In Texas, a transfer on death deed is a simple way to transfer your interest in real property at your death, without having to use a will, or go through probate.
What is it?
A transfer on death (TOD) deed serves a similar function as a beneficiary named on a bank account but applied to real estate. When you name a beneficiary on a bank account, while you are alive, there is no limit on your ability to make deposits, withdrawals, use the assets as security for a loan, or close the account. The beneficiary is basically the “owner in waiting”, with no rights to the account while you are alive. When you pass, the funds in the account automatically belong to the named beneficiary, without the need for probate.
Similarly, with a TOD deed, you can name one or more beneficiaries. While you are alive the property remains completely yours. You can sell all or part of your property, mortgage it for repairs, or a home equity loan, without limitation. The owner has an absolute right to cancel the TOD deed during his or her life by filing a revocation. When you pass, whatever interest you had in the property, now automatically belongs to the beneficiary you named in the TOD deed. The property subject to a TOD deed is not considered to be part of your estate.
There are some limitations and conditions.
1. A TOD deed can only be used to convey an interest in real property (real estate), and not personal property, such as a car, or ownership in a business.
2. The TOD must have the same form as a legal deed, that is; be in writing, state the legal description of the property, name one or more beneficiaries, be signed by you, with your signature being notarized, and the document filed while one is still alive, in the county real estate records where the real property is located.
3. The TOD deed must be executed by the person who owns the property (‘transferor’). An agent holding a power of attorney cannot execute a TOD deed.
4. On taking under a TOD deed the beneficiary takes only what the transferor had, along with all impediments to the title. If the transferor owned the property with others (heirs, business partners), the beneficiary takes only that fraction owned by the transferor. If the property is subject to existing mortgage, tax or judgment liens, those claims remain.
5. After death of the transferor, in order to perfect ownership, the beneficiary must file an affidavit of death with the county clerk, certifying that the transferor has passed.
For more information on a transfer on death deed or any of your estate planning needs, contact the Law Office of Elliott Klein, PLLC.