Transfer on Death Deed – Treasure or Trap?

trap-860x450_cIn 2015 the Texas legislature adopted a provision that became a part of the Texas Estates Code allowing transfer on death deeds (TOD deeds).  These deeds effectively transfer title to the designated beneficiary upon the owner’s/transferor’s death.

This may sound like a wonderful device to avoid probate to those individuals whose only asset that might require probate is a piece of real property.  However, there are a few issues of which individuals should be advised before relying on these deeds.

First, these deeds can be revoked by the owner/transferor – even if the deed says it cannot be.  There are a number of actions by the owner/transferor that effectively revoke the TOD deed’s effectiveness.  A divorce decree dissolving a marriage between an owner/transferor and a beneficiary automatically revokes the TOD deed as to that beneficiary.

Second, there are very specific requirements for such a deed including specific language and recording requirements.  Similarly, there are specific requirement for revoking a TOD deed, including recording requirements.

If the property in question has multiple owners or the TOD deed lists multiple beneficiaries, there are additional conditions and restrictions.

In any case, a beneficiary must not only survive the death of the owner/transferor to receive the real property, but survive by 120 hours.  Otherwise, the designated beneficiary’s interest lapses.  Further, the real property transferred by TOD deed passes without any covenant of warranty of title even if the deed contains a contrary provision.  This can effect the insurability of the title to the property.

A TOD deed is a new legislative creation in Texas.  We have had little experience with them.  Individuals desiring to use them are best cautioned to explore the pros and cons of their use and possible alternative means of achieving their objectives.  It would be wise to consult with an attorney experienced in estate planning or real estate law before placing too much reliance on this form of deed.

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