A Transfer on Death Deed is a simplified method of transferring property upon the death of the owner of real property. This includes surface, minerals, structures and fixtures. The key features are the ability of a current owner to name a beneficiary to receive the property after his or her death. The current owner files a Transfer of Death Deed that names the beneficiary or beneficiaries who will receive their property after their death. Once the current owner dies the beneficiary files a death certificate and affidavit to become owners of the property.
- The process does not require oversight by the probate court.
- The Deed does not need to be supported by consideration.
- Unlike a joint tenancy, the Transfer on Death Deed does not make the beneficiary a owner of the property. Therefore, the current owner can do the following without the approval, consent or knowledge of the beneficiary:
- Revoke the Transfer on Death Deed, and/or
- Sell, mortgage, lease or otherwise dispose of the property.
- A beneficiary of Transfer on Death Deed receives the property free from the claim of “a person who became the spouse of the grantor subsequent to the execution of the transfer-on-death deed“. This may be seen as a “poor man’s” prenuptial agreement because it is simple to complete and requires no agreement of the fiancee. On the other hand, the owner must revoke the Transfer on Death Deed if he or she wants their new spouse to receive the property.
- A Last Testament and Will does not change the effect of the Transfer on Death Deed. In other words, a bequest in a Will does not change the named beneficiary even if it is made after the Transfer on Death Deed.
- It is difficult to plan if the property is currently owned in joint tenancy. For example, if the Transfer on Death Deed was executed by one of joint tenants who dies before the others then the Deed becomes ineffective.
- If the beneficiary predeceases the owner the property reverts to the estate and is subject to probate–unless care was taken to draft the document to pass the property to the beneficiary’s heirs.
- If the beneficiary does not “accept” the property within 9 months the property reverts to the owner’s estate subject to administration by probate court. Therefore, the property will pass according to the Will or intestacy if there is no Will.
- The rules about the need to revoke the Deed to change the outcome require additional estate planning services if changes are desired and might be missed by estate planning attorneys or those using a do-it-yourself kit.
The Transfer on Death Deed has a place in Estate and Prenuptial Planning. However, it is important that owner be aware of its limitations and possible unintended consequences. The beneficiary should also be aware of the need to take timely action in order to avoid probate court. Also, a beneficiary should never pay to be named because the owner if free to change the designation.