By: Scott Burton
One of the newest tools available in the Virgin Islands for estate planning with regard to real estate is the “Transfer on Death Deed.” The transfer on death deed (or “TOD Deed”) was created by statute in 2019. It may be the best option for individuals with smaller estates, or those who live elsewhere and own real property in the Virgin Islands. This article will discuss how the TOD Deed works, along with some of its advantages.
Prior to the creation of the TOD Deed, the most common ways for passing real estate to one’s heirs were: (1) probate (with or without a will); (2) the creation of a family trust; or (3) by adding one’s heirs to title during one’s lifetime. All of these estate planning methods have some disadvantages. Probate, for example, can take several years to finalize and can be quite costly. The creation of a family trust can be costly, and unless it is periodically updated as circumstances change, and unless the property is deeded to the trust, a trust can fail to achieve a person’s goals. Finally, adding an heir as a joint owner during one’s lifetime can cause complications. For example, if the owner wants to sell or refinance the property during his lifetime, the joint owner (typically an adult child), would have to cooperate and sign paperwork as a co-owner.
In contrast, the TOD Deed offers a much easier and more flexible way to leave property to a person’s heirs. To create a TOD Deed, the owner will sign a Transfer on Death Deed, naming the heirs who will inherit the property after death. The deed needs to be drafted in accordance with the new statute and recorded like any other deed. A big advantage to the owner is that the heirs will only acquire an interest after the owner’s death. In the case of husband and wife, no interest would pass until the death of the last surviving spouse. This gives the owner(s) the flexibility to sell or refinance the property without the need to involve the heirs. If the property is sold during the owner’s lifetime to a third party, the heir’s interest would be eliminated, without obligation or notice to the heir.
Another advantage of the TOD Deed is that the owner can revoke the deed or change the heirs during his or her lifetime. In many ways, the TOD Deed is like a will because it can be changed during a person’s lifetime. It is also like a will in that the beneficiary has no claim to the property until the owner, or the last surviving spouse, passes away. However, the main advantage is that there is no probate, and upon the death of the owner, the transfer to the heirs is automatic, and simply requires the recording of the death certificate.
Here is an example of how the TOD Deed works. Husband and Wife sign a transfer on death deed, naming their two children, Son and Daughter as their beneficiaries. Son and Daughter can hold title as joint tenants with the right of survivorship or as tenants in common (i.e., each with a separate 50% interest). Let’s say Husband dies in 2026. Wife still has the right to revoke the TOD Deed or change it during her lifetime. Let’s say Wife then dies in 2028, not having made any changes to the deed. In that case, Son and Daughter would just need to record their parent’s death certificates, and they would then automatically own the property.
As a different example, let’s say that Husband has a medical condition which requires that he sell the property to raise money. He can sell the property without involving his children, since they do not have an interest in the property while he and his wife are alive. Similarly, if Husband and Wife decide to refinance the property to pull out some equity, the children would not be involved.
As with any estate planning tool, there are individual circumstances and factors which need legal consideration to determine whether the TOD Deed is the best option. However, for many Virgin Islanders, the TOD Deed can be a straightforward, flexible and inexpensive estate planning tool.
Contact one of our Dudley Newman Feuerzeig LLP locations, or Scott Burton directly, to understand for any of your Estate Planning or Virgin Islands legal needs.