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Transfer on Death Registration – An Excellent Tool When Properly Used

Indiana has a broad and thoroughly modern Transfer on Death for Property Act. I.C. 32-17-14, et seq. The Act was adopted in 2009.

The Act authorizes the owner of a wide variety of assets to name a beneficiary or beneficiaries to whom the asset is to be transferred at the owner’s death. Assets that may be the subject of a transfer on death registration include bank accounts, real estate, stocks, bonds, membership interests in limited liability companies, and untitled tangible personal property.

An asset may be designated for transfer to a beneficiary under the Act by using the words “pay on death” or “transfer on death” on the appropriate document creating the registration. These terms are interchangeable. Most banks offer a “pay on death” registration for bank accounts, while almost all other assets utilize the “transfer on death” registration. A deed must be executed and recorded to implement a transfer on death registration on real estate.

Transfer to a beneficiary under the Act is a nonprobate transfer.

Estate planning attorneys assist clients with establishing transfer on death registrations frequently. Usually the transfer on death registration is used as part of a comprehensive and integrated estate plan, most often in connection with a revocable trust-based estate plan.

In a revocable trust-based estate plan, all of the owner’s assets can be routed into the owner’s revocable trust at the owner’s death, but the assets can remain titled in the name of the owner during the owner’s life. This avoids disruption of the lifetime routine of the owner and facilitates probate avoidance at death while assuring that the provisions of the revocable trust are available to direct distribution of the assets in the event one or more beneficiaries fail to survive the owner, or in the event the owner wishes to place assets in trust for a beneficiary rather than transferring assets outright to the beneficiary. The revocable trust can and does provide for a variety of contingencies that cannot be written into a standard transfer on death registration.

Transfer on death registration pursuant to the Act is a wonderful tool if used properly. However, like most tools, if the transfer on death registration is not properly used, it can lead to unexpected and disappointing results.