Transferring Property Titles Through Will or Trust Substitutes
Property with a title, such as real estate or a bank account, upon the death of the owner, has to have a mechanism for transferring the title to the person who inherits it. One way this can be accomplished is for a probate court to order the title to be changed. The probate court does this either by reading the directions in the will or, if a person dies without a will, looking up the statutes to see which relative(s) get or share the property.
A Trust is designed to avoid the expense of a probate proceeding and to speed up and keep private the transfer of assets upon death. However, property with a title must have been put into the trust prior to death. In addition, the trust has to be created. But many people want property transferred after their death without the expense of either probate or a trust.
Alternatives to a Trust or Probate For Transferring Property
Here are some of the alternatives to discuss with your Nevada attorney for transferring property with a title:
When you buy life insurance the agent will ask you who should get the death benefit if you die. A married person with children might typically list the spouse as the primary beneficiary and the children as the secondary beneficiary meaning that if the spouse is surviving he or she gets it all, but if the spouse dies first, then the life insurance is equally divided among the children.
Bank Account, Stock Brockerage Account or Certificate of Deposit
Likewise, if you open up a bank account or stock brokerage account or Certificate of Deposit, you can almost always list the people who will get the asset if you die. These are called "payable on death accounts" or "transfer on death accounts, often abbreviated as POD or TOD. The person selling you these accounts may not take the time to ask you if you want to list beneficiaries because that is extra work. However, if you insist, you can almost always make your account POD. NRS 111.480 and the statutes that follow specifically allows for this.
But, some financial institutions will not let people provide for a primary and a secondary beneficiary upon death of the account holder.
In addition it is hard or impossible to get contingency language into the payable on death or transfer on death designations. For example, you probably cannot make your financial account payable "to those of my children who survive and if any of my children fails to survive me then the share of the predeceased child shall go to that child's own children if any, otherwise, in equal shares to my surviving children."
If two people own property as joint tenants and one dies, the survivor simply files with the County Recorder's Office a Certified Copy of the Death Certificate and "Affidavit of Death of Joint Tenant." Then the survivor owns the property without worrying about a will, trust or probate.
Tenants In Common
The most common alternative to a joint tenancy deed is a deed to "tenants in common." For example, a deed to "John and Mary Doe," mean each owns 50% and if one of them dies that 50% interest will have to be probate.
Deed To Couple As Husband & Wife
Occasionally one see a deed granting to "John and Mary Doe as husband and wife." That by itself does not count as a joint tenancy deed and if, say, John, dies, Mary may have to probate John's half of the real estate to own it.
Community Property With Right of Survivorship
Occasionally one also sees a deed granting to "John and Mary Doe as community property with right of survivorship." This probably counts as a joint tenancy deed although we think the better practice would be to deed to "John and Mary Doe as joint tenants."
Will A Spouse Have To Go Through Probate?
A quick answer to whether the surviving spouse will have to go through probate to get 100% good title to property owned by two spouses, at least in Clark County, is to look up the property on the Clark County Recorder's website and on the "Vesting" line see if the County Assessor has entered "JT" which stand for Joint Tenancy or "RS" which stands for "Right of Survivorship", basically the same as JT. But, if that line is blank, the County Assessor thinks the surviving spouse will have to go through probate to get the whole property.
(Actually things get a bit complicated if joint tenancy property is put into a will by one joint tenant, the other joint tenant is still alive and is a different person than the person given the property in the will. The most likely answer is that the surviving joint tenant gets the property regardless of what the will says, but sometimes courts will consider that the person who wrote the will made a mistake and the court will consider correcting the mistake.)
Our fees to write Nevada deeds are set out in Nevada Deeds
N.R.S. 111.655 to N.R.S. 111.699, formerly N.R.S. 111.109, allows for a "deed which becomes effective upon death of grantor." This deed works essentially like a payable on death bank account. Upon the death of one person, or upon the death of the last of two people to die (for example, husband and wife) the deed is effective to convey title to a named beneficiary. TO BE EFFECTIVE THIS DEED MUST BE RECORDED BEFORE THE DEATH OF THE GRANTOR. THE GRANTOR MAY REVOKE THIS DEED PRIOR TO HIS OR HER DEATH. See NRS Chapter 111 Our fees for doing a Transfer on Death Deed are set out in Nevada Deeds.
