ARTICLE THAT JEFF IS WRITING (have previous in … · Web viewTRANSFER ON DEATH PROPERTY ACT INTRODUCTION In 1976, the payable on death or POD concept was introduced when Indiana

TRANSFER ON DEATH PROPERTY ACT

INTRODUCTION

In 1976, the payable on death or POD concept was introduced when Indiana adopted the Multiparty Accounts statute, now IC 32-17-11, from provisions of the Uniform Probate Code. In 1997, the concept was expanded to securities when Indiana adopted the Uniform Probate Code provisions on the Uniform Act on Transfers on Death Securities. In 2008, the transfer on death concept was expanded to include vehicles and watercraft. Proposed legislation in 2008 would have also expanded the concept to the conveyance of real estate but it did not pass. In 2009, the Transfer on Death Property Act (Act), IC 32-17-14, was enacted.

The POD and TOD concepts are very popular, not only with the public, but with estate planning lawyers. As its popularity grows, obvious issues arise, not previously addressed by the statutes or the courts. Among the many issues related to TOD or POD designations are: predeceased beneficiaries, divorced beneficiaries, beneficiaries who may have killed the owner, afterborn children and transfers to beneficiaries who are minors or protected persons. These issues, coupled with the desire to expand the TOD beneficiary designation to real property created the need for a comprehensive approach governing all transfers on death property.

COORDINATION WITH EXISTING PROVISIONS

The coordination with existing provisions begins with the statute creating TOD designations for vehicles, IC 9-17-3-9, which is amended to reference IC 32-17-14. However, the new Act does not apply if it is inconsistent with the requirements of IC 9-17-3-9 or IC 9-17-2-2(b). A similar change is made by Section 4 to IC 9-31-2-30 as it pertains to watercraft.

There was a glitch in this original coordination effort. Both of the statutes amended have a subsection (e) that requires that the beneficiary survive the transferor. As will be discussed under IC 32-17-14, the survivorship of the beneficiary is required unless the beneficiary is a descendant of the transferor in which case the transfer is made to the predeceased beneficiary’s lineal descendants per stirpes under IC 32-17-14-22(a). A technical correction was made in 2010 to the statutes to reference the survivorship requirement for vehicles and boats and except IC 32-17-14-22 which provides distribution to lineal descendants per stirpes. A 2011 amendment allows any “owner” of a vehicle or watercraft to create a TOD transfer. Under prior law, only an “individual” could make the transfer.

The Uniform Transfer on Death Securities Act contained in IC 32-17-9 is repealed in its entirety. IC 32-17-11-10, 11 and 24 which are payable on death provisions in the Multiparty Accounts provisions are also repealed. Other Multiparty Accounts statutes are amended to remove any reference to POD or paid on death designations. IC 32-17-13 which deals with claims against nonprobate transfers is amended to include vehicles, watercrafts and transfers on death under the new Act as nonprobate transfers subject to claims.

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APPLICATION TO PRE-EXISTING TRANSFERS

IC 32-17-14-2 adopts language from the Trust Code and the Power of Attorney Act to apply the new Act to transfers created before July 1, 2009, unless the application of the chapter would: 1) adversely affect a right given to an owner or beneficiary, 2) give a right to any owner or beneficiary that the owner or beneficiary was not intended to have when the transfer on death security, transfer on death securities counter pay on death account was created, 3) impose a duty or liability on any person that was not intended to be imposed when the transfer on death security, transfer on death securities account, or pay on death account was created, or 4) relieve any person from any duty or liability imposed by the terms of the transfer on death security, transfer on death securities account, or pay on death account or under prior law. For POD or TOD transfers created after June 30, 2009, the chapter applies.

In 2010, the Act was amended to clarify that the lineal descendants per stirpes, rules in IC 32-17-14-22 applied to POD or TOD transfers created before July 1, 2009. A 2012 amendment provides that amendments to the Act are retroactive under the Act to TOD transfers created before the amendment.

There are specific exceptions providing that the Act does not apply to proceeds under a life or accidental death insurance policy, annuity, contract, plan, or other products sold or issued by a life insurance company unless the Act is incorporated into the policy by express reference. IC 32-17-14-2(c). There is another exception which states that the Act does not apply to a beneficiary designation if the designation or an applicable law expressly provides that this Act does not apply to the transfer. IC 32-17-14-2(d). A 2011 amendment states that the Act does not apply to IRA’s or retirement plans.

Originally there was an exception to the exceptions for IC 32-17-14-24 which makes a beneficiary designation or a revocation of a beneficiary designation void if procured by fraud, duress, undue influence or mistake, or because the owner lacked capacity. Also, the beneficiary designation was made subject to IC 29-1-2-12.1, the Indiana Slayer Rule, creating a constructive trust if the beneficiary is the murderer of the grantor. As a result, those provisions in IC 32-17-14-24 arguably applied to life insurance or other proceeds paid by a life insurance company or even to a transfer on death beneficiary designation where the Act expressly does not apply. In 2010, this exception to the exceptions was removed.

DEFINITIONS

There are definitions unique to the Transfer on Death Property Act.

“Beneficiary Designation” means a written instrument other than a will or trust that designates the beneficiary of a transfer on death transfer. IC 32-17-14-3(2).

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A 2010 amendment added “Governing Instrument” which refers to a written instrument agreed to by an owner that establishes the terms and conditions of an ownership in beneficiary form.“LDPS” is an abbreviation of Lineal Descendents Per Stirpes which can be used in a beneficiary designation. IC 32-17-14-3(4).

“Ownership in Beneficiary Form” means holding property under registration in beneficiary form or other written instrument that names the owner of the property; directs ownership of the property to be transferred upon death of the owner to a designated beneficiary; and designates the beneficiary. IC 32-17-14-3(6).

“Property” is defined as broadly as possible to include present or future interests in real or personal property, tangible or intangible. It also includes seven specific examples of the types of property subject to the Act. IC 32-17-14-3(9). A proposed 2011 amendment will clarify that “Property” does not include IRAS’s or retirement plans.

“Registration in Beneficiary Form” means titling of an account record, certificate or other written instrument that provides evidence of ownership of the property; directs ownership to be transferred on death of the owner to the designated beneficiary and designates the beneficiary. IC 32-17-14-3(10).

