New Jersey Multiple-Party Deposit Account Act. New Jersey also allows “Transfer on Death” (TOD) registration for securities, like stocks and brokerage accounts, under N.J.S.A. 3B:30-1. Both methods allow assets to transfer directly to a beneficiary upon the owner’s death, bypassing probate.
New Jersey Alternatives for Real Estate Transfer at Death
Last Will and Testament
Since TODDs are not available in New Jersey, a common alternative is a Last Will and Testament. A will allows you to specify who will inherit your property, but it must go through the probate process, where a court oversees the distribution of your assets. This process can be time-consuming and costly.
Revocable Living Trust
A Revocable Living Trust is another alternative. By creating a trust and transferring ownership of your real estate to it, the property is no longer part of your probate estate. You retain control as the trustee during your lifetime, and upon your death, a successor trustee distributes the property to your beneficiaries according to the trust’s terms, avoiding probate.
Joint Ownership with Right of Survivorship
Joint ownership with the right of survivorship is another option. When property is owned this way, such as in a “joint tenancy” or “tenancy by the entirety” for married couples, the property automatically passes to the surviving joint owner upon the death of the other.1Justia Law. New Jersey Revised Statutes Section 46:3-17.2 (2024) – Tenancy by Entirety This transfer occurs outside of probate, but the deed must clearly state the right of survivorship, as property held as “tenants in common” does not have this feature.2Justia Law. New Jersey Revised Statutes Section 46:3-17 (2024) – Tenancies in Common; Joint Tenancies
Life Estate Deed
A Life Estate Deed allows an owner to transfer their property to a beneficiary, known as a “remainderman,” while retaining the right to live on the property for life. Upon the owner’s death, full ownership automatically transfers to the remainderman without the need for probate. This creates a present interest for the remainderman, which can have immediate legal and tax consequences.
Selecting an Estate Planning Tool in New Jersey
Choosing the right method for transferring your real estate in New Jersey depends on your individual circumstances and goals. Factors to consider include the value of your property, your family situation, and whether your primary goal is to avoid probate or plan for incapacity. Each tool comes with its own set of legal and financial implications.
For example, while joint ownership is simple and avoids probate, it gives the co-owner immediate rights to the property. A living trust offers more control and flexibility for complex plans and asset management if you become incapacitated, but it is more complex and costly to set up than a will. Given these complexities, consulting with a New Jersey estate planning attorney is advisable.
An attorney can provide personalized advice for your specific situation. They can help you understand potential tax consequences, the impact on eligibility for government benefits like Medicaid, and ensure that all legal documents are prepared correctly to avoid future disputes. Professional guidance helps ensure your wishes for your property are carried out effectively.