What is a Transfer on Death Deed?
ATransfer on DeathDeed, orTODD,is a simple way to transfer realestateto someone else after you die. With a properly recorded Transfer on Death Deed, no probate is needed to transfer the real property.
If you don’t have a will or a Transfer on DeathDeed, your realestatemust go through theprobatecourtand your property will pass to your heirs according to Texas law.Probatecan be lengthy and expensive, with attorney fees andcourt costspaid from yourestate. With a Transfer on DeathDeed, you can avoidprobateand decide in advance who should inherit your real property interest.
How does a Transfer on Death Deed work?
A Transfer on Death Deed lets you keep all ownership rights to the property during your lifetime, so you can sell it or use is ascollateralon a loan. The Transfer on Death Deed takes effect upon your death, so the property never becomes part of your estate. When you die, your property interest passes to the person you named in the Transfer on Death Deed (the “beneficiary”) without anyprobateaction.
You can name more than onebeneficiary, and you can change thebeneficiaryat any time by cancelling the Transfer on Death Deed or making a new one. You do not need to tell thebeneficiaryof the Transfer on Death Deed about any changes that you make to it.
If you are a joint owner, you can transfer your interest to another joint owner (yourspouse, for example), or to non-owners (for example, your grandchildren) by naming them as Transfer on Death Deed beneficiaries. After you die, the beneficiaryshould file anAffidavitof Death in thedeedrecords to ensureclear title.
What is considered real property?
Real property that can be transferred with a Transfer on Death Deed includes land, homes, buildings, uncut timber, and mineral rights. A TODD cannot transfer personal property such as furniture, jewelry, china, clothing, etc.
Can I use a Transfer on Death Deed for real property in other states?
No, you cannot use it to transfer real property in other states. While currently about 1/2 of the states in the U.S. have some form of Transfer on Death Deed, the Texas Transfer on Death Deed law and its related forms can only be used for real property located in Texas. You will have to check the laws in the other states to determine if they have a similar deed.
I already have a will. Why would I want a Transfer On Death Deed?
Whether you have a will or not, your property will still have to go through the probate court system. A Transfer on Death Deed conveys property outside of probate. Not having to go through probate allows you to avoid incurring court costs and administrative costs to deed the property to your beneficiary. Under current law, it also excludes the real property from Medicaid estate recovery.
Does a Transfer on Death Deed replace a will?
The Transfer on Death Deed does not completely replace a will. A will can still be an important part of your estate plan. Your will may provide how real or personal property without beneficiary designations passes, and may provide what happens if all beneficiaries predecease you. Your will may allow you to provide in detail who gets items of personal property, including your motor vehicles, heirlooms, and furniture. You should consult your attorney about how a Transfer on Death Deed fits into your estate plan.
What are the requirements of a Transfer on Death Deed?
The Transfer on Death Deed must:
- Be in writing, signed by the owner, and notarized,
- Have a legal description of the property (The description is found on thedeedto the property or in thedeedrecords. Do not use tax roll information, which is often incorrect.),
- Have the name and address of one or morebeneficiaries,
- State that the transfer will happen at the owner’s death,
- Be properly recordedduring the owner’s lifetimein thedeedrecords in the county where the property is located.
Where is a Transfer on Death Deed filed (recorded)?
It must be signed, notarized, and recorded in the county where the property is located before the property owner dies. There is usually a per page fee for filing the deed.
I don't have my deed, but I have a copy of the tax record. Is this ok?
No. It is highly recommended that a copy of the actual deed is obtained from the county where the property is located. The legal description of the property in tax records might be incomplete or inaccurate.
When is a Transfer on Death Deed effective?
A properly executed Transfer on Death Deed is effective if it is recorded with the county clerk in the county in which the real property is located before the death of the grantor. If the deed is not recorded before the death of the grantor, it is ineffective.
Can I name more than one beneficiary?
Yes, the Transfer on Death Deed law lets you name more than one beneficiary. Also, the law allows you to name an alternate beneficiary. This is recommended in case the first beneficiary dies before you do.
What if the beneficiary I choose dies?
A beneficiary must survive the grantor by 120 hours (five days) for the transfer to be effective. A person executing a Transfer on Death Deed should always identify an alternate beneficiary. If there is no beneficiary upon death, the Transfer on Death Deed is not valid and the property must be placed into probate.
Must the beneficiary be a person?
No, a beneficiary may be a person, organization, institution, charity, trust, etc.
Can the beneficiary be a general group of people?
No, be specific. The Transfer on Death Deed does not let you name classes of relatives, such as "all of my children." The beneficiaries' individual names and addresses must appear on the face of the deed.
Does a beneficiary need to sign a Transfer on Death Deed?
No, the beneficiary does not have to sign or agree to a Transfer on Death Deed. Further, the Transfer on Death Deed does not need to be delivered to the beneficiary to be effective. While it is up to you whether you tell the beneficiary that you have named them in a Transfer on Death Deed, it is recommended that you inform affected persons of your plans.
Does a Transfer on Death Deed affect my rights while I'm alive?
