Avoiding Probate: The Transfer on Death Deed Law

Finance Matters | By Farha Ahmed –

Whether you’re rich or poor, there is an easy estate tool is available to everyone, thanks to the 2015 Texas legislature.

What we love about Texas is the way the legislature continues to promote a self-help philosophy when it comes to end-of-life decisions. In 1999, the legislature enacted the medical power of attorney or advance directives statute. These documents detail the instructions you can give to your doctors about medical procedures, including the directive to resuscitate or not, and how to appoint someone to make those important decisions on your behalf should you be unable to make decisions for yourself.

In 2015, a new law was passed that impacts how Texans pass on real property to loved ones. It’s called the Transfer on Death Deed (TODD). Whether it is commercial or residential property, improved or unimproved real property, grantors can easily transfer their portion to another individual, corporation or charity as  named beneficiaries.  However, TODD does not apply to personal property.

The code has listed some items that must be put in writing, including the property’s legal description and the name and address of the beneficiary. Grantors can transfer to more than one beneficiary, but the property will be treated as property given in equal portions, and there can be alternate beneficiaries. This document also must be signed by the grantor, then notarized and filed.

The Transfer on Death Deed must be signed by the grantor, but the beneficiary does not have to give consent. The transfer is filed in the real property records where the property is located, not necessarily where the grantor resides.

Since many homeowners are married and don’t have right of survivorship on their deeds, this form allows them to transfer the title to their surviving spouse with ease.  It is not necessary to go to probate court for this transfer of title, meaning the surviving spouse can sell the property quickly, if necessary.

The benefit is that property is passed by operation of law, bypassing the cost and time associated with a probate proceeding. Of course, all of these transfers can be revoked should the grantor change their mind. But any transfer of the title of the property is subject to all mortgages, liens, etc.

For those thinking that filing this transfer can help their estate avoid creditors, think again. The personal representative of the estate can enforce debt liability against the real property. Using TODD does not help avoid federal estate taxes. Texas, however, does not have state estate taxes to worry about.

If you have a TODD, that doesn’t mean you don’t need a will.  If you do have a will, a TODD is superior in that it will trump the terms of that will for that particular property. Still, it’s a good idea to make sure that your will doesn’t contradict your TODD.  It’s also a good idea to have an attorney review your TODD, as you must follow the instructions carefully to ensure its validity.

Once a TODD is filed, it is triggered by the death of the grantor, and the title passes on to the beneficiary. If both spouses own the property, it is recommended that each spouse file their own TODD.

There are many websites that have templates of TODD forms. If you have questions or need to have your forms reviewed, it’s always prudent to consult a lawyer who deals with probate issues. For more information about TODD, visit https://texaslawhelp.org/article/transfer-death-deed-information-and-answers.