Effective December 28, 2009, Ohio eliminated transfer on death deeds and replaced that deed with a TRANSFER ON DEATH DESIGNATION AFFIDAVIT. Beginning December 28, 2009 you must follow the new rules for transfer on death designations. Set forth below are some questions and answers of the impact of the new law.
1. WHAT IS A TRANSFER ON DEATH DEED?
In August of 2000, Ohio became one of only a handful of states that allowed what is commonly called a transfer on death deed or TOD deed. A transfer on death deed allowed an owner of real estate to create a deed with a beneficiary designation naming who would inherit the real estate on death. The new law does not invalidate transfer on death deeds that were filed prior to December 28, 2009. Arguably the new law does not apply to transfer on death deeds that were executed prior to December 28, 2009 but not yet filed. However, some counties are not accepting for filing TOD deeds that were signed prior to December 28, 2009 but filed on or after December 28.
2. WHY DID PEOPLE USE A TRANSFER ON DEATH DEED?
A transfer on death deed was a good way to pass your home or other real estate to beneficiaries without going through probate. Probate is not an estate tax, but the paperwork process needed to be used to pass assets that are inherited through a will. By using a transfer on death deed the time and expense of probate could be avoided.
3. HOW CAN I AVOID PROBATE ON MY HOME OR OTHER REAL ESTATE?
There are several ways that are typically used. The most common are joint and survivor deeds, trusts and now the new TRANSFER ON DEATH DESIGNATION AFFIDAVIT. As part of the new law eliminating transfer on death deeds, the Ohio legislature has adopted a transfer on death designation affidavit. If properly prepared the transfer on death designation affidavit will pass the real estate to the beneficiary outside of probate.
4. WHAT IS THE TRANSFER ON DEATH DESIGNATION AFFIDAVIT?
Effective December 28, 2009, you can avoid probate on real estate if you have an affidavit prepared naming the beneficiary of your real estate. The affidavit must contain the following:
* It must be notarized and filed before death of the property owner.
* It must describe the property and its instrument number.
* It must describe the portion of the property being transferred.
* It must state whether or not you are married. If you are, your spouse must sign the affidavit also.
* It must name the beneficiary
5. WHO CAN BE THE BENEFICIARY OF THE REAL ESTATE?
You can name an individual, trust or other legal entity such as a limited liability company or corporation as the beneficiary of your real estate with the transfer on death designation affidavit.
6. HOW MANY BENEFICIARIES CAN YOU HAVE WITH A TRANSFER ON DEATH DESIGNATION AFFIDAVIT?
* You can have multiple beneficiaries
* Each beneficiary ownership does not have to be equal. For example you can provide that child one inherits 3/4th and child two inherits 1/4th of the real estate
* You can have beneficiaries inherit with a survivorship clause. For example, you can provide that child one and child two are the beneficiaries with a joint and survivor interest. That would mean upon death of the property owner, the children would hold the property with a right of survivorship. So upon the death of child one, child two inherits the property outside of probate. You cannot use this if one of the beneficiaries is a legal entity like a trust.
* The beneficiary named in the affidavit can be a trust, corporation, limited liability company or other legal entity.
* Joint and survivor owners of real estate can name a beneficiary of the joint and survivor deed. For example, a husband and wife can own the property in joint and survivor ownership and have a transfer on death designation affidavit naming the children as beneficiaries.
7. DO I HAVE TO APPLY THE TRANSFER ON DEATH DESIGNATION AFFIDAVIT TO THE ENTIRE PROPERTY?
No. You can have a transfer on death designation affidavit apply to all or a portion of the real estate.
8. SHOULD EVERYONE USE A TRANSFER ON DEATH DESIGNATION AFFIDAVIT?
No. A transfer on death designation affidavit is not the solution to all problems. For some people a trust may be the better solution or a joint and survivor deed. For married couples who may be trying to qualify for Medicaid, it may be necessary to go through probate and not use any of the probate avoidance deeds discussed.
9. WHEN WOULD I USE A TRUST TO AVOID PROBATE OF REAL ESTATE?
A trust may have several advantages over a transfer on death designation affidavit.