Reed & Mansfield Case Scenario:
We recently encountered the following problem with a Transfer on Death Deed: A widow died and had executed a transfer on death deed in favor of her two children for her residence. The widow died and the children tried to sell the residence. The title insurance company, noting that the widow had just died, refused to issue a policy of title insurance to the buyer on the grounds that that title could be clouded by potential claims of creditors of her estate. (Technically the residence was outside her estate but under Nevada law non-probate transfers can be liable for debts of the Decedent in some circumstances.) The title insurance company said they would not issue title insurance unless there was a probate to determine if the decedent had debts or until 18 months after her death.
In a case like the one in the paragraph above, we could do a probate proceeding to make sure there were no creditors if the beneficiary of the Transfer of Death Deed wanted to pay for the proceeding in order to be able to sell the property immediately.
If this property had been in a trust, the new owners could have published a Notice to Creditor under N.R.S. 164.025. This publication would require 90 days. However, this would have been the fastest way to assure a nervous title insurance company that no creditors would be coming after the residence.
Transfer On Death Deeds & Contingent Beneficiaries
Another problem with Transfer on Death Deeds is that they do not allow for contingent beneficiaries. If Mom and Dad do a transfer on death deed of their home to their three adult children, each child to get 1/3, if one of the children dies before both Mom and Dad die and no change is made, the 1/3 of the home going to the predeceased child would have to go thru probate.
Real Estate Transfer Tax Issues With a Transfer on Death Deed
When property is transferred from one person to another, the County Recorder will want to charge a real estate transfer tax (currently $2.55 per $500 of Assessed valuation in Clark County, home of Las Vegas) except in certain cases: If the transfer is between parent an child or between spouses there is no real estate transfer tax due. If the transfer is into or out of a trust without consideration (payment) there is no real estate transfer tax due. Or, if the transfer is by will there is no real estate transfer tax due. So, with a Transfer on Death Deed, if the transfer is between parent and child or between spouses no real estate transfer tax is due either upon filing the original Deed or later when the grantor (original owner) dies and the grantee files to claim ownership. But if the grantee is not a child parent or spouse of the Decedent, then when the grantor dies, and the grantee goes to claim title there will be a real transfer tax due. So in the last case, the Transfer on Death Deed may end up costing more in the end than a trust would.
Just as you can file paperwork (a deed) with the County Recorder so that your property will transfer on death, you can file paperwork with the Nevada Department of Motor Vehicles so that your vehicle will transfer on death. Visit the Nevada DMV webpage for information and forms regarding a vehicle transfer on death or Google, "NV department of motor vehicles transfer on death form." The DMV website says:
"Transfer on Death allows vehicle owners to add or remove a beneficiary to the title of a motor vehicle, trailer or semitrailer. The vehicle owner must be an individual, not a business. However, a business can be listed as the beneficiary.
Ownership of the vehicle passes to the beneficiary upon the death of all legal owners. The beneficiary must apply for a new title to complete the process. The new owner also must obtain a new registration in order to drive the vehicle on public streets.
Vehicles with a lienholder, lessor or titled as Tenants in Common may not carry a Transfer on Death beneficiary. A maximum of three vehicle owners and the beneficiary can be listed on a Certificate of Title."
If two people are both authorized to enter a safety deposit box at a bank there is a rebuttable presumption that the property contained in it belongs to both jointly with right of survivorship. See Safe Deposit Boxes.
If you own a Nevada timeshare and live in another state, be aware that there will have to be a separate Nevada probate for your timeshare after you die. To avoid this, we suggest a Nevada deed which:
- Puts your timeshare into a valid trust in your home state, or
- Puts your timeshare into joint tenancy with someone likely to survive you, or
- Makes your Nevada timeshare go to your beneficiary on your death.
