A Brief Introduction to Transfer-on-Death Deeds

For most average Americans, their home is their most significant asset. Few people will ever make a purchase larger than that of their home, and thus it is one of the most important assets to consider when you start planning your estate. You may want to consider understanding more about Transfer-on-Death Deeds.

Many people go to great lengths to keep their home from passing through the probate process in order to protect it from creditors and help ensure that it passes to exactly whom the decedent wished would inherit the property.

Some people seek to achieve this through Revocable Living Trusts, but these are oftentimes ineffective when it comes to keeping property out of probate.

Another option is potentially establishing a joint tenancy with rights of survivorship with the person whom you want to inherit the property, but if that person is not your spouse or significant other then a joint tenancy could be inconvenient and unnecessary. Additionally, most couples who jointly own property in Texas own it as tenants in common, meaning the surviving spouse would not automatically inherit the property.

A far better and more effective option to ensure your home properly passes on to your loved one or loved ones of choice is to utilize  Transfer-on-Death (TOD) Deeds. Also known as “beneficiary deeds,” Texas joined a growing number of states in the US when it legalized this tool in 2015.

A TOD allows a property owner to designate a beneficiary to whom the deed to his or her home will legally transfer upon the event of their death. It is generally a much more cost-effective and efficient means of transferring real property to a beneficiary upon one’s death than the probate process.

Creating a TOD deed is a relatively simple process and it does not grant any property rights to the beneficiary until the grantor of the TOD has passed away, meaning the deed is entirely revocable if you change your mind. In order to execute an effective transfer, the TOD must fulfill all Texas requirements for a formal, recordable deed. It must also specifically state that the transfer in ownership interest will not occur until the death of the grantor of the deed, and the deed must be recorded and filed prior to the grantor’s death in the county clerk’s office in which the property is located.

However, while a TOD will allow you to circumvent administrative costs associated with a probate proceeding, the property will still be subject to your debts and liabilities including estate taxes and any liens on the property as well as potential liabilities to creditors.

Nonetheless, it can be a fantastic tool to help you streamline the process of passing your home or other real estate on to certain loved ones when you pass.

Transfer-on-death deeds do have some limitations and drawbacks, such as the fact that the beneficiary may be required by the mortgage lender to pay off the entire mortgage in order to take ownership. They are not perfect for every homeowner and they should only be utilized in concert with a broader estate planning strategy. If you would like to learn more about how TODs work or you would like assistance in drafting an effective TOD deed, you will need the assistance of a skilled and knowledgeable estate planning attorney like those at the Amsberry Law Firm. Contact our offices today to learn more.

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Written by Amsberry Law Firm

Amsberry Law Firm

Mr. Amsberry is board-certified in labor and employment law by the Texas Board of Legal Specialization. He is a proven litigator who has argued before the United States 5th Circuit Court of Appeals and earned favorable outcomes in complex, precedent-setting employment and civil rights cases. He served as a reservist assistant judge advocate general in the U.S. Army and is a sought-after lecturer and speaker on a range of legal issues.

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