Transfer on death deeds pass real estate outside of probate
A Transfer on Death Deed (TODD) is a document by which an owner can transfer real estate to someone upon the owner’s death. Real property includes land, homes, buildings, timber and mineral rights. It does not include furniture, jewelry, automobiles, clothing, cash, bank accounts, investment accounts or insurance proceeds.
The TODD must include a description of the property being transferred and the names of the beneficiaries of the property. It is recommended that the property description on the deed be used instead of the tax appraisal description on an ad valorem tax record.
Typically, the TODD will name a primary beneficiary and an alternate or secondary beneficiary, in case the primary beneficiary predeceases the transferor of the property.
The TODD must be signed by the property owner, notarized and filed with the deed records in the county in which the property is located before the owner dies.
If an individual has executed a TODD with regard to a piece of real property, that property does not go through probate. Instead, it passes by contract to the person named upon the death of the owner, similarly to the passage of an insurance policy or a retirement account passes through a beneficiary designation.
The TODD transfer avoids the administrative cost of probate. Also, a TODD takes the real estate out of the probate estate, which currently means, that real property cannot be reached by the recovery program for Medicaid.
The TODD does not take the place of a will. A will is still an important part of an individual’s estate planning. The will determines the disposition of other property in the estate that is not subject to beneficiary designations. Also, the will generally will establish to whom the property goes should those persons named in the will die before the maker of the will, that is, the testator,
A TODD can be cancelled. However, it must be revoked by signing a document which negates the previously signed TODD. Merely tearing up or shredding the TODD will not suffice. Importantly, upon divorce, a TODD to a former spouse is not automatically negated as are designations to a former spouse are automatically voided in a will, even if no new will is executed.
Sandra W. Reed is an attorney with Katten & Benson, an Elder Law firm in Fort Worth. She lives in beautiful Somervell County, near Chalk Mountain.