Understanding Transfer on Death Deed in Texas
A Transfer on Death Deed (TODD) is an estate planning tool that lets you transfer real estate after death without going through probate in Texas. It’s a straightforward way to make sure your property goes to the people you choose.
The Texas Real Property Transfer on Death Act made it legal in 2015 for homeowners and landowners to pass their properties through transfer on death deeds. Now, Texans can easily leave behind homes or land without a will.
Chapter 114 of the Texas Estates Code contains all the rules and guidelines for making a legal transfer on death deed (TODD) in Texas. It covers everything needed to ensure your TODD is valid.
For a TODD to hold up legally, it must follow the guidelines in the Texas Estates Code. This means it must be signed, notarized, and filed with the county clerk’s office before the property owner passes away.
People use TODDs to avoid probate for their real estate. Probate can be a long and costly court process. Transfer on death deeds let you skip it altogether for the property in the deed.
TODDs also give you more control over what happens to your real estate. You can choose exactly who you want to inherit it, and name backup beneficiaries. You can change your mind and update the deed anytime before your death.
For a transfer on death deed to be valid in Texas, it must meet certain requirements. First, it must be in writing – verbal agreements or handshake deals are not sufficient.
The deed must contain the legal description of the property being transferred. This usually means the address and the lot or parcel numbers. Vague descriptions like “my house” or “the ranch” won’t suffice.
The TODD must be signed by the property owner in front of a notary public. If the property is co-owned by a married couple or other joint owners, all owners must sign the deed.
After you sign and notarize the transfer on death deed, you must record it with the county clerk’s office where the property is located. If you don’t record it correctly, the deed won’t be valid.
Creating a transfer on death deed in Texas is a straightforward process, but you must do it correctly. The first step is to obtain the appropriate form – you can find TODD forms in the Texas Transfer Toolkit or from legal aid services.
Once you have the form, fill it out completely and double-check that all the information is accurate. Be sure to include the full legal description of the property and the names of your chosen beneficiaries.
When the form is filled out, sign it in the presence of a notary. Notaries are available at most banks, law offices, and some shipping stores. Bring a valid photo ID with you.
After the deed is notarized, take it to the recorder’s office in the county where the property is located and file it. There will be a small filing fee, usually around $30. Once it’s filed, the deed is officially recorded and will transfer the property to your beneficiaries upon your death.
A key part of a transfer on death deed is naming your beneficiaries – the people who will inherit the property. You can choose one person, multiple people, or even an organization like a charity.
It’s wise to name at least one primary beneficiary and one alternate or contingent beneficiary. That way, if something happens to your first choice, the property can still pass to someone you trust.
The beneficiaries you name in a TODD have no rights to the property while you’re alive. You retain full control and can sell it, rent it out, take out a mortgage, or do anything else you want with it. The deed only takes effect after your death.
After you pass away, the beneficiaries can take ownership of the property by filing an affidavit of death with the county clerk. They’ll need a copy of your death certificate to do this. Once the affidavit is filed, the property is officially transferred to the beneficiaries without going through probate court.
In Texas, transfer on death deeds are one way to pass down property. You might also consider using a will, setting up a living trust, or creating life estate deeds like lady bird deed, although be careful with a lady bird deed.
One advantage of TODDs over wills is that they don’t have to go through probate. Property transferred by a will can get tied up in court for months or even years, but with a transfer on death deed, the beneficiaries can take ownership almost immediately.
TODDs are similar to life estate deeds in some ways – both let you name beneficiaries to inherit the property after your death. But with a life estate deed, you give up some control over the property during your lifetime.
With a TODD, you keep full control until your death. You can revoke the deed anytime, sell the property, or do anything else with it. That flexibility is one reason many people prefer transfer on death deeds in Texas.
While transfer on death deeds can be a useful tool, they’re not right for every situation. One potential issue is that TODDs don’t override claims against your estate, like Medicaid estate recovery.
If you received Medicaid benefits during your life, the state may have a claim against your estate after death. A TODD won’t prevent your property from being used to repay those expenses if your estate doesn’t have enough other assets.
Don’t forget about the tax implications for your beneficiaries. If they decide to sell property transferred by a TODD, they might face capital gains taxes. Talking to a financial advisor or attorney can help clarify any potential tax consequences.
TODDs also don’t protect the property from creditor claims against the beneficiaries. If your beneficiary has significant debt or gets sued, the inherited property could be at risk. In some cases, a living trust or other tool may offer more asset protection.
If you own property with someone else, like a spouse or business partner, TODDs work a bit differently. In Texas, jointly owned property can be held as separate property or community property.
With separate property, each owner can transfer their own interest with a TODD. But with community property, both spouses need to sign the deed – one spouse can’t transfer away the other’s interest.
For married couples, it’s usually best to create a joint TODD that names the same beneficiaries for both spouses’ interests. That way, the whole property can transfer smoothly to the chosen heirs.
If each spouse names different beneficiaries in separate TODDs, it can create conflict and confusion after their deaths. Partitioning or even selling the property to split the interests might be a significant hassle for the beneficiaries.