“Transfer on Death Deed” is a deed that has a transfer on death beneficiary designation. IC 32-17-14-3(12).

“Transfer on Death Transfer” refers to any transfer of property that has a beneficiary designation under this Act. IC 32-17-14-3(13). There are specific examples given in the Act of transfers that are not considered transfer on death transfers:

1) transfers by rights of survivorship;

2) transfers to remaindermen on termination of life tenancy;

3) inter vivos or testamentary transfers under a trust;

4) transfers made under an exercise or non exercise of a power of appointment; and

5) transfers made on death of a person who did not have the right to designate the person’s estate as the beneficiary of the transfer. IC 32-17-14-

4(a).

“Transferring Entity” means a person who owes a debt or is obligated to pay money or benefits; renders contract performance; delivers or conveys property; or changes the record of ownership of property on the books, records and accounts of an enterprise or on a certificate or document of title that evidences property rights. The term includes


governmental agencies, business entities and transfer agents and a person acting as a custodial agent. The term does not include a government office charged with endorsing, entering or recording the transfer of real property in the public records. IC 32-17-14-3(14).

GENERAL REQUIREMENTS

A beneficiary designation must:

1) Designate the beneficiary of the transfer on death transfer;

2) Make the transfer effective upon the death of the owner of the property being transferred; and

3) Comply with the Transfer on Death Property Act, any other applicable law, and the conditions of any governing instrument. IC 32-17-14-4(b).

Other applicable laws could be recording and deed statutes. In determining the last surviving owner of joint properties, the Act provides that the death of the last surviving owner is considered the death of the owner IC 32-17-14-4(c).

The Act provides sample language to create a transfer on death direction. The owner should be identified by name. The language “transfer on death” or “TOD”or “pay on death” or “POD” should be used and the name of the beneficiary should be given. IC 32-17-14-4(d).

A transfer on death transfer: (1) is effective with or without consideration; (2) is not considered testamentary; (3) is not subject to the requirements for a will or for probating a will and may be subject to an agreement between the owner and the transferring entity to carry out the owner’s intent to transfer the property under this chapter. IC 32-17-14-5. The reference to “agreement” is similar to “governing instrument.”

A beneficiary designation that is executed and delivered to the transferring entity before the death of the owner authorizes a transfer of property under the Act; is effective on the death of the owner of the property and transfers the right to receive the property to the designated beneficiary who survives the death of the owner. IC 32-17-14-9(a)(b).

The original act referred to a beneficiary designation delivered in “proper form.” In 2010, the act was amended to delete reference to “proper form.”

When confronted with an properly executed beneficiary designation, the transferring entity shall make the transfer unless there is clear and convincing evidence of the owner’s different intention at the time the beneficiary designation was created. IC 32-17-14-9(c). IC 32-17-14-24 voids beneficiary designations for fraud and other reasons. It is not clear if the transferring entity’s knowledge of that fraud and other matters with clear and convincing evidence would also allow the transferring entity to not make the transfer.


The authority of the transferring entity agent, as agent for an owner, subject to a transfer on death transfer, does not cease at the death of the owner. The transferring entity is specifically directed to transfer the property to the designated beneficiary in accordance with the beneficiary designation and the Act. IC 32-17-14-6.

ASSIGNMENT

A specific section deals with the written assignment of a contractual right. IC 32-17-14-10. The requirements are very similar to the general requirements. While it does not specifically exclude TOD or POD language, it uses more general terminology in describing the type of transfer. For example, the requirement is an assignment of the right to any performance remaining due under contract to an assignee designated by the owner, which expressly states the assignment does not take effect until the death of the owner. IC 32-17-14-10(a)(1) and (2). If the written assignment then meets the general requirements of execution and delivery to the contract obligor before the death of the owner, then the assignment transfers the right to receive performance to the designated assignee beneficiary. IC 32-17-14-10(b). The assignment does not need consideration to be valid or delivery to the assignee beneficiary. IC 32-17-14-10(c). The statute specifically states that this does not preclude other methods of assignment permitted by law postponing enjoinment until the death of the owner. IC 32-17-14-10(d).

TANGIBLE PERSONAL PROPERTY

Specific requirements are also set forth for a deed of gift, bill of sale or other writing intended to transfer an interest in tangible personal property that is effective on the death of the owner. IC 32-17-14-12. This type of property usually does not involve a third party transferring entity. As a result, the requirements are a document that expressly creates ownership in beneficiary form. IC 32-17-14-12(a)(1). As indicated earlier, “beneficiary designation” is a defined term that means a written instrument other than a will or trust that designates the beneficiary of a transfer on death transfer. IC 32-17-14-3(2). The document must also, in all respect, be sufficient to transfer the type of property involved and must be executed by the owner and acknowledged before a notary public or other person authorized to administer oath. IC 32-17-14-12(a). The document does not need to be supported by consideration or delivered to the transferring beneficiary. IC 32-17-14-12(b). Other methods of transferring ownership of tangible personal property as permitted by law that take effect at the death of the owner are permitted. IC 32-17-14-12(c). The most notable difference between this provision and other transfer on death provisions is that you do not need to deliver the document before the death of the owner.

DIRECT TRANSFERS


Property may be transferred with or without consideration by written instrument directly transferring the property to a transferee to hold as owner in beneficiary form. IC 32-17-14-13(a). This addresses the possibility of the owner of the property transferring the property to someone else but with a beneficiary designation attached. A transferee under that instrument is considered to be the owner for all purposes and has the rights to the property provided by law, including the right to revoke or change the beneficiary designation. IC 32-17-14-13(b). This type of a transfer is effective when the written instrument perfecting the transfer becomes effective to make the transferee the owner. IC 32-17-14-13(c).

