Transfer on Death Deeds
In 2015 the Texas Legislature created a new deed called a Transfer on Death Deed (TODD). For many Texans whose only asset is their homestead, a TODD provides an alternative method for transferring ownership on death without necessity of a will and probate.
Unique Aspects of Transfer on Death Deeds
TODDs are unlike conventional deeds in a number of respects, including:
- A TODD is signed and recorded during the grantor's lifetime, but does not actually transfer title until the grantor dies. Accordingly, the grantor remains the owner of the property, can sell or mortgage the land, and can continue to claim all applicable homestead rights and tax exemptions.
- If the property is subject to a mortgage, a TODD will not trigger a due-on-sale clause.
- A TODD can name one or more alternate beneficiaries in case the first choice predeceases the grantor.
- If a TODD names multiple beneficiaries, each beneficiary must receive an equal ownership interest.
- A TODD cannot be signed by the grantor's agent using a power of attorney.
- The grantor retains the right during lifetime to revoke a TODD.
- The grantor is not required to deliver the TODD to the beneficiary, or even tell the beneficiary that the TODD has been signed.
- A TODD conveys no warranty of title, even if the TODD states otherwise.
Wills and Transfer on Death Deeds
A TODD and a will are similar in the respect that they both serve to transfer property upon death. However, a TODD can only transfer real estate, whereas a will can transfer any kind of property in the decedent's probate estate. If a decedent makes inconsistent dispositions of land in both a will and a TODD, the TODD will control. As a practical matter, most folks will be better served by having a will than a TODD, because in addition to the home they will need to transfer car titles, bank accounts, jewelry, and the like. However, for the simplest estates a TODD alone might be sufficient.
Because a TODD causes property to pass to a beneficiary without becoming part of the decedent's probate estate, the property is not subject to recovery actions by Medicaid. However, in some situations where there are insufficent assets to pay the debts of the decedent's estate, the property may be used to pay such expenses.
If you have questions about TODDs, or if you're looking for an experienced Texas real estate and estate planning attorney to help ensure your wishes are carried out, we would welcome the opportunity to speak with you.