If you live in another state we will be happy to work with you or your attorney to avoid needing a Nevada probate for your timeshare on your death.
Likewise, if you live in Nevada and own a timeshare in another state, be aware that upon your death there might have to be probate in that other state concerning the timeshare. Since timeshares usually aren't worth that much, the fees for a probate just for a timeshare end up being relatively expensive on a per cent basis. Consider transferring title of the out of state timeshare to your Nevada trust, or to yourself and the person you want to inherit the timeshare as joint tenants.
Why Bother with a Will or Trust? Why Not make Everything Payable on Death?
What's best for one person or couple may be wrong for another. We believe you should consult with a Nevada estate planning lawyer as to what is best for you.
Here are advantages of a trust over putting everything into payable on death titles; some of the advantages may appeal to you; others may not:
Suppose a person has minor children. A trust or will can specify which adult will supervise the child's money. A will or trust can list alternative adults to perform that service if the first adult named cannot or will not accept that responsibility. This information doesn't easily fit into a payable on death form. Also, consider the case of a person with adult children who have their own minor children. Most people want to leave their money equally to their children. But, an adult child could die before (predecease) the will or trust writer dies. Then most people would want their dead child's children to inherit in place of their dead child. But other people in this case would want the dead child's share to go instead to their other surviving children. A will or trust can specify all of this. Payable on death forms don't. And this brings us back to the situation of an underage grandchild inheriting and needing an adult to supervise the money.
If a young person is going to inherit your money do you want that person to have total control of the money upon attaining the legal age of 18? Many of our clients want the money controlled and not used except for medical or educational purposes until the client is several years older. Some of our clients want the young person tor receive the inheritance in two or three portions, say at age 18, age 22, and age 25. The idea is that if the person blows the first portion, perhaps, they will be more careful with the second or third portion. These provisions can be put into a will or trust but not into a payable on death form.
A trust can be designed to protect the beneficiaries after your death from most creditors of the beneficiaries. See, NRS Chapter 166. We usually do not include spendthrift provisions in our trusts, except for young adults, as described in the above paragraph. However, we can design spendthrift trusts to last the life of a beneficiary if there are enough assets to make the administration of a spendthrift trust worthwhile. Please see our separate section on Spendthrift trusts. In contrast, if the beneficiaries simply get the property by payable on death mechanisms, the property they get can be attacked by their creditors. See, for example, NRS 111.620(2), which states that the statutes allowing security accounts to be payable on death "do not limit the rights of creditors of owners of securities against beneficiaries and other transferees under other laws of this state."
The whole point of doing a trust is to avoid probate: everything should pass under the trust. But, unfortunately, not everything gets into a trust. In the first place, a person may forget to put things in a trust such as newly acquired property or a timeshare. In addition, it is sometimes impossible to put everything into a trust. For example, You write a trust and while you are alive Uncle Joe dies and leaves you 1/4 of his estate. But before the estate is distributed, you die. Now your share of Uncle Joe's estate must go thru probate. In anticipation of a problem like this your trust attorney drafted a pourover will saying that whatever you die owning that is not in the trust will go thru the probate process and be given to your trust so your successor trustee can distribute that property according to your trust. You live in Nevada and your executor and heir is your daughter Jane who lives in California. The pourover will your lawyer drafted along with the trust names Jane as your executor. Now Jane can be appointed to close out your estate in Nevada that goes thru the probate court thru the pourover will. But, suppose there was no pourover will. Jane is your closest heir and she could be a co-administrator of your estate if not named in a will, but she would need to hire a Nevada resident co-administrator who would be entitled to a portion, often half, of the statutory fee for the administrator or executor.
As mentioned above, real estate going from the grantor on the grantor's death to a person who is not a spouse or parent or child of the grantor is subject to the real estate transfer tax is the transfer is done thru a transfer on death deed but not if done through a trust.