REGISTERED PROPERTY

Property held or registered in beneficiary form also has specific requirements. IC 32-17-14-14. An example is stocks and bonds that may be registered in the name of the owner or being held in brokerage account for the owner. Property is registered in beneficiary form by showing on the account records, security certificate or instrument evidencing ownership, the name of the owner and an instruction substantially similar in form to transfer on death transfers indicating the name of the beneficiary and the use of TOD or POD. IC 32-17-14-14(b). Only the transferring entity or person authorized by the transferring entity, may place a transfer on death direction on the account records, security certificate or instrument evidencing ownership. IC 32-17-14-14(c). If the property is registered in beneficiary form before the death of the owner, or the transfer on death direction is delivered to the transferring entity before the owner’s death, then the transfer is valid. IC 32-17-14-14(d). In the absence of fraud, duress and due influence, lack of capacity or mistake, the account records, security certificate or instruments showing a transfer on death direction, that was regularly made by the owner and accepted by the transferring entity and not revoked or changed will be accepted. IC 32-17-14-14(e).

TRANSFER ON DEATH DEED

The Transfer on Death Property Act adds a new concept to Indiana law which is a transfer on death or a payable on death transfer of real estate. The basic requirements are a deed with a beneficiary designation executed and recorded with the recorder of deeds in the county in which the real property is situated before the death of the owner. IC 29-17-14-11(a). The transfer on death deed is void if it is not recorded before the death of the owner. IC 32-17-14-11(b). There is no need for the deed to be supported by consideration or delivery to the granting beneficiary. IC 32-17-14-11(c). The beneficiary can be either a revocable or an irrevocable trust. IC 32-17-14-11(d). As in all other transfer on death transfers, words in the substance of “transfer on death” or “payable on death” or “POD” or “TOD” are sufficient in making a beneficiary designation. IC 32-17-14-11(f)(g). Such designations are not to be construed as requiring liquidation of the real property before transferring. IC 32-17-14-11(g).

There are specific rules of construction which govern a transfer on death deed. IC 32-17-14-11(e). If the real property is owned as tenants by the entirety, a beneficiary designation is inoperable and void unless both spouses join in the conveyance. IC 32-17-14-11(e)(1). Where the real property is owned as joint tenants with rights of survivorship, any one of the


joint tenants can make a beneficiary designation by a transfer on death deed, however, the transfer on death deed severs the joint tenancy and the co-tenancy becomes tenants in common. IC 32-17-14-11(e)(2). However, if joint tenants with rights of survivorship have gone together to create a beneficiary designation on the death of a survivor, a conveyance of any joint owner’s interest has no effect on the original beneficiary designation for the non- severing joint tenant. IC 32-17-14-11(e)(3). Obviously, a tenant in common can make a beneficiary designation of their undivided interest. IC 32-17-14-11(e)(4). If the owner’s interest is a life estate and that owner tries to create a beneficiary designation, the conveyance is inoperable and void. IC 32-17-14-11(e)(5). If an owner tries to create a beneficiary designation and the designation conflicts with the terms and conditions of the owner’s interest in the real estate, the terms and conditions of the conveyance establishing the interest of the owner prevail. IC 32-17-14-11(e)(6). A 2011 amendment states that a TOD deed does not need to be transferred at the Auditor’s office before recording.

TRANSFERRING ENTITY AGREEMENT

Throughout the Transfer on Death Property Act, numerous references are made to “governing instrument,” “transferring entity requirements,” or an “agreement” with the transferring entity. The provisions recognize that many third parties have specific rules related to the transfer on death designation. There are two main sections of the Act which govern these agreements. IC 32-17-14-7 and 26.

IC 32-17-14-7 contains a list of five items that, if they are required, makes an agreement between the owner and the transferring entity necessary to carry out a transfer on death transfer. Originally, it was not clear from the statute alone who is requiring these five things to occur. A 2010 amendment clarified that they are requirements of the transferring entity. IC 32-17-14-7.

The first item that requires an agreement is the submission to the transferring entity of a beneficiary designation under a governing instrument. IC 32-17-14-7(a)(1). An example may be an agreement with the bank holding funds for the owner that requires that the transferring entity receive delivery of the beneficiary designation before it is accepted.

The next item requiring an agreement is the registration by a transferring entity of a transfer on death direction on any certificate or record evidencing ownership of property. IC 32-17-14-7(a)(2). As discussed above, this would be similar to what was referred to in IC 32-17-14-10-14 as property held or registered in beneficiary form on an account record, security certificate, or instrument evidencing ownership of property.

An agreement is required if the consent of a contract obligor for the transfer of performance due under the contract is required. IC 32-17-14-7(a)(3). This would be similar to an assignment of a contractual right that is referred to in IC 32-17-14-10. A lease or other real estate agreement may require the consent of another party.


The next item which requires an agreement would be if there is a requirement for the consent of the financial institution for transfer of an obligation of the financial institution. IC 32-17-14-7(a)(4).

The final item that would require an agreement is if there was requirement for the consent of a transferring entity for a transfer of an interest in the transferring entity. IC 32-17-14-7(a)(5).

If any one of the five things listed above applies, the transferring entity is not required to accept an owner’s request to assist the owner in carrying out a transfer on death transfer. However if acceptance by the transferring entity is required, the transferring entity’s acceptance of the designation or revocation or change, relates back to and is effective to the time the request was received by the transferring entity. This is important because delivery must be done before the death of the owner. IC 32-17-14-7(c).

TRANSFER RULES

A 2012 amendment made it clear that a transferring entity may not adopt rules for making, execution, acceptance and revocation of the beneficiary designation that are inconsistent with the Act as a whole. The transferring entity may adopt 20 rules applicable to all transfers set forth in the Act, in whole or in part, by incorporation by reference. The amendment was addressed at banks that were ignoring LDPS rules.

The rules, set out in IC 32-17-14-26, may be changed in the beneficiary designation.

1. A beneficiary designation or a request for registration of property in beneficiary form must be in writing, signed by the owner, dated, and, in the case of a transfer on death deed, compliant with all requirements for the recording of deeds.

2. A security that is not registered in the name of the owner may be registered in beneficiary form on instructions given by a broker or person delivering the security.

3. A beneficiary designation may designate one (1) or more primary beneficiaries and one (1) or more contingent beneficiaries.

4. On property registered in beneficiary form, a primary beneficiary is the person shown immediately following the transfer on death direction. Words indicating that the person is a primary beneficiary are not required. The name of a contingent beneficiary in the registration must have the words “contingent” or words of similar meaning to indicate the contingent nature of the interest being transferred.

