New S.D. law simplifies property transfers on owner’s death

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

The “transfer on death” legislation in South Dakota is a 21st century blessing to property owners. The purpose of the Real Property Transfer on Death Act is to simplify a transfer of real property, or mineral interests, on the death of the owner.

I have noticed that some advocates overlook the fact that the law also applies to mineral interests. A transfer on death deed is completed not by probate and not by an executed will, but rather by the execution of a special deed.  

The law as written has a second important benefit regarding 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 new law creates a workable method of transferring property 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 non-probate transfer of both real estate and mineral interests by the proper writing and recording of  the transfer on death deed.

This contemporary law allows an owner of property to “will” the property or mineral interests to a named beneficiary. Such beneficiaries are also called grantees. The property passes, that is transfers, only at the grantor’s death. This action does not require the writing of a will or the creation of an estate trust.

I list some important considerations without belaboring the technical details in this piece. 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 cancel the transfer, 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  revoke the recorded transfer on death deed, and put things back to where they were before the transfer on death deed.

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. The transfer process is distinguishable, for example, from the creation of a so-called life estate in property.  The creation of a life estate in property  during the grantor’s lifetime might complicate such things as obtaining a mortgage or otherwise addressing one’s legal rights concerning 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 control the property or to  sell the property. And importantly for those with wayward beneficiaries, the property owner may change the beneficiary at any time. 

David L. Ganje practices commercial, natural resources and environmental law. His website is lexenergy.net.

Photo: Black Hills National Cemetery, public domain, wikimedia commons

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