Everything You Need to Know About Transfer on Death Deeds in Texas

As an estate planning lawyer, one of the most common questions we hear from clients is, “How can I transfer my property to my loved ones without going through probate?” In Texas, one solution is using a Transfer on Death Deed (TODD).

This powerful estate planning tool allows you to designate beneficiaries who will inherit your real property automatically upon your passing without the need for probate court.

What is a Transfer on Death Deed?

A Transfer on Death Deed, also known as a TODD, is a legal document that allows property owners to transfer their real estate to designated beneficiaries upon the owner’s death. The deed functions as a non-probate transfer, meaning the property passes directly to the beneficiaries without going through the often lengthy and costly probate process.

In Texas, Transfer on Death Deeds have been recognized by law since 2015, when the Texas Real Property Transfer on Death Act was enacted. This legislation added Chapter 114 to the Texas Estates Code, which governs the use of TODDs in the state.

Benefits of Using a Transfer on Death Deed in Texas

There are several compelling reasons why a Transfer on Death Deed might be the right choice for your estate plan.

Avoiding Probate

One of the primary benefits of using a TODD is that it allows your property to transfer to your designated beneficiaries without going through probate court. Probate can be a time-consuming and expensive process, often taking months or even years to resolve. By using a Transfer on Death Deed, you can save your loved ones the hassle and expense of probate, ensuring they receive their inheritance more quickly.

Maintaining Control During Life

Another advantage of TODDs is that you retain full control over your property during your lifetime. Unlike some other estate planning tools, such as irrevocable trusts, a Transfer on Death Deed does not affect your ownership rights while you are alive. You can still sell, mortgage, or otherwise use your property as you see fit. Additionally, you have the flexibility to revoke or change the TODD at any time should your circumstances or preferences change.

Simplicity and Affordability

Transfer on Death Deeds are a straightforward and cost-effective estate planning solution. Compared to other options, such as creating a living trust, TODDs are generally easier to set up and less expensive. This makes them an attractive choice for those who want to streamline the inheritance process without incurring significant legal fees.

Requirements for a Valid Transfer on Death Deed in Texas

To create a valid Transfer on Death Deed in Texas, there are certain requirements that must be met:

1. The deed must be signed, notarized, and recorded in the county where the property is located.
2. It must include a complete legal description of the property being transferred.
3. The deed must name one or more beneficiaries who will receive the property upon the owner’s death.

It’s important to note that the beneficiaries named in a TODD have no ownership rights to the property until the grantor (the current owner) passes away. The grantor retains full control and can even revoke or change the deed at any time during their life.

Limitations and Potential Drawbacks of TODDs

While Transfer on Death Deeds offers many benefits, there are some limitations and potential drawbacks to consider.

Medicaid Estate Recovery

In Texas, property transferred via a TODD may still be subject to Medicaid estate recovery. If the deceased owner received Medicaid benefits, the state may seek to recover those costs from their estate, including property passed through a Transfer on Death Deed.

Creditor Claims

Properties inherited through a TODD are not automatically protected from creditor claims against the deceased owner’s estate. In some cases, creditors may still be able to seek payment from the transferred property.

Limited to Real Property

Transfer on Death Deeds only work for transferring real estate. They cannot be used for personal property, such as vehicles, or financial accounts like bank or investment accounts.

Potential for Conflict

If a Transfer on Death Deed leaves the property to multiple beneficiaries, there is the potential for disputes to arise. Disagreements over how to divide or use the inherited property can lead to conflict among the beneficiaries.

Special Considerations for Co-Owned Property

When using a Transfer on Death Deed for co-owned property, there are some special rules and considerations to keep in mind. In Texas, the rules may differ depending on whether the property is community property or separate property and how it is titled.

For example, if a married couple owns the property as joint tenants with rights of survivorship, the surviving spouse will automatically inherit the property upon the other spouse’s death. A TODD would not be necessary in this situation. However, if the couple owns the property as tenants in common, each spouse can use a TODD to leave their share of the property to their chosen beneficiaries.

How to Create a Transfer on Death Deed in Texas

Creating a Transfer on Death Deed in Texas is a relatively simple process:

1. Obtain the proper Texas TODD form.
2. Fill out the form with all required information, including a legal description of the property and the names of the beneficiaries.
3. Have the form notarized.
4. Record the notarized form with the county clerk in the county where the property is located.
5. Provide a copy of the recorded deed to the named beneficiaries.

Revoking or Changing a Transfer on Death Deed

One of the benefits of a Transfer on Death Deed is the flexibility it provides. If your circumstances change or you simply change your mind about who you want to inherit your property, you can revoke or change the TODD at any time during your life.

To revoke a Transfer on Death Deed, you must file a new deed or revocation form with the same county clerk where the original TODD was recorded. Similarly, if you want to change the beneficiaries, you can do so by filing a new TODD that supersedes the previous one.

Simplify Your Estate Planning with a Transfer on Death Deed in Texas

A Transfer on Death Deed can be a powerful tool for transferring real property to your loved ones outside of probate in Texas. By understanding the benefits, limitations, and state-specific rules governing TODDs, you can make an informed decision about whether this estate planning strategy is right for your situation.

As with any legal matter, it’s crucial to consult with a knowledgeable Texas estate planning attorney before creating a Transfer on Death Deed. They can help you navigate the process, ensure your deed is properly drafted and executed, and advise you on how TODDs fit into your overall estate plan.

At The Titus Law Firm, we have extensive experience helping clients create effective estate plans tailored to their unique needs and goals. If you have questions about using Transfer on Death Deeds or any other estate planning tools in Texas, we invite you to contact our office to schedule a consultation. Our dedicated team is here to provide the guidance and support you need to protect your legacy and ensure your final wishes are carried out smoothly.