5. Multiple surviving beneficiaries share equally in the property being transferred unless a different percentage or fractional share is stated for each


beneficiary. If a percentage or fractional share is designated for multiple beneficiaries, the surviving beneficiaries share in the proportion that their designated shares bear to each other.

6. A transfer of unequal shares to multiple beneficiaries for property registered in beneficiary form may be expressed in numerical form following the name of the beneficiary in the registration.

7. A transfer on death transfer of property also transfers any interest, rent, royalties, earnings, dividends, or credits earned or declared on the property but not paid or credited before the owner’s death.

8. If a distribution by a transferring entity under a transfer on death transfer results in fractional shares in a security or other property that is not divisible, the transferring entity may distribute the fractional shares in the name of all beneficiaries as tenants in common or as the beneficiaries may direct, or the transferring entity may sell the property that is not divisible and distribute the proceeds to the beneficiaries in the proportions to which they are entitled.

9. On the death of the owner, the property, minus all amounts and charges owed by the owner to the transferring entity, belongs to the surviving beneficiaries and, in the case of substitute beneficiaries permitted under section 22 of this chapter, the lineal descendants of designated beneficiaries who did not survive the owner are entitled to the property as follows:

(A) If there are multiple primary beneficiaries and a primary beneficiary does not survive the owner and does not have a substitute under section 22 of this chapter, the share of the nonsurviving beneficiary is allocated among the surviving beneficiaries in the proportion that their shares bear to each other.

(B) If there are no surviving primary beneficiaries and there are no substitutes for the nonsurviving primary beneficiaries under section 22 of this chapter, the property belongs to the surviving contingent beneficiaries in equal shares or according to the percentages or fractional shares stated in the registration.

(C) If there are multiple contingent beneficiaries and a contingent beneficiary does not survive the owner and does not have a substitute under section 22 of this chapter, the share of the nonsurviving contingent beneficiary is allocated among the surviving contingent beneficiaries in the proportion that their shares bear to each other.

10. If a trustee designated as a beneficiary:

(A) does not survive the owner;(B) resigns; or


(C) is unable or unwilling to execute the trust as trustee and no successor trustee is appointed in the twelve (12) months following the owner’s death;

the transferring entity may make the distribution as if the trust did not survive the owner.

11. If a trustee is designated as a beneficiary and no trust instrument or probated will creating an express trust is presented to the transferring entity, the transferring entity may make the distribution as if the trust did not survive the owner.

12. If the transferring entity is not presented evidence during the twelve (12) months after the owner’s death that there are lineal descendants of a nonsurviving beneficiary for whom LDPS distribution applies who survived the owner, the transferring entity may make the transfer as if the nonsurviving beneficiary’s descendants also failed to survive the owner.

13. If a beneficiary cannot be located at the time the transfer is made to located beneficiaries, the transferring entity shall hold the missing beneficiary’s share. If the missing beneficiary’s share is not claimed by the beneficiary or by the beneficiary’s personal representative or successor during the twelve (12) months after the owner’s death, the transferring entity shall transfer the share as if the beneficiary did not survive the owner.

14. A transferring entity has no obligation to attempt to locate a missing beneficiary, to pay interest on the share held for a missing beneficiary, or to invest the share in any different property.

15. Cash, interest, rent, royalties, earnings, or dividends payable to a missing beneficiary may be held by the transferring entity at interest or reinvested by the transferring entity in the account or in a dividend reinvestment account associated with a security held for the missing beneficiary.

16. If a transferring entity is required to make a transfer on death transfer to a minor or an incapacitated adult, the transfer may be made under the Indiana Uniform Transfers to Minors Act, the Indiana Uniform Custodial Trust Act, or a similar law of another state.

17. A written request for the execution of a transfer on death transfer may be made by any beneficiary, a beneficiary’s legal representative or attorney in fact, or the owner’s personal representative.

18. A transfer under a transfer on death deed occurs automatically upon the owner’s death subject to the requirements of subdivision (20) and does not require a request for the execution of the transfer.


19. A written request for the execution of a transfer on death on death transfer must be accompanied by the following:

(A) A certificate or instrument evidencing ownership of the contract, account, security, or property.

(B) Proof of the deaths of the owners and any nonsurviving beneficiary.(C) An inheritance tax waiver from states that require it.(D) In the case of a request by a legal representative, a copy of the

instrument creating the legal authority or a certified copy of the court order appointing the legal representative.

(E) Any other proof of the person’s entitlement that the transferring entity may require.

20. On the death of an owner whose transfer on death deed has been recorded, the beneficiary shall file an affidavit in the office of the recorder of the county in which the real property is located. A 2011 amendment states that the affidavit must be transferred at the Auditor’s office before it can be recorded. The affidavit must contain the following:

(A) The legal description of the property.(B) A certified copy if the death certificate certifying the owner’s death.(C) The name and address of each designated beneficiary who survives

the owner or is in existence on the death of the owner’s death.(D) The name of each designated beneficiary who has not survived the

owner’s death or is not in existence on the date of the owner’s death.(E) A cross-reference to the recorded transfer on death deed.

Rules involving a trustee designated as the beneficiary are significant. If the trustee does not survive the owner, resigns or is unwilling or unable to execute the trust and no successor trustee is appointed in the twelve months following the owner’s death, the transferring entity may make the distribution as if the trust did not survive the owner. IC 32-17-14-26(b)(10). Related to the same issue is the requirement that if the trustee is designated as a beneficiary and no trust instrument or probated will creating an express trust is presented to the transferring entity, the transferring entity may make the distribution as if the trust did not survive the owner. IC 32-17-14-26(b)(11). Originally, this particular rule does not specify any time limitations. A 2010 amendment now uses the terminology found earlier in the Act that the trust is treated as nonexistent unless no affidavit of certification is presented within twelve (12) months of the owner’s death.

Another rule provides that if the transferring entity is not presented evidence during the twelve months after the owner’s death of their lineal descendants, the transferring entity may make the transfer as if the nonsurviving descendants also failed to survive the owner. IC 32-17-14-26(b)(12).

The written request for transfer on death transfer must be accompanied by a certificate evidencing ownership, proof of death of the owner or any nonsurviving beneficiary, an


inheritance tax waiver, if required, and a copy of the instrument creating legal authority if a legal representative makes the request. IC 32-17-14-26(b)(19).