* If the property is an investment property such as a rental property, a trust would make it easier to manage the property if there are several owners inheriting the property. If property is held by individuals all decisions have to be unanimous. The trustee of property held in a trust can make the decisions without the approval of the beneficiaries.
* The beneficiaries of a trust do not have liability for any claims related to the real estate
* The trust could protect the assets from potential creditor claims or divorce claims of any of the beneficiaries.
* The trust could avoid any additional death taxes on the real estate.
* The trust can hold a benefit for grandchildren if your child dies before you. For example if you have three children and you provide the assets go to your children equally and one of your children dies prior to you, that child's share can be held for minor grandchildren in trust.
10. WHEN WOULD I USE A JOINT AND SURVIVOR DEED TO HOLD REAL ESTATE?
Typically a joint and survivor deed is used for a husband and wife to pass the real estate to the surviving spouse. This may be the appropriate solution for some people. However it may not be the correct solution to address estate tax issues, liability issues, and Medicaid planning.
Also if a joint and survivor deed is used for a parent and a child there could be adverse income tax results and liability issues.
Example: Widow owns a house that she bought for $50,000 which is worth $250,000. widow puts daughter on the deed as a joint and survivor benefit to avoid probate. Daughter is married. (Either before or after the house is put in joint and survivor deed.) Here are the issues:
* Daughter now owns a portion of the house. If Widow wants to sell house she needs signature of daughter and daughter?s spouse.
* If widow had owned the house in her own name and sold the house there would be no income tax. Since she owns the house in joint and survivor ownership, the daughter could owe Federal and Ohio income taxes on the sale of approximately $20,000.
* If daughter has any debt problems, daughter?s ? of house could be subject to creditor claims. The creditor could force the sale of the house.
11. WHERE IS THE LAW ON THE TRANSFER ON DEATH DESIGNATION AFFIDAVIT?
Ohio Revised Code, Title 53, Sections 5302.22; 5302.222; 5302.23; and 5302.24
Copyright * Budish, Solomon, Steiner & Peck, Ltd. This article may be reproduced with proper attribution to the law firm of Budish, Solomon, Steiner & Peck, Ltd.
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Thanks for a great article. Do I have to have an attorney prepare the tod affidavit or can a non-attorney prepare it. If yes, what would it look like.
ReplyDeleteSteve
Anything having to do with real estate is best prepared and filed by an attorney! Especially when it's something new like this, for which the law and forms are new.
ReplyDeleteMy brother, grandmother and I own a 120 acre farm with a survivorship deed. Grandma signed a TOD affidavit for her 1/3 interest to my aunt. Wouldn't my brother and I get it all if we outlive grandma? Thanks for any input.
ReplyDeleteHey there anonymous: I would really need to see the deed and the TOD affidavit to determine the final disposition of the property. Not sure you can do TOD for a 1/3 interest that is already part of a joint and survivorship deed. If you want more assistance, contact me.
ReplyDeleteMy husband and I have a joint and survivorship deed to our home. Should he die before me, it's my understanding that the home/property would pass to me. Do his children by previous marriages have any claim to the home? They have been provided for in a will/trust. But, could they get an attorney and file for a portion of the home also?
ReplyDeleteHello Anonymous, you are correct that if your husband dies, the house will pass to you. It would not be easy for his children to make a claim against the house, but it's never impossible. The claim would have to be on something beside "they have a right to it." There would have to be some other legal argumnet, like fraud, creditors or something else.
ReplyDeletemedicaid gets its share of estate? is it reimbursement of previous payments of health bills?
ReplyDeleteIf a person is on Medicaid, at death, all remaining assets owned by that person are subject to estate recovery by Medicaid to repay the Medicaid benefits that were paid on behalf of that person. This is true whether the asset goes through probate or not.
ReplyDeleteOn a TOD designation affidavit, as sole owner, if I'm leaving my home to my two children, and the individed interest is 50% each, would the type of tenancy be joint? Thanks.
