David Ganje: Have your cake and eat it too

David Ganje
Special to the Farm Forum
David Ganje

Sometimes it actually happens. Sometimes introducing laws actually make things better. No law is perfect and most are problematic, but I am pleased to report that some laws actually work to their purpose.

The Real Property Transfer on Death Act is a 21st century blessing to property owners in South Dakota. The underlying purpose of the transfer on death legislation is to simplify a transfer of real property, or mineral interests, on the death of the owner. It is done not by probate and not by an executed will, but by the drafting of a deed.

The law as written has a second important benefit in the area of mineral interests. Real property rights include mineral rights. Such property rights may be split or “severed” into surface estate rights and mineral estate rights. Surface rights and mineral rights to one property parcel may be owned by two separate parties. These different ownership rights may be independently transferred or developed.

The law creates a workable method of transferring both real estate and mineral interests without the use of a trust or without having to go into probate court.

Transfer on death deeds are a practical way to transfer property to a beneficiary upon death. The law allows for the nonprobate transfer of both real estate and mineral interests by the proper writing and recording of a transfer on death deed.

This law allows an owner of real property to “will” the property or mineral interests to a named beneficiary. The real property passes at the grantor’s death to the beneficiary by the drafting and recording of a special deed. This action does not require the writing of a will or the creation of an estate trust.

During the owner’s lifetime, the named beneficiary in the deed has no interest in the property. A property owner during his or her life still holds the legal authority to transfer the property to other parties or to deal with it for other purposes.

So, how can you have your cake and eat it too? After recording such a transfer deed, an owner may still during his life revoke the recorded transfer on death deed and put things back to where they were.

A benefit of using a transfer on death deed is that the grantor will fully and freely own the property until his or her death. If the grantor and property owner instead created, for example, a life estate with a remainder interest, the beneficiary of the life estate would have an interest in the property during the grantor's lifetime – this might complicate such things as obtaining a mortgage or exercising one’s legal rights which are affected by acts upon the land itself.

To recap some important issues under the law: With a transfer on death deed, a beneficiary does not have the right to give permission to use the property or to sell the property. The property owner may change the beneficiary at any time.

David Ganje is an attorney who practices natural resources, environmental and commercial law in South Dakota.