What is a transfer on death deed & where is it allowed?

Use a transfer on death deed (TOD) to pass your house to someone without the hassle of probate.

Elissa

Elissa Suh

Published November 6, 2020

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KEY TAKEAWAYS

  • Transfer on death deeds are allowed in more than half of the states

  • A TOD deed shouldn’t take the place of writing a will and it cannot be altered by one

  • TODs let the property avoid probate but it may not provide additional protections

  • You can create a transfer on death deed for free to create and you can revoke it at any time

A transfer on death deed (TOD) lets a property owner pass land or real estate to a designated beneficiary outside of the probate process. A transfer on death deed can be a helpful estate planning tool but it is not permitted in every state. A TOD deed is also known as a beneficiary deed or revocable transfer on death deed.

The beneficiary you name on the transfer on death deed doesn’t come into ownership of the property until after you die, so they won’t be responsible for paying for or maintaining the home while you’re alive. While you can use a last will and testament to transfer your property to someone when you die, it must be proven during probate, which takes time. Using a transfer on death deed avoids the probate process, so your chosen beneficiary can ultimately receive the house or property much faster than with a will. (You still need a will to pass on other assets and belongings.)

A transfer on death deed can be a useful addition to your estate plan, but it may not address other concerns, like minimizing estate tax or creditor protection, for which you need a trust.

In addition to a will or trust, you can also transfer property by making someone else a joint owner, or using a life estate deed.

How does a transfer on death deed work?

A transfer on death deed is a document that transfers your ownership in a piece of real estate to someone else after you die. The person transferring property is called the transferor or grantor, and the person named to receive the property is the beneficiary, grantee, or grantee beneficiary.

The beneficiary of a TOD deed is similar to a beneficiary of a will — they can be a family member, friend, business, charity, or a living trust. You can even name multiple beneficiaries to own the property in equal shares. It’s also a good idea to choose a contingent beneficiary (alternate beneficiary) as a back-up in case the primary beneficiary is dead.

There is no obligation to notify your named beneficiary about the deed, but you still might want to let them know so there isn’t any confusion when you die.

A transfer on death deed is revocable, which means you can change the deed or revoke its terms before you die. You must revoke the deed in the same manner that you created it (we’ll discuss how to do both later). Writing a will does won’t change the transfer on death deed. If you create a deed and then state different instructions in your will, the TOD deed will take precedence.

If you plan to use a TOD deed, you should still consider writing a will to provide instructions on who should get your other assets. You can download the Policygenius app to get started.

Duties of the named beneficiary

The beneficiary is not responsible for the home in any way and does not have legal ownership of it during the grantor’s lifetime. The grantor or property owner must continue to pay the mortgage and related housing expenses, like property taxes. An outstanding mortgage or any liens will pass to the beneficiary.

If you’re the beneficiary of a transfer on death deed, you can claim the property by going to the county recorder office. You should bring a copy of the transferor’s death certificate and complete an affidavit (a sworn written statement) declaring the grantor’s death, which will be filed with the clerk.

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Transfer on death deeds with joint ownership

Giving away assets can be tricky if there are multiple owners. Depending on how the property is owned, you may not be allowed to give away your share of the property.

If you and the co-owner are tenants in common, you can both do whatever you want with your interest (share) in the property. For example, let’s say you and your roommate own an apartment as tenants in common. If you use a transfer on death deed and name your sister as beneficiary, when you die your sister and roommate will co-own the property together.

If you and the co-owner are joint tenants, you get to keep their share once they die and vice versa. The surviving person becomes the sole owner of the property. That is why joint tenancy is formally known as joint tenancy with rights of survivorship. Dividing community property with rights of survivorship would also follow these rules. For example, if a married couple owns a home as joint tenants, when one spouse dies the surviving spouse becomes the sole owner.

Since the joint owner automatically receives the asset, it can be difficult to try and give it away to someone else (especially in a community property state; you may need to talk with an estate attorney.) Joint tenancy supersedes the terms of a transfer on death deed. For example, let’s say you and your spouse own a house as joint tenants and you execute a transfer on death deed by yourself and name your daughter as beneficiary. When you die, your daughter won’t get the house — your spouse does. However, if your spouse dies first then the deed is still valid; the house goes to your daughter after you die.

Using a transfer on death deed when you and someone else jointly own property works best if you both have the same beneficiary in mind. You can each use a transfer on death deed or complete one together if permitted in your state.