ReplyDeleteAnonymous, When the two children inherit the house, they would own it jointly as tenants in common. That means each owns a 1/2 interest in the real estate and if one of them dies, his or her 1/2 has to go through probate. The 1/2 will pass the way the child's Will says.
ReplyDeleteI had a question on a TOD deed? Do the beneficaries have to sign that TOD deed as well, if they are the grantees on the property deed?
ReplyDeleteHello Mike. The only people who have to sign the TOD affidavit are the owners of the real estate. If the beneficiaries are only grantees at death, they do not sign.
ReplyDeletecan my mother continue to give us five children gifts of cash. she is 89 and may go to a long term facility although we are taking care of her at home now.
ReplyDeleteMy sister and I will be named as the beneficiaries to my dads two homes and small amount of farm land in a TOD designation affidavit. Will we be subject to taxes or will that only take place if we decide to sell the properties?
ReplyDeleteHello Anonymous. any cash gifts made within 5 years of a Medicaid application will cause a penalty period during which Medicaid will be denied. You need to be careful with gifting if you think a Medicaid application will be needed. You can only make a payment to yourself for caring for her if there is a written care agreement with her agreeing to pay you for the care being provided.
ReplyDeleteHello the other Anonymous. When you inherit real estate, there is no tax you pay when you get the land. If the total value of the estate of the deceased person exceeds certain limits, there may be estate or inheritance tax due, and if there is no cash with which to pay, the real estate could be subject to that tax. You should consult with a probate attorney to determine that. When you sell the property, there may be capital gains tax owed on any appreciation from the value of the property as of the deceased's person date of death. Consult your tax professional on that issue.
ReplyDeleteIf beneficiaries are named in ALL accounts, ie. stocks, banks, retirement, life insurance etc. and one has a TOD affidavit on the house, are there any other forms of accounts or assets that would cause a person's estate to go through probate?
ReplyDeleteIf person A sold a piece of real estate to person B and gave person B the deed showing the new ownership, does that deed have to be filed. what are the problems in not filing it?
ReplyDeleteis there any way to shelter any financial assets if you are already within the 5 year medicaid period?
ReplyDeleteTo Anonymous--the only assets that go through probate are those in sole name. Therefore, if ALL assets are joint and survivorship, name a beneficiary, are transfer on death, are payable on death or are in trust there would be no probate. If one asset is missed, then only that one asset has to be probated.
ReplyDeleteAgain to Anonymous, if person A sells to person B and delivers that deed, the transaction is valid as to A and B. However, if the deed is not recorded, and A again sells it to C, without C knowing about the deed to B, B could have problems since the deed was not recorded for the whole world, including C, to see. I would not recommend holding the deed-if the real estate was meant to be transferred, then record the deed for safety.
ReplyDeleteAgain to Anonymous, there are still planning techniques to be used to protect assets against Medicaid even if you are within the 5 year period, depending upon the Power of Attorney you have, the amount of the assets, what has already been gifted, the amount of income and the cost of the nursing home. It's complicated, so you would need to see an elder law attorney (like me)!
ReplyDeleteMy parents want to leave their house to my brother and sister. They want to avoid probate. Not worth more than $80K. I was going to suggest a survivorship deed or is the Transfer of Death Afidavit just as good. Here is my second question. If both my brother and sister have creditors, (medical bills), can they force one or both to sell? My parents goal is that they will have a place to live for the remainder of their lives.
ReplyDeleteHi again Anonymous! If the house is made joint and survivorship, it will avoid probate. However, that also means means that all the joint owners have ownership rights and any creditor of any of the owners can go after the house. The alternative way to avoid probate is to make the house TOD to the siblings. That way, the parents will continue to own the house, and no creditor of the children could touch it. Then, at the parents' death the house will pass to the TOD beneficiaries without probate. That would best accomplish your parents' goals.