On the death of an owner whose transfer on death deed has been recorded, the beneficiary shall file an affidavit that has a legal description of the property, certified copy of the death certificate attached, the name and address of each designated beneficiary, the name of each designated beneficiary who has not survived the owner’s death or is not in existence on the date of the owner’s death and a cross reference to the recorded transfer on the death deed. IC 32-17-14-26(b)(20). A sample form is attached as Exhibit D.

REVOCATION

GENERALLY. A beneficiary designation may be revoked or changed during the lifetime of the owner. IC 32-17-14-16(a). A revocation or change in beneficiary designation must comply with the terms of any governing instrument, the Act, or any other applicable law. IC 32-17-14-16(f). The effective date of the revocation or change in beneficiary is determined in the same manner as the effective date of the beneficiary designation. IC 32-17-14-16(i). This typically requires execution and delivery. If the owner transfers the property during the owner’s lifetime, with or without consideration the beneficiary designation is terminated with respect to the property transferred. IC 32-17-14-16(h). The beneficiary designation may not be revoked or changed by a will unless the beneficiary designation expressly grants the owner the right to revoke or change the beneficiary designation by will. IC 32-17-14-16(g). A subsequent beneficiary designation revokes a prior beneficiary designation unless the subsequent beneficiary designation expressly provides otherwise. IC 32-17-14-16(e). If the beneficiary designation restricts conveyance of the owner’s interest unless another person joins in the conveyance, then the revocation or change of beneficiary can only be made with the agreement of each living owner required for the conveyance. IC 32-17-14-16(c).

DEEDS. For transfer on death deeds, there are specific rules. The transfer on death designation in the deed is revoked or changed when there is executed and recorded with the recorder of the deeds in the county in which the property is situated, a subsequent deed of conveyance revoking, amending or changing the beneficiary designation, or an affidavit acknowledged or approved under IC 32-21-2-3 that revokes or changes the beneficiary designation. IC 32-17-14-16(j). A 2010 amendment clarifies that the recording be while the owner is alive. A physical act such as a written modification on or the destruction of a transfer on death deed, after the transfer on death deed has been recorded has no effect on the beneficiary designation. IC 32-17-14-16(k). A transfer on death deed may not be revoked or modified by will or trust. IC 32-17-14-16(l). Revocation or change of beneficiary designation involving property owned as tenants by the entirety must be made with the agreement of both spouses, so long as both spouses are alive. On the death of one of the spouses, the surviving spouse may revoke or change the beneficiary designation made by both spouses. IC 32-17-14-16(b).

BENEFICIARY RIGHTS


A beneficiary of a transfer on death transfer takes the owner’s interest in the property at the death of the owner subject to all conveyances, assignments, contracts, set offs, licenses, easements, liens and security interest made by the owner to which the owner was subject during the owner’s lifetime. IC 32-17-14-19(a). The beneficiary of a transfer on death transfer on an account with the bank, savings loan association, credit union, broker or mutual fund, takes the owner’s interest in the property at the death of the owner subject to all requests for payment of money issued by the owner before the owner’s death whether paid before or after the owner’s death or unpaid. The beneficiary is liable to the payee of an unsatisfied request for payment to the extent that the request represents an obligation that was enforceable against the owner during the owner’s lifetime. IC 32-17-14-19(b). The beneficiary’s liability with respect to an unsatisfied request for payment is limited to the proportionate share of the request for payment as the beneficiary’s proportionate share of the account under the designation. To the respect more than that is paid, the beneficiary has a right of contribution from other beneficiaries subject to the same payment request. IC 32-17-14-19(c).

The beneficiary who is not a lineal descendant of the owner is not entitled to the property unless the beneficiary survives the owner and survives the owner by the time, if any, required by the terms of the beneficiary designation. IC 32-17-14-20. If the property subject to the beneficiary designation is lost, destroyed, damaged or involuntary converted during the owner’s lifetime, the beneficiary succeeds to any right with respect to the loss, destruction, damage or involuntary conversion that the owner would have had if the owner had survived, however, the beneficiary has no interest in any payment or substitute property received by the owner during the owner’s lifetime. IC 32-17-14-18.

If the owner is determined to be a protected person for whom a guardian or conservator takes possession of the owner’s property, the beneficiary’s right to that property would be determined under IC 29-3-8-6.5. This formula basically calculates the percentage of the TOD property in the overall estate and awards to the beneficiaries the same percentage of the property left at the time the owner dies. IC 32-17-14-17(c).

The trustee of a trust may be designated beneficiary regardless of whether the trust is amendable, revocable, irrevocable, funded, unfunded, or amended after the designation is made. IC 32-17-14-21(a). Unless a beneficiary designation provides otherwise, a trust is revoked or terminated, before the death of the owner, is considered nonexisting at the owner’s death. IC 32-17-14-21(b). Unless the beneficiary designation provides otherwise, a legal entity of trust that does not exist or comes into existence effective as of the owner’s death, is considered nonexistent at the owner’s death. IC 32-17-14-21(c).

RULES OF CONSTRUCTION

LINEAL DESCENDANTS PER STIRPES. IC 32-17-14-22 contains an exception to the requirement that the beneficiary survive the owner. Because of a 2010 amendment, this exception apparently applies to transfer on death transfers for vehicles or watercraft. A distinction is drawn under this part of the Act between a designated beneficiary who is a


lineal descendant of the owner and a designated beneficiary is not a lineal descendant of the owner. If the designated beneficiary is a lineal descendant of the owner, but is deceased at the time the beneficiary designation is made; does not survive the owner or is treated as not surviving the owner, the beneficiary’s right to the transfer on death transfer belongs to the beneficiary’s lineal descendants per stirpes who survive the owner unless the owner provides otherwise in the beneficiary designation. IC 32-17-14-22(b). In order to negate the presumed lineal descendant’s per stirpes, the owner and the beneficiary designation may make the notation “no LDPS” after the beneficiary’s name or include other words negating the intention that the lineal descendants receive the benefit. IC 32-17-14-22(c).

