Title to real estate can be transferred upon death by what type of document?

Wills and Estate Planning

Transferring real property in Texas is accomplished by filing a signed and written document commonly known as a ‘deed’. It is a document that is signed by the person or persons who own the property (the Grantor) and who are selling or gifting real property to someone else (the Grantee). We are often asked, “Can you transfer real property to someone now but make it effective at the time of your death?” The answer is yes, but only if you are careful to follow the guidelines that Texas has set out. There are two types of deeds used most often for transfers of real property effective at the death of the property owner: a Ladybird Deed and a Transfer on Death Deed.

Typically, aging parents are interested in simplifying their estate planning process so that their children or heirs can minimize the expense and stress of going through the probate process. Sometimes, they may be trying to qualify for Medicaid to assist with the costs of nursing home care. In both situations, transferring the homestead or other real property to children or other family members can be accomplished using the Ladybird Deed or the Transfer on Death Deed. If structured properly, neither of these deeds will complete the transfer of title to the property until the property owner has died.

Enhanced Life Estate Deed or Lady Bird Deed:

A Lady Bird Deed, formally known as Enhanced Life Estate Deed, is usually used for keeping property in the family and protecting it from being sold for repayment of Medicaid benefits. Lady Bird Deeds include the following characteristics: (1) it can reserve the property owner’s right to sell the property to anyone during the lifetime of the property owner; (2) it allows the property owner to gift the property during his or her lifetime; and (3) the deed is treated as an ‘approved transfer’ for purposes of qualifying for Medicaid benefits – but only for the homestead. Lady Bird Deeds usually include warranty language for the title of the property. Title companies sometimes require the joinder of remainder beneficiaries under this type of deed if the property is sold during the property owner’s lifetime. This type of deed is not a ‘statutory deed’ but is recognized under common law in Texas.

Transfer on Death Deed:

A Transfer on Death Deed is very similar to the Lady Bird Deed but has some important differences. It must be filed in the deed records of county clerk’s office where the property is located before the property owner dies.Transfer on death deeds are subject to creditors’ liens. A beneficiary of this type of deed must survive the property owner by at least 120 hours. A Transfer on Death Deed never gives a warranty of title and cannot be executed by an agent using a power of attorney.

Before choosing which type of deed is right for your situation, always consult an attorney. Choosing the wrong type of transfer document can have unintended consequences and can make matters more rather than less complicated upon the death or incapacity of the property owner. It is important to remember that the strategic transferring of real property by deed is only a small portion of the estate planning process and typically a broader analysis is recommended. At MehaffyWeber, our experienced estate planning attorneys help clients determine the best plan to achieve their goals. Contact us today to speak to one our estate planning attorneys.

A Transfer on Death Deed is a way to title real estate so it transfers, as the name would imply, upon your passing. Transfer on Death Deeds are used in Estate Planning to avoid probate and simplify the passing of real estate to your loved ones or Beneficiaries. It’s also known as a “Beneficiary Deed” because in essence, you’re naming a Beneficiary who will receive the deed to your property after you pass away. 

Transfer on Death Deeds can be beneficial for a number of reasons, but a main benefit is that you can achieve the goal of avoiding probate without needing to create an entire Trust, which can sometimes be a bit more complicated depending on the route you take to create it.  In this article, you will learn about:

• The different types of Transfer on Death Deeds

• Which states allow Transfer on Death Deeds

• How to use Transfer on Death Deeds to avoid probate

• The tax implications of Transfer on Death Deeds

What is a Transfer on Death Dead?

A Transfer on Death Deed, also called a TOD Deed, is a great way to ensure your property or real estate goes to the Beneficiary you choose while avoiding the costly, timely and often-stressful process known as probate. You can create a TOD Deed simply by moving real estate from your name only into your Beneficiary’s name as a TOD. The property remains yours and you continue to control it until you pass away, at which point the deed automatically transfers to the name of your Beneficiary. 

As long as you’re living, you can still refinance, sell, rent out or do anything else you choose to your property. It belongs to you until your death. Only then does your Beneficiary benefit. And don’t worry, TOD Deeds are revocable, which means you can amend or revoke them at any time.  