DeleteTOD for a house appears to be a good way to bypass probate. However, in a down economy, that doesn't seem to be the case. In May, my mother passed and left her condominium, bank account and investments equally to my three siblings and I. The problem came in with selling the condo. Because of the recession, it was barely worth the appraised value even though she had lived in it 13 years! The amount she owed the bank was almost the same as what we eventually sold it for! We actually had to bring almost $7,500 to the closing! We saw this coming and immediately contacted several attorneys about our NOT accepting the bequest. (My brother and his wife live in California -- a community property state -- and were worried that the TOD -- being a recorded document -- could be linked with the bank's short sale or foreclosure by any of the credit reporting agencies and we might all take a big credit hit.) The lawyers were at a loss as to what to recommend as there doesn't seem to be any provisions made for an "upside down" situation such as ours and we felt we had no choice but to go ahead and "hope for the best." Is this something you have encountered within the past few years in this downturn economy? I have my home in TOD for my children, but I'm going to take it off so this doesn't happen to them, too.
DeleteYes, Barbara, there can be problems with leaving a home TOD to the children like what you describe with an "upside down" loan. This is a relatively new problem, so we have not generally seen what you described. However, it is not the only issue with TOD deeds. Although quick, easy and inexpensive, it does open the door to issues between the children. For example, all the children have to agree on sales price, broker, what to fix up before sale, etc. Plus the child AND his or her spouse have to sign the deed, which means all the spouses end up having a say also. Using a trust to avoid probate and putting one child in charge (and no personal responsibility) might be a better option. Going through probate so that the executor handles things before the children have to get involved can work, but most folks are trying to avoid the time delays, cost and hassles of probate. There is no one right answer.
ReplyDeleteI've re-married late in life. We both had our own houses. Because of the bad economy, I couldn't sell my house, I'm renting it, but plan to sell it in the next year or two. I want to put my wife's name on the rental house, in case something happens to me. Instead of deeding it to her, and then doing a TOD, can I do a TOD to my house to my wife, and if she doesn't outlive me, then to my daughter? It seems silly to do two deeds when we want to sell this house hopefully in the next couple of years.
ReplyDeleteThe TOD "deed" has been changed even since this article. Now it is a TOD affidavit. So, you do not need to change the deed, you simply need to execute and record a TOD affidavit that specifies that the house passes to your wife as the primary beneficiary and to your daughter as the secondary beneficiary. The affidavit will take care of avoiding probate at your death should you die before the house sells. And, when you sell the house, the affidavit is simply invalid anymore. Let me know if you would like our assistance in preparing and recording the affidavit.
DeleteMy father's house in Ohio went to my stepmother when he died. She put it into a TOD deed in 2001 naming the 4 stepchildren, and her 4 children as equal beneficiaries., One year before her death she obtained of $30,000 line of credit against the house that had been paid off. The week before she died she went into a hospice facility and she had used $13,704.of that line of credit at that time . Her children say she had no real assets, so 4 days before she died, one of her sons took out the rest of the available money, $16,329.00, on that line of credit and put it into his checking account. They used $13,278.00 of that to pay for her funeral, and part of the rest of it to fix up the house All of this was done without her children notifying any of us stepchildren of this situation.
ReplyDeleteNow here we are year later We understand that the $30,000 line of credit, will need to be paid to the bank when the house is sold. They want to split this $30,000.00.equally 8 ways. The 4 of us were not named in her will as beneficiaries/heirs, just her 4 children. We feel we are being forced to pay for half of her funeral, since they did not immediately use that $16,329 to pay back the loan.
They say the money was taken and used for her benefit. How is that to her benefit? If she died without assets there is no money to pay the bills. Just mark them deceased and send them back. We feel that the additional $16,329.00 was taken to benefit them, so that they could have a funeral without having to pay for it themselves. The executor of the estate has been living there for the past 13 months rent-free since her death and they have used the rest of the LOC to pay for his utilities.
What are our options at this point?
Hi Mo. I wish I could respond, but this is really a legal issue and I can't respond in a blog type forum. We would have to meet and you become a client. I would be happy to do so, just contact me directly! Laurie
Deletehow much is the average legal fee for a 30,000 mobile home tod in ohio
ReplyDeleteThe cost of a TOD affidavit for real estate in Ohio varies by who prepares the affidavit, and how complicated the legal description of the land is. May be anywhere from $100 to $300. For a car or mobile home title, which can also be set up as TOD, the cost is simply the Clerk of Courts cost to issue a new title, not sure of the exact amount, but probably under $25. Either one is way less expensive than having that asset go through probate.