If the designated beneficiary is not a lineal descendant of the owner, then the requirement that the beneficiary must survive the owner’s death remains intact unless the beneficiary designation indicates that it is to be otherwise. The owner’s intent can be designated by the words “lineal descendant per stirpes” following the name of the beneficiary or the notation “LDPS.” IC 32-17-14-22(e).

If there are no lineal descendants for the predeceased beneficiary, the right to receive the property belongs to any other surviving beneficiary designated in the beneficiary designation. If there are no other beneficiaries, the property belongs to the owner’s estate. IC 32-17-14-22(f).

DISSOLUTION OF MARRIAGE. If the beneficiary designation is made in favor of the owner’s spouse and the marriage is dissolved or annulled, the designation is revoked on the date the marriage is dissolved or annulled. This is true even though the spouse’s status is not indicated on the beneficiary designation. The beneficiary designation is treated as though the former spouse had not survived the owner. IC 32-17-14-23(a).

This rule does not apply if the beneficiary designation has been made irrevocable or revocable only with the spouse’s consent or is made after the marriage is dissolved or annulled or expressly states dissolution or annulment does not affect the designation. IC 32-17-14-23(b). If the couple remarries, the beneficiary designation that was revoked is revived. IC 32-17-14-23(c). This provision regarding dissolution of marriage does not apply to retirement plans under ERISA. IC 32-17-14-23(d).

FRAUD. As indicated earlier, a beneficiary designation that is procured by fraud, duress, undue influence or mistake or because the owner lacked capacity is void. IC 32-17-14-24(a)

SLAYER RULE. IC 32-17-14-24(b) adopts the provisions of IC 29-1-2-12.1 which is known as the Slayer Rule. If the beneficiary murders the owner, then the beneficiary’s share is held in constructive trust pursuant to the terms of that provision.

NO SPOUSAL RIGHTS OR ALLOWANCES. Originally, a spouse or child of the owner did not have any rights to elect to take against the beneficiary designation or for an allowance. IC 32-17-14-25(a). In 2010, this was changed to prohibit spousal elections but to allow allowances. A proposed 2011 amendment would remove any reference to a spousal election deferring to common law.


ADOPTION. If the beneficiary designation is for the children of the owner, then the designation includes all children regardless of whether they are adopted before or after the beneficiary designation is made. IC 32-17-14-25(b).

AFTERBORN CHILD. If the beneficiary in the beneficiary designation is a child of the owner, and there is a child either born or adopted by the owner after the beneficiary designation, then that afterborn or adopted child will be entitled to a share of the beneficial interest expressed as a fraction in which the numerator is one and the denominator is the total number of the owner’s children. IC 32-17-14-25(c). The beneficiary designation can provide otherwise. In addition, a transferring entity is not obligated to apply this rule to property registered in beneficiary form. IC 32-17-14-25(d). The rule only applies if the beneficiary designation is a child of the owner. IC 32-17-14-25(e).

TRANSFEROR PROTECTIONS

A beneficiary designation is presumed to be valid and a party may rely on the presumption of the validity unless the party has actual knowledge that the beneficiary designation was not validly executed. A person who acts in good faith reliance on a transfer on death deed is immune from liability to the same extent as if the person had dealt directly with a named owner and the named owner had been competent and not incapacitated. IC 32-17-14-26(c).

A transferring entity is protected in many ways. The transferring entity may execute the transfer on death transfer with or without a written request for execution. The transferring entity may rely and act on a certified or authenticated copy of a death certificate containing the fact, place, date, and time of death and the identity of the decedent and a certified and authenticated copy of a report or record that is of a person missing, detained, dead or alive, and the dates, circumstances and places disclosed by the record or report. IC 32-17-14-27(b)(c). The transferring entity has no duty to verify the information contained within the written request for the execution of the beneficiary designation. The transferring entity may rely and act on a request made by a beneficiary or beneficiary’s attorney in fact, guardian, conservator, or other agent. IC 32-17-14-27(d).

If the transferring entity receives a written notice in a manner, place and time that gives the entity reasonable opportunity to act before making the transfer and gives notice of a claim of the beneficiary of the transfer adverse to the transfer to be made with the name of the claimant and an address for communications directed to the claimant, identifies the deceased owner and states the nature of the claim as it effects the transfer, then the transferring entity must delay the distribution. IC 32-17-14-27(f). This coordinates the Transfer on Death Act with the claims against nonprobate property provisions in IC 32-17-13.

Upon receipt of this notice, the transferring entity can discharge any duty to the claimant by sending a notice by certified mail to the claimant at the address provided in the notice of claim. The notice must advise the claimant that a transfer in the claimant’s asserted claim will be made at least forty five (45) days after the date of the mailing unless the transfer is restrained by court order. If the transferring entity mails the notice described by this


subsection to the claimant, the transferring entity shall withhold making the transfer for at least 45 days after the date of the mailing. Unless the transfer is restrained by court order, the transferring entity may make the transfer at least 45 days after the date of mailing. IC 32-17-14-27(g). Without this notice, a transferring entity has no duty to withhold making a transfer based on knowledge of any fact or claim adverse to the transfer.

Except as provided above, the transferring entity has no duty: (1) to give notice to any person of the date and manner and persons to whom a transfer will be made under a beneficiary designation; (2) to attempt to locate any beneficiary of lineal descendant substitute; (3) to determine whether a nonsurviving beneficiary descendant had a lineal descendant who has survived the owner; (4) to locate a trustee or custodian; (5) to obtain the appointment of a successor trustee custodian; (6) to discover the instrument of a trust instrument or will that creates an express trust; or (7) to determine any fact or law that would cause the beneficiary designation to be revoked in whole and in part because of a change in marital status or other reason, or cause of variation distribution provided in the beneficiary designation. IC 32-17-14-27)(e).

The transferring entity is not responsible for the application or use of the property transferred to a fiduciary entitled to receive the property. IC 32-17-14-27(i). A transferring entity that makes the transfer in good faith and reliance on the information the transferring entity reasonably believes to be accurate is discharged from all claims for the amounts paid and the property transferred. IC 32-17-14-27(k).

If the transferring entity still has qualms, it can ask the parties disputing the transfer to adjudicate their respective rights or require the party to file an indemnity bond protecting the transferring entity. IC 32-17-14-27(j).

