Gabriel Katzner - March 29, 2022 - Estate Planning
What is a transfer-on death deed

A transfer-on-death-deed (TOD deed)  also known  as a beneficiary deed can be a helpful estate planning tool but it is not allowed in every state. A transfer -on-death deed lets you transfer your property to your beneficiary upon your death (as long as you still own it) without going through probate. Like a living trust, you will continue to own and control your real property throughout your lifetime. You can sell it, lease it, refinance it, give it away, or take other actions. You are also responsible for paying the mortgage and taxes and maintaining the property. If you change your mind about your beneficiaries, you can amend your TOD or revoke it at any time.

What is a transfer-on-death deed?

Do you own a home? If so, who’s on the deed? When you own a property, such as a home, it is important to specify who will inherit your property when you die. The best way to avoid probate is to create a living trust and transfer the ownership of your property to the trust, but another option is a transfer-on-death deed(TOD deed).

With a living trust, you have full ownership and use of your home while you are alive. Depending on how you write your trust documents, you or your trust will pay the expenses associated with the property. Upon your death, the trustee for your trust will distribute your property to your beneficiaries. No probate is needed.


Wich states allow Transfer-on-death deed?

States where allow a Transfer-on-death deed

Currently, 30 states allow you to make a trasnfer-on-death deed. You do not need to live in one of these  states to use a TOD deed, but your property must be located in one. Different states have slightly different processes for executing a TOD, but the overall process is about the same.

Step 1: Complete the TOD Deed

An experienced estate planning or real estate attorney can assist you in determining the specific form and language required for a TOD in order to ensure that it complies with the laws for the state in which the property is located. Unlike a traditional deed, there is specific language in a TOD that clarifies that the deed does not take effect until you die.

Step 2: Name Your Beneficiary

Your choices for a beneficiary are virtually unlimited. You can name one or more people, an organization, a business, or a charity. If you name a person, consider naming an alternate or contingent beneficiary as well, just in case your primary beneficiary dies before you do. To make your intentions clear, name your beneficiaries using their given legal name, not their relationship to you. If you have more than one beneficiary, such as your children, you will need to indicate on the TOD deed how the beneficiaries will own the property.

You could potentially choose:
  • Equal joint tenants with rights of survivorship
  • Tenants-in-common (each with one-half share)
  • Some other form of co-ownership

Step 3: Describe the Property

In addition to clearly identifying the beneficiaries, it is important to identify the property. You can find the current description of your property on your current deed in the official property records, your sales contract, or your mortgage documents. Since legal descriptions of property are not always accurately transferred between documents, consult with your real estate or estate planning attorney or your title company to ensure that the legal descriptions on your TOD deed are accurate.

Step 4: Sign the Deed

Let’s put some scenarios:

If you are the sole owner of the property, you can sign the TOD deed alone. Suppose you are marry and living in a community property state or you declare your property as a homestead. In any case, you and your spouse both need to sign the deed, a joinder, or a waiver indicating that your spouse has no objection to the TOD deed. Once again, an experienced estate planning attorney can help you ensure that your intended transfer-on-death deed meets all legal requirements and that everything in the deed is properly documented.

What happens if you co-own a property with someone as tenants in common?

If you co-own a property with someone as tenants in common, you can still designate a beneficiary for your share of the property. However, all co-owners will need to sign the deed, and it will not be effective until the last co-owner has died. For example, if you sign a TOD alone, then the deed will not be in effect unless you are the last surviving owner. If this should happen, then the TOD deed will transfer ownership of the property to your beneficiary upon your death.

If you co-sign a TOD deed with your co-owner and you die before they do, then they have full control of the property until their death. They can even revoke the TOD before their death.

Check to see if your state requires signatures on a TOD deed to be notarized. An attorney or a title company can generally arrange this for you if necessary.Your beneficiary doesn’t have to sign the TOD deed, and you are not required to tell them about your plans. However, it is important to keep in mind that a TOD deed is a matter of public record, so anyone can find out who will be the beneficiary.

Step 5: Record the Deed

The next step is to file the deed with the proper land records authority. Depending on your location, this may be the county clerk, recorder’s office, land registrar, or office of land records in the county in which the property is located. Generally, a minimal recording fee is charged when the deed is recorded. A TOD deed is ineffective unless all the parts involved follow the steps everything will be correct. Your estate planning attorney will verify that you have completed all the necessary steps to ensure that your property passes to your intended beneficiary or beneficiaries.

The Advantages of a TOD deed

There are several advantages to using a Transfer-on-death deed:

  • It helps you avoid the public and costly probate process.
  • It avoids the risks associated with putting another person’s name on the deed while you and they are still living. For example, if you put your adult child’s name on the current deed, the property is subject to the child’s creditors, divorce settlement, etc. If you have a mortgage and name another person on the deed, there may be a real estate transfer, conveyance, or documentary stamp tax consequence. You may also inadvertently trigger your mortgage’s due-on-sale clause.
  • TOD deeds are usually easy and affordable to create.
  • A TOD deed can be changed or revoked at any time as long as state laws are followed.
  • A TOD deed takes precedent over a Last Will and Testament no matter which one was written first or last. A will cannot change or revoke a TOD deed.

With a TOD deed, there is no property transfer or change in beneficial ownership until after you have died. This helps avoid the potential to inadvertently open the property up to creditors’ claims or trigger unnecessary fees or taxes.

The Disadvantages of a TOD deed

The law has many idiosyncrasies when it comes to distributing property to many beneficiaries. Unfortunately, these peculiarities can result in outcomes that are other than what you intended. The subtle difference between naming beneficiaries as joint tenants with rights of survivorship versus tenants in common, illustrates this point.

Let’s assume that four children are named as beneficiaries in a TOD deed, and each child has two children (eight grandchildren). In the first case, if one child died, their children (two grandchildren) would not inherit a right to the property. In the second case, they would share the deceased child’s one-fourth share of the property.

There are many benefits to a TOD deed. However, the deed must be clearly written to ensure that your property is transferred to your beneficiaries in the way you intended. An experienced estate planning attorney can help you determine whether a TOD deed is your best option and, if it is, to ensure that it meets all the requirements for your state law.


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