Transfer on Death Deed

A Texas Transfer on Death (TODD) is a type of real property deed that transfers real property upon the death of the grantor (property owner). It’s a vehicle for legally titling your real estate during your lifetime so the property is transferred at your death to one of more beneficiaries whom you choose. This method of property conveyance avoids probate and can be a very quick way to distribute assets.

A TODD conveys real property and everything permanently attached to the property or legally defined as real property – including buildings, fences, uncut timber, minerals, underground water, rock and sand. The owner retains the right to possess, sell or lease any or all of the real property.  Plus, the owner retains their tax status as it relates to the property. However, a Transfer on Death Deed cannot transfer personal property.

Beneficiaries may include individuals, trusts and charitable organizations. An owner can name multiple beneficiaries, as well as primary and alternate beneficiaries. However, Texas law dictates that multiple beneficiaries must receive equal and indivisible shares without any right of survivorship. Consequently, it’s not possible for the owner to convey unequal percentages to multiple beneficiaries.

Functionally, a Transfer on Death Deed does not affect any of the owner’s real property rights during their lifetime. Upon the owner’s death, the deed conveys the property and all real property rights to the named beneficiary. The owner/grantor retains the right to modify or revoke the deed at will, without notifying the beneficiary.

To revoke the deed, the owner creates and executes a new Transfer on Death Deed that invalidates the prior one or states the property should convey to someone other than the named beneficiary in the original deed. The owner must sign the new deed in the presence of a notary and record the deed before the owner’s death in the public property records.

A TODD doesn’t entirely protect property from creditor claims. On one hand, an owner may use a Transfer on Death Deed for property conveyance even if there’s an existing debt or lien, such as a mortgage, on the property. However, upon the owner’s death, the beneficiary takes the property subject to any mortgages, liens and claims that may be attached, and the beneficiary becomes legally responsible for those debts.

To be valid, a Transfer on Death Deed must:

• be in writing, signed by the owner, and notarized; an owner’s agent-in-fact under a power of attorney is not permitted to execute the deed on the owner’s behalf.
• contain the legal description of the property;
• include the name and address of each designated beneficiary;
• state that the transfer of property will happen at the owner’s death;
• be properly recorded during the owner’s lifetime in the deed records in the county where the property is located.

Notice, delivery to, or acceptance of the deed by the designated beneficiary is not required.

There are unique attributes about a Transfer on Death Deed that property owners should consider before creating and filing the deed:

• under current Texas law, an owner can protect their property from state Medicaid reimbursement claims for long-term care. Real property transferred at the owner’s death by a TODD removes the property from the owner’s probate estate; hence, the property will effectively pass free of the state’s Medicaid reimbursement claims.
• if the beneficiary of a Transfer on Death Deed is the owner’s spouse and the owner and spouse divorce, the final divorce decree will revoke the Transfer on Death Deed as long as the decree is properly filed of public record.
• a TODD is not the same thing as a will, and doesn’t have the same effect. A will dictates property distribution in its entirety, while a Transfer on Death Deed specifically addresses a real property transfer. A Transfer on Death Deed supersedes a will regardless of the date either was signed. If a will names a beneficiary that’s different than the beneficiary named in the TODD, the beneficiary named in the TODD will receive the property.

Property owners should take caution to ensure that their will and Transfer on Death Deed are aligned in their intended purposes.

When considering a Transfer on Death Deed, it’s important to consult a skilled estate planning lawyer who can point out all the nuances of using one in your particular life situation. The attorneys at Reagan Moore can help ensure your probate-avoidance deed is properly structured to work in concert with other elements of your estate plan. But first, we want to hear what you’re thinking. Understanding your goals will shape our strategy for you. We’re here to discuss your options.