States that allow transfer on death deeds

As of November 2020, these 28 states allow transfer-on-death deeds:

  • Alaska
  • Arizona
  • Arkansas
  • California
  • Colorado
  • District of Columbia
  • Hawaii
  • Illinois
  • Indiana
  • Kansas
  • Michigan (a Ladybird Deed, formerly called an enhanced life estate, achieves similar)
  • Minnesota
  • Missouri
  • Montana
  • Nebraska
  • Nevada
  • New Mexico
  • North Dakota
  • Ohio
  • Oklahoma
  • Oregon
  • South Dakota
  • Texas
  • Virginia
  • Washington
  • West Virginia
  • Wisconsin
  • Wyoming

How to get a transfer on death deed

States that allow a transfer on death deed will often provide a free deed template for homeowners to use. You can check your state or county website to see if they offer a downloadable form.

These are the steps you need to take to complete a transfer on death deed.

  1. Complete the deed
  2. Sign the deed
  3. Find a notary if notarization is required by your state
  4. File it with county recorder’s office

Fill out the deed

To complete the deed you need some basic information like your name and personal information, a legal description of the property (single family home, for example), the beneficiary’s full name, address, and relation to you.

Sign the deed

Just as with other legal papers, like real estate deeds and estate planning documents, the TOD deed must be signed by the person who creates it (the transferor in this case). The beneficiary does not need to sign it. Some states may require you to notarize the deed as well.

Learn how to find a notary public.

File it with county clerk

In order for the transfer on death deed to become valid, you must file it and record it with the proper local authority, like the county clerk or recorder’s office. Your state may use other names for this department, like county office of land records and you may have to pay a small filing fee. The deed is only valid if you record it. If someone finds an unrecorded transfer on death deed with your belongings after you’ve died, it will not be valid.

Revoking a TOD deed

If you want to change or revoke a transfer on death deed, you can do so by filling a revocation. This is simply a written document that states you want to revoke the terms of the beneficiary deed you’ve already made. States may similarly include a revocation form for people to use, or include a sample in their statutes that you can copy. You must also file the revocation wherever you filed the original transfer on death deed.

Should I use a transfer on death deed?

A TOD deed simplifies the transfer of property after your death and is fairly easy to create. Even if you have other assets that will need to go through probate, using the deed for your house can help ease the probate process for your beneficiaries and loved ones. A TOD deed is especially useful if you have property in other states and want to avoid ancillary probate.

There are a few disadvantages to a transfer on death deed. For one, it does not offer a title warranty. That means there is no guarantee that the transferor actually owns the property and has the right to give it to you. If there are ownership issues, like someone else has a claim to the property, the beneficiary may not be able to receive it. Additionally, a transfer on death deed does not protect against estate creditors — the property can be sold to satisfy estate debt once the grantor dies. (For credit protection, you may want an irrevocable trust.)

Here are a few more estate planning issues that a transfer on death deed may not solve.

Transfer on death deeds & taxes

Even if the property you pass using a transfer on death deed isn’t counted toward probate, it may still be included in the valuation of your estate and thus count towards any applicable estate tax.

Since the transfer on death deed doesn’t give away your property while you’re alive, it may not be subjected to gift tax, but this depends on your state.

Worried about taxes? This is one instance when you should hire an estate attorney.

Transfer on death deeds & Medicaid

To qualify for Medicaid or other government benefits, your income and assets usually need to fall below certain limits. If you own real estate, you may be over the asset limit. (Every state has different requirements; you can check this state-by-state Medicaid guide here.) Using a transfer on death deed to give away your house to try and lower the value of your assets doesn't count as a Medicaid spend down so it will not help you qualify for the program.

If you give someone your house via transfer on death deed, it may or may not be protected from Medicaid estate recovery (MERP) after you die depending on the state.

If you want to qualify for Medicaid and protect your house from recovery, then you might want to consider opening an irrevocable Medicaid trust.

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Personal Finance Editor

Elissa Suh

Personal Finance Editor

Elissa is a personal finance editor at Policygenius in New York City. She writes about estate planning, mortgages, and occasionally health insurance. In the past she has written about film and music.

Policygenius’ editorial content is not written by an insurance agent. It’s intended for informational purposes and should not be considered legal or financial advice. Consult a professional to learn what financial products are right for you.

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