on July 26, 2023
One of the biggest concerns clients have when meeting with estate planning attorneys is avoiding probate. Probate is a court process that facilitates the transfer of probate assets pursuant to a decedent’s Last Will and Testament, or via intestate succession when a person dies without a Will under Ohio law. Probate assets are merely assets that are not held in trust, jointly owned, or do not have a designated beneficiary. Avoiding probate can facilitate quick, less costly transfers to the desired beneficiary. Luckily, in Ohio there are three easy ways to transfer real estate, which is one of the most commonly held assets, outside of probate: (1) Survivorship Tenancies; (2) Transfer on Death Designation Affidavits; and (3) titling property as Trustee of your Trust Agreement. In addition, in more complex situations, real estate may be owned by a business entity as a business asset. Business interests may be transferred via succession planning in the corporate documents and records to avoid probate.
1. Survivorship Tenancy. A survivorship tenancy is most often used by married couples. It is created when the owner of real property conveys his or her real estate interest to two or more people where, upon the death of one of the owners of the real estate, the property interest will vest in the surviving owner. The language required to create a survivorship tenancy is found in Section 5302.17 of the Ohio Revised Code, which contains the Ohio form of a survivorship deed. The key language in this statute is, “for their joint lives, remainder to the survivor of them.” If a deed does not contain the survivorship language, the ownership interest is merely a tenancy in common, even if the owners are married. By way of example, if a married couple owns a property “jointly,” but the conveying deed fails to include survivorship language, the surviving spouse would have to probate the deceased spouse’s 50% interest in the property. The 50% interest would then transfer to the beneficiaries designated in the decedent’s Last Will and Testament or via intestate succession. In the alternative, if the same married couple owns the property jointly with rights of survivorship, the surviving spouse (or any survivor in a survivorship tenancy) would merely have to file an Affidavit of Survivorship with the county recorder and attach a certified copy of the death certificate to the affidavit in order to transfer the deceased owner’s interest in the property to the surviving owner(s).
2. Transfer on Death Designation Affidavit. A Transfer on Death Designation Affidavit allows the owner of real property to name one or more beneficiaries to his or her real property interest. This allows the owner to keep title to his or her real estate during life, with the transfer effective upon the owner’s death. Ohio Revised Code Section 5302.22(D) contains the statutory requirements for a transfer on death designation affidavit. Under this section, the affidavit must contain: (a) a description of the property (the legal description); (b) a description of the interest being transferred, if less than the entire interest in the real property is being transferred; (c) a statement that the affiant is the owner of the real property at the time of filing, along with his or her marital status; and (d) a statement designating the beneficiaries, by name, as transfer on death beneficiaries. The process to transfer the real property to the designated beneficiary is similar to that in a survivorship tenancy, where one need only file an affidavit that the owner has died along with a death certificate.
A property owner can use both a survivorship tenancy and a transfer on death designation affidavit to effect multiple transfers. In such a scenario, both owners of the survivorship tenancy must sign the transfer on death designation affidavit. Upon the death of the first owner, the real property transfers to the survivor, and upon the death of the second owner, the real property transfers to the beneficiary designated in the affidavit.
3. Holding Real Property in Trust. An owner can hold real estate in a trust. This option provides more flexibility than the other two options above—the owner can provide specific instructions on how the real property is to be used, how costs will be allocated, and who the property will transfer to upon the owner’s death. An owner of real property outside of Ohio can similarly hold the asset in trust and avoid an ancillary administration in another state upon the owner’s death. In Ohio, when real estate is held in trust, the trustee should also record a memorandum of trust in the county where the real property is located. Upon the death of the initial trustee, the successor trustee will file an affidavit with the county recorder where the real property is located and thereafter will administer the real property in accordance with the trust provisions.
4. Real Property Owned by a Business Entity. Business entities may also hold an interest in real property, which is considered an asset of the business entity. Succession planning in the corporate records and documents will determine how the business interests transfer upon the death of a member or a shareholder of the business entity. Appropriate succession planning will avoid the probate of business interests.
This blog does not cover all of the complexities involved in some real estate transactions. Dower rights, the death of a designated beneficiary, and other issues may arise that could prevent the owner from accomplishing the goal to avoid probate. In addition, if you are holding real property located outside of Ohio in trust, there may be different requirements as to how that asset should be titled, the language contained in the trust agreement, and the execution requirements. All of this makes it important to speak with an estate planning attorney when structuring your plan. Christopher Teodosio can be contacted at 330-434-6927 if you have any questions related to estate planning for real estate or other estate planning or probate questions.
This blog is intended to provide information generally and to identify general legal requirements. It is not intended as a form of, or as a substitute for legal advice. Such advice should always come from in-house or retained counsel. Moreover, if this Blog in any way seems to contradict advice of counsel, counsel's opinion should control over anything written herein. No attorney client relationship is created or implied by this Blog. © 2024 Brouse McDowell. All rights reserved.
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