Estate planning can be a complex process, with several instruments available to ensure a smooth transition of assets upon death. One of these tools is the "Transfer on Death" (TOD) provision. TOD provisions simplify the asset transfer process, benefiting both the original owner and the beneficiaries. This comprehensive guide focuses on TOD provisions under New Hampshire law.
Understanding Transfer on Death
A Transfer on Death (TOD) provision allows the owner of an asset to name a beneficiary who will inherit the asset upon the owner's demise, circumventing the often lengthy and complex probate process. The asset can range from financial accounts, such as a bank account or stock portfolio, to physical assets like a car or real estate. The named beneficiary has no legal rights to the asset during the owner's lifetime. The asset only transfers to the beneficiary upon the owner's death. This transfer process is typically quicker and more cost-efficient than the traditional probate process, as it does not involve court proceedings.
Transfer on Death vs. Joint Ownership
TOD provisions and joint ownership are both common methods of transferring assets, but they operate differently under New Hampshire law. Joint ownership implies that two or more people hold an equal interest in a specific asset, such as a home or bank account. In New Hampshire, assets owned jointly usually pass directly to the surviving joint tenant upon the death of the other, bypassing probate. On the other hand, a TOD provision enables an asset owner to designate a beneficiary who will receive the asset upon their death, also avoiding the probate process. Unlike joint ownership, the beneficiary does not hold any ownership interest in the asset until the owner's death.
Creditor Protections from Transfer on Death
TOD provisions in New Hampshire can offer a degree of protection from creditors. When an owner passes away with outstanding debts, creditors typically have a set period to stake their claim against the estate. However, assets transferred via TOD provisions bypass probate and are generally inaccessible to creditors unless they can establish a fraudulent transfer case.
Conflicts Between Your Will and TOD Provisions
Confusion may arise if a will and a TOD provision contradict each other. In New Hampshire, a TOD provision usually supersedes a will. This means that if your will stipulates that an asset should be transferred to a particular individual, but the TOD provision on the asset names a different person, the asset will transfer to the person named in the TOD provision.
Tax and Debt Implications of TOD
Tax considerations play a critical role when implementing TOD provisions. In New Hampshire, assets transferred via TOD face the same estate tax rules as assets transferred through other means. New Hampshire does not impose a state estate tax, meaning only federal estate taxes apply. The implications for debts are equally important. As noted earlier, assets transferred via TOD provisions in New Hampshire are typically protected from the deceased's debts, barring a successful fraudulent transfer case.
Real Estate and TOD in New Hampshire
Unlike other states, New Hampshire does not allow real estate to be transferred via a TOD deed. However, real estate can be transferred upon death using other mechanisms such as a will, a living trust or joint ownership with rights of survivorship. These methods should be discussed with an experienced estate planning attorney to understand their implications fully.
The Validity of Lady Bird Deeds in New Hampshire
A Lady Bird deed, also referred to as an enhanced life estate deed, is a legal document that enables an individual to pass property to beneficiaries while retaining a life estate in the property. The individual also retains the right to sell, lease, or mortgage the property without the beneficiaries' consent. However, Lady Bird deeds are not recognized in New Hampshire. Nonetheless, similar outcomes can often be achieved through the use of a revocable living trust or joint ownership, as previously discussed.
How to Establish a TOD Provision in New Hampshire
In New Hampshire, establishing a TOD provision often involves filling out a form provided by the financial institution that holds your assets. For real estate, as mentioned earlier, a TOD deed is not an option. Instead, other mechanisms such as a will, a living trust or joint ownership with rights of survivorship should be considered. Adherence to all pertinent rules and requirements is vital to avoid potential complications or disputes.
The Limitations of TOD Provisions
Despite the advantages TOD provisions offer, they are not without limitations. They do not allow for complex asset dispositions or provide detailed instructions, as a will or trust might do. Also, if the beneficiary dies before the owner, the asset will typically go through probate unless a contingent beneficiary is named.
Revoking a TOD Provision
TOD provisions can be revoked or changed at any time during the owner's life, as long as the owner is mentally competent. In New Hampshire, this usually involves completing a form provided by the financial institution. In conclusion, the laws governing TOD provisions in New Hampshire are intricate and have significant implications. A deep understanding of these laws is crucial when planning your estate. Consulting with an experienced estate planning attorney is advisable to ensure your assets will be distributed according to your wishes.
