What is a Transfer on Death Deed?
Real estate owners can now transfer title to their real estate (to be effective on the date of their death) without having to go through probate. The Texas legislature enacted a new statute (effective September 1, 2015) that creates a new mechanism to transfer real estate upon death. This new mechanism is called the “Transfer on Death Deed”, but lawyers will often refer it as a TOD Deed.
When is it advisable to have a TOD Deed?
The Transfer on Death Deed is useful for a number of reasons. A TOD Deed works like a beneficiary designation on an insurance policy or bank account…the grantor names a beneficiary or beneficiaries to inherit his or her real estate when he or she dies. Since the TOD Deed conveys real estate to previously chosen beneficiaries without having to invoke the probate court, it saves costly fees and valuable time. A Transfer on Death Deed is especially practical when the only probate asset is the real property (i.e. the grantor’s home). And because the Transfer on Death Deed allows the beneficiaries to bypass the probate court to transfer ownership, is a very simple and convenient way to transfer ownership of real estate upon death. The beneficiary simply files the affidavit of death in the county clerk’s office where the property is located to become the legal owner of it.
What are the Transfer on Death Deed Requirements?
There are important requirements to meet in order to utilize the Transfer on Death Deed:
- In Writing The TOD Deed must be in writing and must contain an address and description of the property and the names and addresses of all beneficiaries.
- Signed The TOD Deed must be signed by the grantor (aka the current owner) in the presence of a notary public.
- Recorded The TOD Deed must be (a) recorded in the real property records of the county in which the property is located (b) before the property owner’s death.
- Correct The TOD Deed must contain the correct language or else it will not be effective.
When does a TOD Deed become effective?
While effective once signed and recorded, ownership will not transfer until the Affidavit of Death is provided to the county clerk’s office in the county in which the property is located, therefore the beneficiary does not have legal rights to the grantor’s property until his or her death. For instance, the grantor might want to sell the property. He or she can do so, even if the beneficiary disagrees. The sale would essentially void the Transfer on Death Deed altogether.
What happens if I die without a TOD Deed?
If you have a Will, the Will gets filed in court (attorneys are involved, so this is not cheap) and the executor will eventually transfer property to the devisee(s) listed in the Will often after the decedent's debts are paid.
If you do not have a Will (aka you die "intestate"), the property will go to your heirs as defined by the Texas legislature.
Either way, a fairly expensive probate procedure will be required to transfer real estate if you do not have a Transfer on Death Deed (and may still be required if the existence of other assets require it).
Can I name more than one beneficiary in a TOD Deed?
Yes, you can list multiple beneficiaries as well as alternate beneficiaries.
Does a TOD Deed Replace the Need For a Will?
No, a Transfer on Death Deed does not replace a Will or make a Will unnecessary. A Will covers many situations that may arise, such as how to distribute belongings other than real estate, such as vehicles, furniture, family heirlooms, etc. Another reason to have both a Will and a Transfer on Death Deed is that the beneficiary of the deed must survive the decedent by 120 hours, so in the event that the beneficiary passes away before or within 120 hours of the grantor, the grantor’s desires will still be carried out according to the terms of the Will. In the instance that the Will and Transfer on Death Deed name different primary beneficiaries, the beneficiary named in the Transfer on Death Deed would inherit the real estate, not the person named in the Will.
Can a TOD Deed be Replaced or Modified?
Yes, if the grantor changes his or her mind, the Transfer on Death Deed can be revoked by simply filing a revocation document with the county clerk’s office in the county in which the property is located. The grantor then may file a new Transfer on Death Deed if he or she so chooses.
How does the Medicaid estate recovery program (MERP) affect the TOD Deed?
Generally speaking, when an individual receives Medicaid benefits, the federal government requires the state to seek reimbursement from the decedent's estate when it goes through probate. In other words, Medicaid will be repaid out of the decedent's assets before the decedent's assets are transferred to his/her heirs (or devisees if the decedent had a will). One of the many benefits of a Transfer on Death Deed is that any property passed via a TOD Deed is exempted from the state's Medicaid collection efforts.
How do I obtain a Transfer on Death Deed?
It’s easier and less expensive than you might think. For only $125, you can get a custom attorney-prepared TOD Deed.