Types of TOD Deeds

There are different names for a Transfer on Death Deed, and sometimes those names may depend on what state you live in. TOD Deeds may also be called: 

• Transfer-on-Death Instrument

• Deed Upon Death 

• Beneficiary Deed

• TODD

Additionally, a few states allow what’s known as a Lady Bird Deed, also called an Enhanced Life Estate Deed. Lady Bird Deeds allow you to keep control over a property while you’re alive, but then transfer it without going through probate after you pass away.

Whatever it’s called in your state, TOD Deeds serve one main purpose: to allow you to transfer the deed of a property to a named-Beneficiary after you pass away while avoiding the probate process.    

Which States Allow Transfer on Death Deeds?

The first state to recognize a TOD Deed was Missouri in 1989. Since that time, other states have followed suit, recognizing them as well. Note that you don’t actually have to live in the state to title property with a TOD Deed - the property just needs to be in one of the following states: 

• **Alaska

• Arizona

• Arkansas

• California

• Colorado

• **District of Columbia

• **Hawaii

• **Illinois

• Indiana

• Kansas

• **Maine

• Minnesota

• Missouri

• Montana

• **Nebraska

• **Nevada

• **New Mexico

• **North Dakota

• Ohio

• Oklahoma

• **Oregon

• **South Dakota

• **Texas

• **Utah

• **Virginia

• **Washington

• **West Virginia

• Wisconsin

• Wyoming

**States that adopted the Uniform Real Property Transfer on Death Act (URPTODA).

URPTODA was introduced by the Uniform Law Commission and was designed to be a model for states to use when and if they decided to create their own TOD Deed laws.

How to Use a Transfer on Death Deed to Avoid Probate

Perhaps the biggest benefit to a Transfer on Death Deed is the fact that it allows real estate to bypass probate and instead just go directly to a Beneficiary. Setting up a TOD Deed is simple. And while the process may vary slightly from state to state, there are some general, basic steps to follow. 

1. Get Your State-Specific Deed Form. 

Look up the requirements for the state the property is in. Many states have state-specific forms or language that must be used in order to be valid.  

2. Decide on Your Beneficiary.

You can choose one person, multiple people, an organization or a charity to be your Beneficiary. Be specific when you’re listing Beneficiaries. For example, don’t say “my children.” Instead, use their full names: “John J. Smith and Jane J. Smith.” If you do select more than one Beneficiary, be sure to include how the property will be titled in their names. If you use “Joint Tenants,” that means when one dies, the surviving Beneficiary will become the owner. Be sure to check what language your state recognizes - some states won’t accept “Joint Tenants.”

You may also want to consider naming an alternate Beneficiary in case your chosen one doesn’t survive you. 

3. Include a Description of the Property.

Using the existing deed, copy a description of the property exactly as it currently is. Compare it against the original at least once for accuracy. 

4. Sign the New Deed.

If you’re the only owner, your signature is likely sufficient. That said, you should check to see if you’re in a community property state. If that’s the case, you should have your spouse sign as well. 

5. Record the Deed.

Until you file a TOD Deed, it won’t be valid. To record it, you need to find your Land Records office in the county the property is in. This entity can be several names, including: County Recorder, Registrar of Deeds or Land Registry, to name a few. If you’re unsure where to go to record a deed, simply call your local courthouse and ask where you should go to record real estate deeds.  

Tax Implications of Transfer on Death Deeds

Keep in mind that as long as you’re alive, TOD Deeds have no impact on (or benefit for) your Beneficiary. He or she has no legal rights to the property until after you pass away. That means you pay the property taxes on it until you die. One downside to a TOD Deed is it’s not an effective tax beneficial tool. However, the threshold is quite high, and the majority of Beneficiaries do not pay taxes on TOD Deeds. They will, however, take over any financial obligations on the property once they are owner, such as mortgage payments and property taxes. 

A Transfer on Death Deed can be a great way to ensure your loved ones or Beneficiaries get the inheritance you intend. It streamlines the process, allowing for a simple transfer of property ownership without the headache, cost and time that probate requires. If you’ve been thinking about starting or revising your Estate Plan to ensure all your affairs are in order, now may be a great time to learn more about TOD Deeds and to see if they’re a smart move.