Finally, the transferring entity is entitled to all protections provided by the Act or any other protections in other applicable Indiana law. IC 32-17-14-10-27(l).

ACTIVITIES BY AN AGENT

An attorney-in-fact, guardian, conservator or other agent acting on behalf of the owner of property may make, revoke, or change a beneficiary designation if the action complies with the terms of the Act and any other applicable law and the action is not expressly forbidden by the document establishing the agent’s right to act on behalf of the owner. An attorney-in-fact, guardian, conservator or other agent may withdraw, sell, pledge or otherwise transfer property that is subject to the beneficiary designation notwithstanding the fact that the effect of the transfer may be to extinguish the beneficiary’s right to receive a transfer of the property at the death of the owner. IC 32-17-14-17.

REMEDIES


IC 32-17-14-28 discusses remedies available in certain situations and limitations on those remedies. First, it makes clear that protections provided to a transferring entity or to a purchaser or lender do not affect the rights of the beneficiaries who are involved in disputes that are with parties other than the transferring entity, purchaser or lender for value and concern ownership of the property under this Act. IC 32-17-14-28(a). If money or property was improperly distributed under a transfer on death transfer, the transferee of the improper transfer is liable for the return of the money or property, including income to the transferring entity or the delivery of the money or property including income to the rightful transferee. IC 32-17-14-27(b). In a 2010 amendment, recovery of attorney fees was added. If the property received by the transferee under the transfer on death transfer, it has already been sold or transferred by the transferee, the transferee is then liable to an amount equal to the sum of the value of the property as of the date of the disposition and the income and gain that the transferee received from the property as proceeds. IC 32-17-14-27(c). In a 2010 amendment, recovery of attorney fees was added. If the transferee of the improperly received property has encumbered the property, then the transferee is liable for an amount sufficient to release the security interest lien or other encumbrance. IC 32-17-14-27(d).

A purchaser for value of property or a lender who acquires the security interest in property, in good faith or without actual knowledge that the transfer was improper or that the affidavit, information was not true takes property free of any claims of unreliability to the owner’s estate, creditors of the owner’s estate, persons claiming rights as beneficiaries of the transfer on death transfer, or heirs of the owner’s estate. Purchaser or lender for value has no duty to verify sworn in information. IC 32-17-14-27(e). The purchaser or lender for value is not relieved from any notice provided by instruments of record with respect to the property. IC 32-17-14-27(f).

If the transfer is improper because of IC 32-17-14-22 through 25 of the Act, then there is no liability on the transferring entity if the transfer was made in good faith. The remedy of the rightful transferee must be obtained in an action against the improper transferee. IC 32-17-14-27(g). Section 22 deals with lineal descendants per stirpes. Section 23 deals with dissolution of marriage. Section 24 deals with fraud, duress or a mistake. Section 25 is basically the rules of construction dealing with allowances, elections, adoptions and afterborn children.

CREDITORS RIGHTS

We previously discussed the coordination of the Transfer on Death Property Act with the claims against nonprobate transfers contained in IC 32-17-14-27(f) and (g) whereby notice can be given to the transferring entity of these types of nonprobate claims.

IC 32-17-14-29 states that the act does not limit the right of the owner’s creditors against beneficiaries or other transferees available under applicable Indiana law especially as contained in the claim against nonprobate transfers in IC 32-17-13.

CHANGE IN FACTS


IC 32-17-14-30 states that the following four (4) changes in fact shall not relieve the transferring entity of its obligations under this Act:

1. Beneficiary designation;2. Residency of the owner;3. Residence or place of business of the transferring entity; or4. Location of the property.

JURISDICTION

IC 32-17-14-31 vests jurisdiction in the probate court to determine questions and issue appropriate orders concerning the determination of the beneficiary and the proper share. The probate court can also issue appropriate orders concerning any action to obtain distribution of any money or property from the transferring entity or with respect to money or property that was improperly distributed to any person and obtain the return of any money or property or income earned on the money or property or the amount equal to the sum of the value of the property plus incoming gain.

FOREIGN TRANSFER ON DEATH TRANSFERS

IC 32-17-14-32 recognizes a beneficiary designation made under the Uniform Probate Code as enacted by another state or the Uniform TOD Security Registration Law as enacted by another state or a similar law of another state except for transfer on death deeds. IC 32-17-14-32(a). Under the laws of those states, a transfer on death transfer may be executed and then enforced in Indiana. Except for transfer on death deeds, the meaning of the legal effect of a transfer on death transfer is determined by the law of the state selected in a governing instrument or beneficiary designation. IC 32-17-14-32(b) and (c).


EXHIBIT A

TRANSFER ON DEATH UNREGISTERED

TANGIBLE PERSONAL PROPERTY

[Owner’s name or names] (collectively and separately “Owner”) TRANSFERS ON OWNER’S DEATH to [Primary Beneficiary name or names] (collectively and separately “Primary Beneficiary”) any interest Owner owns at Owner’s death in the following described unregistered tangible personal property:

[Description](Optional) If a Primary Beneficiary shall not survive the Owner, or is not in existence when Owner dies, then the interest transferred on Owner’s death to that predeceased Primary Beneficiary shall [Choose one option]

(a) lapse and no transfer shall occur.(b) be distributed to the predeceased Primary Beneficiary’s LDPS.(c) be distributed to [Contingent Beneficiary name or names] (collectively and

separately “Contingent Beneficiary”).

(Optional) If a Contingent Beneficiary whose interest is contingent to that of the predeceased Primary Beneficiary shall not survive the Owner, or is not in existence when Owner dies, then the interest transferred on death to that predeceased Contingent Beneficiary shall [Choose one option]

(a) lapse and no transfer shall occur.(b) be distributed to the predeceased Contingent Beneficiary’s LDPS.(c) be distributed to [Second Contingent Beneficiary name or names]

(collectively and separately “Second Contingent Beneficiary”).

(Optional) This Transfer on Death revokes, modifies and supersedes a Transfer on Death to the extent it applies to the same property signed by Owner on [date signed].