Deletewhat is the average legal fee for tod in ohio
ReplyDeleteThe cost of a TOD affidavit for real estate in Ohio varies by who prepares the affidavit, and how complicated the legal description of the land is. May be anywhere from $100 to $300.
DeleteLaurie,
ReplyDeleteI am happy to see all of the assistance you have given others through this blog. I would like to as a couple of questions please.
My father has been willed everything of his mothers including her home. He is an only child. How do I find out if there was a TOD or benificenary named? If none were named is there a way to have the title transfered without the use of a lawyer?
Thank you so much for your assistance.
The title ownership of the house is public record, accessible at the county recorder's office in person, and in some counties, online. Real estate in sole name passes through probate at death, and the probate proceeding is filed in the Probate Court of the county in which the decedent lived. Those records are public and can be accessed in person or in many counties, online. If the house is joint or survivorship or TOD, then no probate is needed, only some paperwork in the form of an Affidavit that is filed along with a certified death to prove the person is dead. You don't necessarily need an attorney for any kind of transfer, but, it is advisable because it is very easy to really cause problems in the chain of title if a mistake is made. That would end up much more costly than paying an attorney to do it correctly the first time.
Deletemy mother passed in state ohio , my step father passed 65 hours later.does survivorship need be established by affidavit?could my mothers estate still have interest in deeded property?
ReplyDeleteFirst, the deed title hopefully was joint and survivor with both mother and step-father. If so, then when mom died, the title vested into your step-father, but then he died. With no other information, I would say that the property passed to him, but since it was then in his name alone, and he died, it will have to pass through a probate proceeding in his name to clear the title to pass to others.
DeleteIf the deed was only in mom's name or was in both names as "tenants-in-common," then 1/2 has to go through mom's estate to pass to step-dad's probate estate, and it will be administered there. That would mean two probate estates.
I can't give complete legal advice here, and you are not my client. If you need more information or true legal advice, contact me or another attorney.
My parents own a home which they left to me in their Wills. I am an only child and my father just recently proceeded my mother in death.. When they brought the house they got a "General Warranty Deed" with Survivorship. Both their names appear on the Deed and it also states, "for their joint lives, remainder to the survivor of them". My question is this, would that include me as their sole heir? Will I have to probate the Will to transfer the Deed into my name? Hopefully I can avoid probate court because I am currently unemployed as a result of being the only caregiver to both of my parents ( until death). I know probate is an expensive and time consuming process which isn't an option for me at this time.
ReplyDeleteThank you so much for your assistance.
Hello. I am finally getting back to responding to a couple of comments. As to the language in the deed that is "for their joint lives, remainder to the survivor of them," that was as to the two of you parents. When the first died, it passed without probate to the survivor of them. In order to clear the real estate at the first death, the survivor should have filed an "affidavit of surviving spouse" along with a death certificate, THEN a TOD affidavit to leave the house to you upon the death of the second. Sounds like that was not done. Now, at the second death, the house does have to go through probate in order to pass to you. This will have to be done eventually, either at the time you sell the house, or you want to refinance it. Part of the cost of probate is the attorney's fees, so you could try to go to court yourself to process it. The clerks are pretty nice to people trying to do things themselves. If not now, at least take care of it before you die so that a bigger mess is not left. Good luck.
DeleteSpouse had owned their parents home, at the request of one surviving parent, for several years. Spouse became ill, ( and eventually died), but for preparedness purposes, transferred said property to another family member using a TODA almost 6 months before their passing in order to avoid probate, ( all other assets were under "Survivorship" and passed to remaining spouse). There was no actual estate to settle, per se, at the time of death. Spouse had some unsecured credit card debt, that has gone unpaid,due to no assets and lack of funds from surviving spouse. Companies were informed of this fact, through the attorney handling the proceedings. Now Collection agency is trying to obtain info via mail and phone calls. Attorney has given conflicting advice to a very worried surviving spouse! Can these companies order that the estate be reopened, if they find out about the transfer and feel that the TODA transfer was done to avoid paying debts? How likely is that possibility or do most eventually write off these debts?
