If you own real estate and want to make sure it passes to someone you choose when you die, you may have heard about a Transfer on Death Deed, often called a TODD.
A Transfer on Death Deed is a legal document that allows you to name someone who will receive your real estate when you pass away. One of the biggest benefits is that the property can transfer to your named beneficiary without going through probate.
It sounds simple, and in many cases, it can be. But there are some important things to understand before deciding whether a Transfer on Death Deed is right for you.
How Does a Transfer on Death Deed Work?
A Transfer on Death Deed allows you to name a beneficiary who will receive your property after your death.
You continue to own the property during your lifetime. The person you name does not become the owner simply because you have named them on the deed.
During your lifetime, you generally maintain control over the property. You can continue to live in the home, sell the property, refinance it, or change your mind about who should receive it.
The transfer does not happen until your death.
For example, suppose you own a home and want your daughter to receive it when you pass away. You could execute a Transfer on Death Deed naming your daughter as the beneficiary. You would continue to own and control the home during your lifetime. After your death, assuming the deed was properly prepared and recorded and the requirements are met, the property can pass to your daughter without having to go through the probate process.
This can be an attractive option for someone who wants a relatively simple way to transfer a particular piece of real estate.
Why Do People Use a Transfer on Death Deed?
One of the biggest reasons people consider a Transfer on Death Deed is to avoid probate.
Probate is the court-supervised process used to settle certain aspects of a person’s estate after death. Depending on the circumstances, probate can take time and involve court filings, notices, and other administrative steps.
A Transfer on Death Deed can allow a piece of real estate to pass directly to the person named on the deed rather than requiring that property to be transferred through probate.
It can also give the property owner flexibility.
Because the beneficiary does not become the owner during your lifetime, you generally retain control of the property. If your circumstances change, your estate plan can be changed as well.
However, avoiding probate is not the only consideration when deciding how to transfer real estate.
A Transfer on Death Deed Is Not the Same as a Will
It is important to understand that a Transfer on Death Deed and a Will serve different purposes.
A Will provides instructions for how you want certain property and assets handled after your death. A Transfer on Death Deed specifically addresses the transfer of the real estate described in the deed.
Having a Transfer on Death Deed does not necessarily mean you do not need a Will or other estate planning documents.
Your estate plan should work together as a whole. If you have other assets, minor children, a spouse, a trust, or other beneficiaries, there may be additional issues to consider.
For some people, a Transfer on Death Deed may be a useful part of an estate plan. For others, a revocable living trust or another planning strategy may make more sense.
What Should You Watch Out For?
Although a Transfer on Death Deed can be useful, it is not something you should simply prepare and record without considering the bigger picture.
First, the deed needs to be properly prepared, signed, and recorded. An error in the deed or failure to follow the applicable requirements can create problems later.
You also need to think carefully about who you are naming as your beneficiary.
What happens if the person you name dies before you? What if you want to name more than one person? What if your family circumstances change? These are the types of questions that should be considered before you rely on a Transfer on Death Deed as your estate planning solution.
You should also consider what happens with the rest of your estate. A Transfer on Death Deed only addresses the property covered by the deed. It does not create a complete estate plan.
Is a Transfer on Death Deed Right for You?
A Transfer on Death Deed can be a useful estate planning tool, particularly for someone who wants to transfer real estate outside of probate while maintaining control of the property during their lifetime.
But there is no one-size-fits-all estate plan.
The right approach depends on your property, your family, your other assets, and what you want to happen after you are gone. In some situations, a Transfer on Death Deed may be exactly what you need. In others, a revocable living trust or another estate planning strategy may provide better protection and flexibility.
The most important thing is to understand your options before making a decision.
Not sure if a Transfer on Death Deed is right for you? Schedule a consultation today!
You can also check out our YouTube channel for more discussions about estate planning and probate at https://www.youtube.com/@dallawfirm.