If you are looking for ways to avoid or minimize probate, having a transfer on death deed is one way to achieve that. This document can help you transfer your home easily, quickly and without cost because it avoids the probate process.
But before opting for a transfer on death deed, it is good to have clear information on everything this document entails.
What is a transfer on death deed?
A transfer of death deed, TODD as acronym, is a document of ownership for real property in which you name the person you want the property transferred to when you die. Since you have already named your beneficiary in the deed, no probate will be conducted for the real property. Without a transfer on death deed or some other probate avoidance strategy, your home must go through the probate court. And due to how complex and expensive probate is, it is a great favor to your family to rid them of the stress by holding your property via a transfer on death deed.
What property can you hold by a transfer on death deed?
Transfer on death deed only works for real property (your home, land, business building, etc.). Bank accounts and other kinds of assets cannot be held in a transfer on death deed. However, bank accounts can be converted into a transfer on death account or payable on death account. Such accounts will also pass outside probate because the owner will name a beneficiary in the account.
Do transfer on death deeds avoid probate?
By the fact that there is already a beneficiary named in the deed, transfer on death deeds avoid probate.
How do transfer on death deeds work?
In a transfer on death deed, the property owner can name one or more persons as the beneficiary of the property. A beneficiary can be an individual, charity, or any other organization. When the owner dies, the beneficiary automatically becomes the owner. They become joint owners if there are more than one beneficiaries named. In some states, TODD is also known as TOD instrument, deed upon death, or beneficiary deed.
However, the transfer on death deed allows you keep all ownership rights during your lifetime. During this time, you can choose to sell the property, use it as collateral on a loan, or change the beneficiary in the transfer on death deed. You can do whatever you want when you are still alive and the full owner. Only when you die does the deed become effective, that is, able to transfer ownership rights. The full equity value and interest passes to the named beneficiary without going through probate.
If you are a joint owner of the property in a “Tenants in Common” ownership, you cannot transfer the full ownership to someone else since you are not the full owner. But you can transfer your interest in the property to another joint owner (probably your spouse) or any other individual(s) of your choosing through a transfer on death deed. The beneficiary will have to issue an Affidavit of Death in the deed record to get a clear title (non-defective ownership to the property).
Does transfer on death deed work in all states?
Not all states recognize TOD deeds. Currently, only the following states accept it:
- Alaska
- Arizona
- Arkansas
- California
- Colorado
- Hawaii
- Illinois
- Indiana
- Kansas
- Maine
- Minnesota
- Missouri
- Montana
- Nebraska
- Nevada
- New Mexico
- North Dakota
- Oklahoma
- Oregon
- South Dakota
- Texas
- Utah
- Virginia
- Washington
- West Virginia
- Wisconsin
- Wyoming
- Ohio (which uses TOD affidavit rather than TOD deed, but they work the same way.
A few other states also have documents that work like the TOD deed but have different names.
If unfortunately you do not reside in any of these states that recognize the deed, you can still avoid probate using other means. Owning your property by joint tenancy with rights of survivorship is a great alternative to transfer real property outside probate.
Advantages of a Transfer on death deed
- Avoids probate with or without a will
- In a joint tenancy ownership, you cannot sell or do anything to the property without consent from the other joint owner(s). But with a TOD deed, you have complete ownership and control till death.
- Transfer on death deeds are very simple and cheap, as compared to setting up a living trust.
Talk to an attorney
If you are looking to avoid probate, there are many ways to achieve that. And transfer on death deeds only binds real property. So to keep other assets away from probate, kindly speak with an estate planning attorney near you for professional guidance.