ReplyDeleteGenerally speaking, when there is no probate, creditors are out of luck. Also, surviving spouses don't have a legal obligation to pay off the other spouse's debts as long as they were not co-signers. Also, each state usually has a statute that says if the creditor doesn't make a claim against the estate or otherwise notify the family about the debt within a specified period of time, they can no longer make a claim (for example, Ohio is currently 6 months). This doesn't count if the family knew or should have known about the debt.
DeleteHard to answer this without more information. Some credit card companies would probably write it off as being too expensive to collect if the debt isn't that much. If the balance is large, they may feel it is worth it to go after. Once turned over to collections, they are like bulldogs because they only make money if they collect the debt. Sorry I can't be more help at this point.
My mother passed away recently and had purchased a couple of items on credit. She also did a TOD last year for real estate she left to my sisters and I in equal share. My questions are will we need to return the items she purchased on credit and will we have to sell the home to pay the credit cards she owed. Mom had excellent credit when she passed.
ReplyDeleteIt's hard to give a precise answer because I don't know the kind of cards or the amount of debt. Generally speaking though, the children are not liable for mom's credit card debt. Neither is the house that went to you as TOD, unless the credit care company had already taken judgment against her and filed a lien against the house. Not likely, as you said her credit was good before she died. So, you will probably not be liable in any way, but this is not a legal opinion, since I do not have all the facts. You should actually consult with an attorney for a much more specific answer.
DeleteHi, Laurie, our situation is a bit complex, so I'll list facts according to topic:
ReplyDeleteBasic facts: I and my husband, Rob, have lived for 8 years with mom in her paid off home in Ohio, since she was 92. She is now 100 and suffers from moderate dementia. I’ve been her caregiver for fully 3 years, prior to which she functioned well on her own. I cook and clean for her, give her the medication she requires, do her laundry, monitor her blood pressure, heart rate and diet, and assist her physically in other ways.
Facts about our residency: In 2006, I was forced out of my job due to workplace bullying. We moved in with mom shortly after, renting out our own home due to the financial pressure. Then, in 2008-2010, Rob and I both lost more than one new job due to the recession. We were unable to sustain payments on our home, despite having renters, and went bankrupt in 2010, losing the home to foreclosure in 2013. All the while, we lived at mom's house, informally paying a minimal rent ($200/month). In early 2013, due to the amount of care I was giving to mom, we informally agreed with her that we would stop paying rent, as we were providing so many services.
Facts about the home: The small ranch home was purchased for $10,000 in 1950, by mom and dad. Dad died in 1992, passing on the house to mom. My parents made only 1 major improvement, adding a two-room addition in the 1960s, which cost about $5000. The home is dilapidated, as they put little money in it since then. It has cracked original windows, degraded siding, bricks loose in the foundation, and the interior is not any better. Rob and I have done what we could since we’ve been here, with paint and some flooring, but it’s still bad. Our residential area has not recovered from the recession—in this market the house is worth $20,000 at best.
Facts about legal preparations: My brother has durable power of attorney and handles mom’s bills. Mom filed a transfer on death affidavit with Rob and I as dual beneficiaries, using an attorney, in 2010, as a thank you for us helping her. Mom recently signed and had notarized a statutory power of attorney granting my brother property transfer rights. Because we are working poor now, we couldn’t afford an attorney this time, so I found a reliable online form provided by a community agency and she used that. I have yet to file the new poa with the county recorder, but will in the near future. We took the step of the new poa because if mom lives long enough, her care will become beyond my proficiency to provide, and we will use Medicaid to place her in a nursing home. If she is no longer mentally competent enough at that time to sign the house over to me, using the caregiver exemption, we wanted to be sure my brother could do it for her, as that is her intention. I realize if that happens we will have to live an additional two years in the house in order to avoid Medicaid placing a lien on it.
