You have likely heard the advice from neighbors or financial advisors: “Just put a beneficiary on everything, and you won’t need a will.”
It is an appealing promise. The idea of bypassing the probate court is universally attractive. In Ohio, a robust system of “non-probate transfers” allows you to pass assets like your home, car, and bank accounts directly to your loved ones.
However, there is a dangerous gap between knowing these tools exist and executing them correctly.
At Brumbaugh Law Firm, we frequently meet families who thought they had a “simple” plan, only to find themselves stuck in probate court because of a single overlooked detail.
We’ll help you look at the mechanics of Payable-on-Death (POD) and Transfer-on-Death (TOD) instruments in Ohio, the critical 2009 legal shift regarding real estate, and the specific steps your beneficiaries must take to actually claim their inheritance.
The Financial Case for Bypassing Probate
Avoiding probate is the primary goal for many of our clients, and it usually comes down to math and privacy.
In Ohio, probate is a public legal proceeding. Anyone can pull the records to see what you owned and who received it. More importantly, it can be expensive. Statutory attorney fees in Ohio can be authorized up to 6% on the first $3,000 of the estate and 4% on the next $15,000, with varying percentages thereafter.
For a modest estate, these costs, combined with court filing fees, can significantly reduce what you leave behind. By utilizing non-probate transfers, you are essentially pre-approving the transfer of ownership, removing the need for a judge’s permission.
The Ohio Non-Probate Hierarchy
To create a seamless plan, you must understand the different “buckets” of assets and the specific Ohio laws that govern them.
1. Financial Accounts: POD and TOD
Bank accounts (checking, savings, CDs) utilize Payable-on-Death (POD) designations. Investment accounts (brokerage, stocks) use Transfer-on-Death (TOD) registrations.
- The Strategy: This is often the easiest step. However, make sure you name contingent beneficiaries. If your primary beneficiary passes away before you, and no backup is named, that account falls right back into probate.
2. Real Estate: The Transfer on Death Designation Affidavit
This is where many online guides fail to provide current information.
- The Law: Prior to late 2009, Ohio used “TOD Deeds.” On December 28, 2009, Ohio law shifted (ORC 5302.22). We no longer use deeds for this purpose. We use a Transfer on Death Designation Affidavit.
- The Requirement: This document must be signed, notarized, and recorded with the County Recorder while you are alive. You cannot sign it and leave it in a drawer for your kids to find later. If it isn’t recorded before death, it is invalid.
3. Vehicles and Watercraft
Ohio allows you to designate a TOD beneficiary on your vehicle title. This costs a few dollars at the Clerk of Courts title office.
- The Trap: Do not forget the “toys.” Campers, boats, and mobile homes all require their own separate designations.
Call (419) 504-4674 To Speak With Our Team
It’s never too early to start planning. Our attorneys are ready to walk you through every step, from protecting your home to qualifying for care. Contact us today to move forward with confidence.
3 Ways How DIY Plans Fail
If you are acting as your own estate attorney, be wary of these common pitfalls that we see in our Sandusky office.
1. The “Trailer Trap”
Here is a scenario that happens frequently. A parent designates beneficiaries on the house, the car, and the bank accounts. But they own a boat trailer or a utility trailer that weighs more than 4,000 pounds.
In Ohio, trailers over this weight limit are titled vehicles. If you forget to add a TOD beneficiary to that specific title, that single trailer can force your family to open a probate estate just to transfer it. The legal fees often cost more than the trailer is worth.
2. The Minor Child Disaster
You should never name a minor child (under 18) as a direct beneficiary on a POD or TOD account.
- The Consequence: If you pass away, a 12-year-old cannot legally inherit $50,000. The court will freeze the assets and appoint a guardian to manage the money (often at great expense) until the child turns 18. At 18, the child receives a check for the full amount, often with disastrous spending results.
- The Fix: This is where a trust and wills attorney becomes vital. A trust can hold these assets for the child’s benefit without court interference.
3. The “Per Stirpes” vs. “Per Capita” Problem
Most bank forms default to “Per Capita” (by the head).
- Scenario: You leave your account to your two children, Bob and Sue. Bob dies before you, leaving behind two grandkids.
- Per Capita Result: Sue gets 100% of the money. Bob’s children get nothing.
- Per Stirpes Result: Sue gets 50%, and Bob’s 50% is split between his children.
- Action: Check your beneficiary forms. If you want your grandkids to be protected, you usually need to specify “Per Stirpes.”
How to Execute the Plan
Many beneficiaries mistakenly believe that ownership transfers automatically the moment you pass away. It does not.
For real estate, the beneficiary has work to do. They must file an Affidavit of Confirmation.
The Beneficiary’s Checklist:
- Obtain a Death Certificate: You will need a certified copy.
- Draft the Affidavit: This legal document confirms the owner has died and identifies the designated beneficiary.
- Legal Description: You must include the precise legal description of the property and the Auditor’s Parcel ID number.
- Record It: The affidavit and death certificate must be filed with the County Recorder in the county where the property is located.
Until this is filed, the property is effectively in limbo. You cannot sell it, refinance it, or even insure it properly.
Additionally, all beneficiaries with an interest in the real estate, including their spouses who may hold dower rights, even if not listed on the title, must all agree 100% on everything concerning selling the property. There are no tie-breakers, no executor in charge (since probate was avoided) and no trustee to take charge.
This is often a disaster.
How TOD Impacts Medicaid Estate Recovery
For our clients concerned about long-term care costs, the interaction between TOD designations and Medicaid is critical.
Ohio has a Medicaid Estate Recovery Program. Generally, the state seeks to recover costs from the probate estate of a deceased Medicaid recipient. For years, assets in a TOD arrangement bypassed probate and were safe from recovery.
However, rules change. Ohio has adopted an expanded estate recovery program that lets the Medicaid estate recovery department come after both probate and non-probate assets when someone on the Medicaid program passes. This means avoiding probate no longer protects assets from estate recovery in Ohio.
A TOD designation does not hide assets from the initial Medicaid “spend down” calculation. A TOD only keeps that asset out of probate after death if Medicaid didn’t force you to spend it on care while alive.
Furthermore, if you are dealing with Medicaid eligibility, simply giving away assets or adding names to titles can trigger penalty periods. For example, does owning a car affect Medicaid eligibility? Generally, one vehicle is exempt, but how you title a second vehicle or a high-value trailer matters immensely.
When a Trust is Superior to a TOD
While TODs are inexpensive on the front end, they are not always the best solution. You might need a better strategy if:
- You have minor children or grandchildren.
- You have a beneficiary with special needs: A direct inheritance could disqualify them from government benefits.
- You want to control spending: A TOD is a lump sum, while a trust can distribute money over time.
- You anticipate family conflict: A probate attorney will tell you that beneficiary designations can be challenged in court if there are questions about competency or undue influence.
- You think having all your kids and their spouses having to agree on how to sell the real estate is an example of “too many cooks in the kitchen”.
Your Next Steps With Brumbaugh
Non-probate transfers are a necessary tool in the Ohio estate planning toolbox, but they are not a “set it and forget it” solution. A missed signature, an unrecorded document, or a forgotten trailer can undo your best intentions.
At Brumbaugh Law Firm, we believe in a holistic approach. We look at your entire financial picture, from your investments to your vehicle titles, to make sure your plan actually works when your family needs it most.
If you are relying on non-probate transfer designations, is your plan optimized to avoid the “Silent Probate” traps?
Contact us today to schedule a comprehensive review of your beneficiary designations. Let’s make sure your legacy passes to your loved ones exactly as you intend.