Date

[Typed name of Owner]

STATE OF INDIANA, COUNTY OF ___________, SS:


Before me, a notary public in and for said county and state residing in ________County, Indiana, personally appeared __________________, and acknowledged the execution of the foregoing document.

Witness my hand and notary seal this _____ day of _________________, 20__.

______________________________ Notary Public

My Commission Expires:

(printed name of notary)

THIS INSTRUMENT WAS PREPARED BY (Name of lawyer), LAWYER, (Name and Address of Law Firm) AT THE SPECIFIC REQUEST OF OWNER OR BENEFICIARY AND IS BASED SOLELY ON INFORMATION SUPPLIED BY ONE OR MORE OF THOSE PARTIES AND WITHOUT EXAMINATION FOR ACCURACY. THIS PREPARER ASSUMES NO LIABILITY FOR ANY ERRORS, INACCURACY OR OMISSIONS IN THIS INSTRUMENT RESULTING FROM THE INFORMATION PROVIDED. THE PARTIES ACCEPT THIS DISCLAIMER BY OWNER’S EXECUTION OF THIS DOCUMENT OR BENEFICIARY’S ACCEPTANCE.


EXHIBIT B

TRANSFER ON DEATH DEED

[Owner’s name or names] (collectively and separately “Owner”) TRANSFERS ON OWNER’S DEATH for NO CONSIDERATION, to [Primary Beneficiary’s name or names. If more than one, specify interest transferred; i.e., JTWROS, Life Estate with remainder to, or tenants in common, etc.] (collectively and separately “Primary Beneficiary”) any interest Owner owns at Owner’s death in the following described real estate:

[Description]

(Optional) If a Primary Beneficiary shall not survive the Owner, or is not in existence when Owner dies, then the interest transferred on Owner’s death to that predeceased Primary Beneficiary shall [Choose one option]

(d) lapse and no transfer shall occur.(e) be distributed to the predeceased Primary Beneficiary’s LDPS.(f) be distributed to [Contingent Beneficiary name or names specifying interest

transferred if more than one] (collectively and separately “Contingent Beneficiary”).

(Optional) If a Contingent Beneficiary whose interest is contingent to that of the predeceased Primary Beneficiary shall not survive the Owner, or is not in existence when Owner dies, then the interest transferred on death to that predeceased Contingent Beneficiary shall [Choose one option]

(d) lapse and no transfer shall occur.(e) be distributed to the predeceased Contingent Beneficiary’s LDPS.(f) be distributed to [Second Contingent Beneficiary name or names specifying

interest transferred if more than one] (collectively and separately “Second Contingent Beneficiary”).

(Optional) This Transfer on Death revokes, modifies and supersedes Owner’s Transfer on Death Deed signed by Owner [date signed] and recorded [date recorded] in the Office of the Recorder of [County] County, Indiana as [Recording Information].

Dated

[Typed name of Owner]





______________________________ Notary Public



I AFFIRM UNDER THE PENALTIES FOR PERJURY, THAT I HAVE TAKEN REASONABLE CARE TO REDACT EACH SOCIAL SECURITY NUMBER IN THIS DOCUMENT, UNLESS REQUIRED BY LAW.

_____________________________

OWNER’S ADDRESS:

BENEFICIARY’S ADDRESS:

MAIL TAX STATEMENTS TO:

THIS INSTRUMENT WAS PREPARED BY (Name of lawyer), LAWYER, (Name and Address of Law Firm) AT THE SPECIFIC REQUEST OF OWNER OR BENEFICIARY AND IS BASED SOLELY ON INFORMATION SUPPLIED BY ONE OR MORE OF THOSE PARTIES AND WITHOUT EXAMINATION FOR ACCURACY. THIS PREPARER ASSUMES NO LIABILITY FOR ANY ERRORS, INACCURACY OR OMISSIONS IN THIS INSTRUMENT RESULTING FROM THE INFORMATION


PROVIDED. THE PARTIES ACCEPT THIS DISCLAIMER BY OWNER’S EXECUTION OF THIS DOCUMENT OR BENEFICIARY’S ACCEPTANCE.

EXHIBIT C

TRANSFER ON DEATH AFFIDAVIT

[Name of Affiant], upon personal knowledge and belief, makes these statements.

1. [Owner’s name] (“Owner”) died [Date of Death] (a certified copy of the Owner’s death certificate is attached as Exhibit A) owning at death an interest in the following described real estate:

[Description]

2. On [Date of Transfer on Death Deed], Owner signed a Transfer on Death Deed transferring, on Owner’s death, Owner’s interest in the real estate described above which document was recorded [Date of Recording] in the office of the Recorder of [Name of County] County, Indiana as [Recording information].

3. The designated beneficiary or beneficiaries in the Transfer on Death Deed and their addresses who did not survive Owner or were not in existence when Owner died are:

[Name of predeceased beneficiary and address]

4. The designated beneficiary or beneficiaries in the Transfer on Death Deed and their addresses who survive the Owner or are in existence at Owner’s death are:

[Name of surviving beneficiary and address]

5. The purpose of this Affidavit is to comply with the requirements of IC 32-17-14-26(b)(20) to transfer on death Owner’s interest in the real estate described above to the Transfer on Death Deed beneficiary.

Dated this ____ day of ______________, 20__.

[Typed name of Affiant]





______________________________ Notary Public




_____________________________



EXHIBIT D

TRANSFER ON DEATH DEEDREVOCATION

[Owner’s name or names] (collectively or separately “Owner”) REVOKES a Transfer on Death Deed signed by Owner on [Date signed] and recorded [Date recorded] in the office of the Recorder of [County] County, Indiana as [Recording information] which Transfer on Death Deed transferred on Owner’s death Owner’s interest in the following described real estate:

[Description]

Dated

[Type Owner’s name]

STATE OF INDIANA, COUNTY OF ______________ SS:

Before me, a notary public in and for said county and state residing in ________County, Indiana, personally appeared __________________, and acknowledged the execution of the foregoing document, and who, having been duly sworn, stated that the representations therein contained are true.


______________________________ Notary Public




_____________________________




Documents

ARTICLE THAT JEFF IS WRITING (have previous in … · Web viewTRANSFER ON DEATH PROPERTY ACT INTRODUCTION In 1976, the payable on death or POD concept was introduced when Indiana