My questions: If mom dies and the house transfers to Rob and I through the transfer on death affidavit, and we immediately sell it, using the proceeds to purchase another house in better condition at a slightly higher cost ($50,000 or less), what kind of capital gains tax burden will we bear? And would it make any difference for either type of transfer (affidavit or caregiver exemption) if we lived in mom’s house an additional two years after her death without making any improvements, and THEN sold it and bought a new house similar to the above description? What if we made improvements to mom’s house so that it doubles in value and sold it two years later, using the proceeds to purchase a slightly more expensive house? And finally, do you see any holes in our preparations?
Sorry about the length of this post, but we’d like to know if it’s possible to sell mom’s house and not suffer tax penalties, even if we have to live in it an extra two years. The house is in such bad condition, and we’ve lived in it in poor circumstances so long, we really want a fresh start after mom is gone, including a new house.
Thanks for anything you can tell us.
Your question was long on detail. I think you are mixing up various laws. First, there is a Medicaid rule that if you make gifts of assets withing 5 years of making a Medicaid application, then Medicaid is denied for a number of months. The calculation is the value of the asset her, $20,000 divided by the average cost of one month in the nursing home, $6114, equaling a 2.3 month time during which Medicaid will not pay the nursing home. At this point, the house has not been gifted at all. The transfer on death affidavit is not a gift. The Power of attorney to you brother is not a gift. Mom still owns the home for Medicaid purposes. If she ACTUALLY gifts the house to you and your brother, and she applies for Medicaid within 5 years, she will be denied for the 2.3 months. BUT, there is an exemption that if a child moves in to care for a parent and keeps the parent out of the nursing home for at least two years prior to her going into the nursing home when she SHOULD have been in the nursing home, as proven by Medicaid form 3697, then the house can be given to the child without a penalty period. BUT, no tax prevention. If she sells the house, then she gets up to a $250,000 capital gains exclusion so that she pays no capital gains because she lived there and owned it for 2 of the last five years. If want the exemption AFTER she gifts it to you, you need to live there at least 2 years to get the same exemption. HOWEVER, if mom dies and you inherit the house, then the tax basis "steps-up" to the current fair market value, so that if you then sell it for the fair market value, there will be no capital gains to pay. You have a variety of issues and really should get professional legal help to make sure you can keep the house. There are many possibilities. I can only help so far, with this info, since you are not a client. Good Luck!
DeleteHi Laurie,
ReplyDeleteRecently my mom died and left 2 Ohio homes to the kids. TOD affidavits were filed 4 months before her death. She may have some upcoming medical bills (Medicare, not Medicaid) and a few unsecured credit card debts. She resided in the first mortgaged house and had the second as rental with no tenancy since purchasing it over 2 years ago. The cash purchase price of the rental was $100k+ under what it would be valued today because it was a total rehab. My questions are these: Will we have to pay taxes on any proceeds over the purchase price of the rental home at the time we resell it? Can creditors attach a lien to the house(s) before TOD has taken place? How long do we have to sell both houses? Will the mortgage company give us time to sell the first house with the mortgage before they demand we get a new mortgage (we are keeping up the payments)? Any general insight you can provide would be greatly appreciated. OHAnonymous
As to the first question, on the rental property, the tax basis at the time she died (normally what she paid for it, plus improvements less depreciation) "steps-up" to the full fair market of the property on her date of death. The amount of the capital gains on real estate is the difference between the tax basis and the sales price. Assuming that the sales price shortly after death is the same as the stepped-up basis, there would be no capital gains taxes to pay.
DeleteA creditor should not be able to attach a lien on the property after her death, since the ownership of the property vests in the new TOD owner immediately upon the death of the original owner, even though the proof of her death is recorded later. They may try, or they may send you threatening letters. Most family members go ahead and pay them off, since it's the right thing to do. You should seek legal counsel should you not wish to pay these bills.