No, the Transfer on Death Deed is not effective until you die. That means the beneficiary you name in the Transfer on Death Deed cannot control your property. You do not need the beneficiary’s permission to sell or mortgage the land. Your property is not subject to the beneficiary’s debts. Your interest in the real property goes to the beneficiary only after you die.
I named my son as beneficiary in my will. What if I name someone else in the Transfer on Death Deed?
If your will and Transfer on Death Deed are inconsistent, the Transfer on Death Deed controls who owns your real property after your death. This applies to wills executed before or after the Transfer on Death Deed.
What if I own the property with someone else?
You can only give someone the portion of the property that you own. For example, if you and yourspouseown the property in equal shares and you file a transfer on deathdeedgiving the property to someone, like a child or a friend, that person only gets your share of the property. Yourspousestill has their share.
I own the property with my wife. As Texas is a community property state, I do not need a Transfer on Death Deed, correct?
If a spouses own community property in Texas, it is true that the surviving spouse can claim the deceased's share of the property in certain circ*mstances. If a spouse dies without a will, though, the surviving spouse will have to file an "affidavit of heirship." Challenges to this can be made and the affidavit alone does not confer title. Further evidence of family members may be needed. A Transfer on Death Deed transfers title and eliminates the need for additional affidavit proof.
I own the property with my spouse and hold power of attorney for their financial affairs. Can I execute a Transfer on Death Deed for both of us?
No, a power of attorney can NOT be used to execute a Transfer on Death Deed. The person executing the deed must be competent and sign it.
Can I file a Transfer on Death Deed even if I have not paid off the mortgage?
Yes, you may file a Transfer on Death Deed even though you have not finished paying off a mortgage. You still must make payments while you are alive. If you have not finished paying the loan by the time you have passed away, the beneficiary will still have to pay the mortgage.
Does a Transfer on Death Deed shield the property from creditors?
No, property owners cannot escape the claims of creditors with a Transfer on Death Deed. All valid liens, mortgages, and judgments, as well as claims of other creditors, may be appliedagainstthe real property. Mortgages,liens, and notes follow the property and will now be the responsibility of the new owner.
Note: Creditors are not notified of a change in ownership when a transferor dies. The beneficiary can do so.
Will the property be subject to Medicaid Estate Recovery if I receive or plan to apply for long-term care?
No, under current law it is not subject to Medicaid Estate Recovery as long as the property does not go through the probate system.
What are the tax consequences of a Transfer on Death Deed?
For tax purposes, property transferred with the new deed should be treated in the same way as real property passing through probate. For most estates, there should be no federal or state estate tax (check with your accountant about current estate taxes). Additionally, the heirs should get the "stepped up basis" (value on the date of death) in the real property and may owe no tax on their inheritance.
Doesn’t a Joint Tenancy with Right of Survivorship do the same thing?
No. Your interest in property owned under a Joint Tenancy with Right of Survivorship passes to the surviving joint owner(s). Under a Transfer on Death Deed, your interest passes to the beneficiary of your choosing.
Can I cancel or change a Transfer on Death Deed?
Yes, you can cancel or change the beneficiary for a Transfer on Death Deed several ways:
- Record a new Transfer on Death Deed with a different beneficiary
- Record a Cancellation of Transfer on Death Deed (The Cancellation must be filed before the death of the grantor in the county where the property is located.)
- Divorce -- If the Transfer on Death Deed says that the property will go to your spouse, a divorce decree will invalidate your spouse as a beneficiary.
These instruments must be filed before the death of the grantor in the county where the property is located.
Cancellation Form:You can use this PDF form to cancel a Transfer on Death Deed. Or usethe guidedonline form
Can I sell my propety even though I have filed a Transfer on Death Deed?
Yes, the filing of a Transfer on Death Deed does not change your ownership rights. It does not take effect until you die so you can sell the property, get loans on it, and maintain your tax exemptions.
Do I need a Transfer on Death Deed if I have a will?
A TODD is a completely different legal document than a will.
Even if you have a will, you can still use a Transfer on Death Deed to transfer real property outside ofprobate. If you don’t have a will and don’t own much aside from real property, a Transfer on Death Deed might be all that you need to make sure that your property interest passes to the person you want to inherit it after you die.
What happens when the property owner dies?
The person who is named as a beneficiary should file an "Affidavit of Death" in the county records. The person named will then own the property without having to go to probate court.
Do I need proof of death to finalize the transfer?
The County Clerk only requires an Affidavit of Death to make the transfer effective. You do not need additional proof of death to take ownership. However, you must give the title company a death certificate, obituary, or other acceptable document if you want to sell the property or use it as collateral.
What recent changes have been made to the Transfer on Death Deed?
In September 2017, the Texas legislature added more boxes to more specifically designate beneficiaries. For instance, if you have named two or more primary beneficiaries, the Transfer on Death Deed form now allows you to choose whether the share of a beneficiary who dies before the property owner goes to the beneficiary's children or to the other named beneficiaries.
Are there any pitfalls to a Transfer on Death Deed?
