June 17, 2024
Transfer on death (TOD) deeds are a commonly used estate planning tool intended to avoid probate. While they can effectively transfer ownership of real estate without a probate proceeding, there are drawbacks to their use. One such drawback is illustrated by a case from Minnesota titled Strope-Robinson v. State Farm Fire and Casualty Company. In that case, Ms. Strope-Robinson became the owner of her uncle’s property pursuant to a TOD deed. The uncle had insured the property, and the niece assumed the insurance would continue to provide coverage after his death. A week after the uncle’s death, the house caught fire. The insurance company denied coverage on the basis that the policy was not issued to the owner (the niece). The insurance company successfully argued that, because the title to the property passed immediately and directly to the niece upon the uncle’s death, neither the uncle nor his estate had an insurable interest in the property. As a result, the coverage paid for by the uncle was not available to the niece, and there was no insurance coverage for the fire damage.
House Enrolled Act 1034, passed and signed into law during the most recent legislative session of Indiana, attempts to address this problem, although not immediately. For transfers that occur on or after January 1, 2025, the law will require insurance companies in transfer on death situations to continue coverage for a period of time of between 30 and 60 days, thus allowing the new owner the opportunity to secure insurance coverage of their own.
It is noteworthy that it does not go into effect until 2025. In the meantime, those who have transfer on death deeds as part of their estate plan should check with their insurance agent or company now to make sure that there is a continuing period of coverage for the transfer on death beneficiary.
If you have any questions or concerns regarding this matter, please contact Randy Hesser or any of the other attorneys at Warrick & Boyn, LLP.