How long the mortgage company will wait depends upon the company. For most, as long as you let them know what you are doing, and don't try to hide or avoid them, they will work with you. The payments are still due regardless of mom's death, but if you can't afford to pay them and then get reimbursed by the net sales proceeds, you need to work that out with the company.
I can't give much more help than these general rules, since I don't represent you. If you did want us to assist, let me know. Good Luck!
Hi Laurie,
ReplyDeleteMy mom's long time boyfriend has a terminal illness and he wants to make sure his home (and hers for the last 15 years) goes to her upon his death. He is looking into the transfer on death affidavit to do so, but we cannot find if his son would be able to contest it or if she will be fine and has no worries. Are transfer on death affidavits if completed properly iron clad? Looking forward to your answer.
Hello Misty. The most straightforward way to leave the house is probably a transfer on death affidavit. The affidavit allows the property to pass directly to the beneficiary WITHOUT probate, just some paperwork. It makes it harder to contest, since there is no probate proceeding. So, it should work. However, having said that, you can find an attorney who will take any case for a buck, so the son could still TRY to contest it. It's harder and expensive, so that is a deterrent, but some people just have to make things hard. I think the son would lose, unless he can prove dad was not competent or was unduly influenced by your mom when he signed the affidavit. So, it should be good, but I can't say that with 100% certainty. It is certainly better than passing it through Probate.
DeleteLaurie
Is a tenancy by the entirety invalid in ohio? How about West Virginia
ReplyDeleteUnder Ohio law, tenancy by the entirety deeds are no longer being prepared. However, if you still have one, it remains valid. I do not practice in West Virginia, so I cannot comment on WV law. Thanks.
DeleteAlmost 2 years later so I'm not sure if you're still answering questions on this blog, but it's worth a shot.
ReplyDeleteIn 2002, my grandfather's wife filed a TOD Deed naming her 5 children from a previous marriage as beneficiaries...this was done without his knowledge. She then passed away in 2006. At that time he was told he could do nothing to remove them from the title; those 5 children owned half of his home.
Now my grandfather has pretty significant dementia and is living in the VA nursing home in MO near my mom who holds full POA. He has not lived in the home for 3 years now and she would like to sell it so she doesn't have to continue paying taxes and insurance with his money on a home which is empty. The other 5 "step-children" do not like my grandfather and refuse to sign off allowing the house to be sold. Since it was written under the TOD Deed law (prior to the TOD affidavit change) is he the sole owner of the home to do as he chooses or are their signatures needed to sell? They are at a stalemate at this point and my mom has no idea what to do.
Hi Laurie, Thank you for sharing your knowledge. It's very kind of you and very helpful. My elderly father owns a home and land in Ohio, and the property has appreciated in value since he bought it many years ago. He wants his children to inherit the property, and we are trying to determine whether a Transfer of Death affidavit would be preferable to going through probate. The obvious benefit of a TOD affidavit is avoiding the cost and delay of probate. Our only concern is whether a TOD affidavit will enable a step-up in cost basis to the appraised market value at the time of death. I know that going through the probate process enables a step-up in cost basis as part of the probate estate accounting. How does the step-up in cost basis come into effect in the case of a TOD affidavit? Do each of the beneficiaries after the property is sold simply self-report the appraised market value at the time of death as the cost basis when preparing their individual income taxes, or is something else required?
ReplyDeleteHi Laurie, Thank you for sharing your knowledge. It's very kind of you and very helpful. My elderly father owns a home and land in Ohio, and the property has appreciated in value since he bought it many years ago. He wants his children to inherit the property, and we are trying to determine whether a Transfer of Death affidavit would be preferable to going through probate. The obvious benefit of a TOD affidavit is avoiding the cost and delay of probate. Our only concern is whether a TOD affidavit will enable a step-up in cost basis to the appraised market value at the time of death. I know that going through the probate process enables a step-up in cost basis as part of the probate estate accounting. How does the step-up in cost basis come into effect in the case of a TOD affidavit? Do each of the beneficiaries after the property is sold simply self-report the appraised market value at the time of death as the cost basis when preparing their individual income taxes, or is something else required?
ReplyDelete