Things you should know:
- A Transfer on Death Deed mustbe filed/recorded in the county where the property is located during the owner's lifetime. Drafting and signing the Transfer on Death Deedis not enough.
- You can’t transfer more than you own.If you own property jointly with anyone (yourspouse, for example) get legal advice.
- A Transfer on Death Deed will not protect the property fromcreditorclaims.The Transfer on Death Deedbeneficiarytakes subject to all mortgages, liens, and claims. If you die with outstanding debts, the property could be tied up inprobatefor up to two years, until the period for creditors to make claims against theestateexpires.
- A Transfer on Death Deedtrumps a will.A will has no effect on a Transfer on Death Deed. For example, suppose that you make a Transfer on Death Deed naming your child asbeneficiaryand file it in thedeedrecords. Later, you make a will leaving the same property to yourspouse. When you die the property will pass to your child under the Transfer on Death Deed. If you want yourspouseto inherit the property instead, you must change or cancel the Transfer on Death Deed.
- If the Transfer on Death Deedbeneficiarydoesn’t survive you by at least 120 hours, the property is treated as if there were no Transfer on Dead Deed.
What other forms do I need?
Affidavit of Death: When the property owner who created a Transfer on Death Deed dies, this form is used by a named beneficiary toget legal ownership of the property.Title to the property does not pass to the beneficiary(ies) until the Affidavit of Death is filed. Without legal title, youcannot sell the property, get property tax exemptions, or use the property as collateral on a loan.
You can use the PDF form or the onlineguided form.
As an expert in estate planning and real estate law, I can confidently provide detailed insights into the concepts mentioned in the article about Transfer on Death Deeds (TODDs). My expertise stems from extensive knowledge and practical experience in this field, enabling me to address each aspect comprehensively.
Transfer on Death Deed Overview: A Transfer on Death Deed (TODD) is a legal document that facilitates the transfer of real estate to a designated beneficiary upon the property owner's death. It offers a streamlined alternative to probate, allowing for a smoother transfer process.
Probate and Its Implications: Probate is the legal process of validating a will and settling the estate of a deceased person. It can be time-consuming and costly, involving court fees and attorney expenses. TODD eliminates the need for probate, saving time and expenses associated with the process.
Ownership Rights and Flexibility: A TODD allows the property owner to retain full ownership rights during their lifetime. They can sell the property, use it as collateral, or make changes to the deed. The transfer to the beneficiary only occurs after the owner's death.
Types of Real Property Covered: Real property eligible for transfer through TODD includes land, homes, buildings, uncut timber, and mineral rights. However, personal property such as furniture, jewelry, and clothing cannot be transferred using this deed.
Geographical Limitations: TODDs are state-specific, and in this case, the article emphasizes that the Texas Transfer on Death Deed law is applicable only to real property located within the state of Texas.
Comparison with Wills: While a TODD can replace probate for real property, it does not replace a will entirely. Wills address various aspects of estate planning, including personal property distribution and detailed instructions that may not be covered by a TODD.
Requirements of a TODD: The article outlines specific requirements for a valid TODD, including being in writing, signed and notarized by the owner, containing a legal property description, naming beneficiaries, and being properly recorded during the owner's lifetime in the county where the property is located.
Effectiveness and Beneficiary Considerations: A TODD becomes effective upon the death of the property owner, and beneficiaries must file an Affidavit of Death in the deed records to ensure clear title.
Handling Joint Ownership: For jointly owned property, the TODD allows the owner to transfer their share to a chosen beneficiary, leaving the co-owner's share unaffected.
Financial Affairs and Power of Attorney: Notably, a power of attorney cannot be used to execute a TODD, emphasizing the importance of the grantor's competence in signing the deed.
Cancelling or Changing a TODD: The article explains various methods to cancel or change a TODD, including recording a new deed, filing a Cancellation of Transfer on Death Deed, or addressing changes through divorce.
Creditor Claims and Medicaid Estate Recovery: It clarifies that TODDs do not shield the property from creditors, and Medicaid Estate Recovery does not apply as long as the property bypasses probate.
Tax Consequences and Joint Tenancy Distinction: TODDs have tax implications similar to properties going through probate, with heirs receiving a stepped-up basis. It also differentiates TODDs from Joint Tenancy with Right of Survivorship.
Handling Death and Proof of Death: Upon the property owner's death, the named beneficiary files an Affidavit of Death, and additional proof of death is required for transactions like selling the property.
Recent Changes and Potential Pitfalls: The article mentions recent legislative changes in Texas regarding beneficiary designations. It also warns of pitfalls, such as the need to file the TODD during the owner's lifetime and potential challenges if outstanding debts exist.
Required Forms: In addition to the TODD, the article mentions the Affidavit of Death as a crucial form for the beneficiary to obtain legal ownership.
In conclusion, Transfer on Death Deeds is a powerful tool in estate planning, offering a straightforward way to transfer real property while avoiding the complexities of probate. However, individuals should be aware of the specific requirements, limitations, and potential pitfalls associated with TODDs. It's advisable to consult with legal professionals to ensure that estate plans align with individual circ*mstances and state laws.
