What is a Transfer on Death Deed & How Do I Use One?

A Transfer on Death (TOD) Deed allows property owners to pass real estate directly to beneficiaries without probate. It provides control during life and simplifies inheritance. Understanding its function, legal requirements, and state laws ensures a valid and effective transfer.

What Is a Transfer on Death Deed?

A Transfer on Death (TOD) Deed is a legal document that allows property owners to transfer real estate to beneficiaries upon death without going through probate. The deed remains revocable during the owner’s lifetime, meaning changes can be made at any time. Upon the owner’s death, the named beneficiary automatically becomes the property owner without court involvement.

A TOD deed is recognized in many states and is commonly used for estate planning to simplify asset transfers. Unlike a will, it does not require probate proceedings, reducing time and legal costs. The property owner retains full control over the property during their lifetime, including the right to sell or mortgage it.

How Does a Transfer on Death Deed Work?

A Transfer on Death (TOD) Deed works by allowing a property owner to designate a beneficiary who will receive ownership of the real estate upon the owner’s death without probate.

1. Creation and Execution – The property owner prepares a TOD deed, naming the beneficiary. The document must be signed, notarized, and recorded with the local county recorder’s office before the owner’s death.
2. Owner’s Control – The owner retains full rights over the property while alive. They can sell, refinance, or revoke the TOD deed at any time without the beneficiary’s consent.
3. Automatic Transfer – Upon the owner’s death, ownership automatically transfers to the beneficiary. The beneficiary must file a death certificate with the county recorder to update ownership records.
4. No Probate Required – Unlike a will, the property does not go through probate, expediting the inheritance process and reducing legal costs.
5. Limitations and Conditions – The deed must comply with state laws. Some states have specific requirements regarding revocation, multiple beneficiaries, and creditor claims.

A TOD deed provides a straightforward way to pass real estate while avoiding probate, but it must be properly recorded and meet legal requirements to be valid.

What Are the Different Types of Transfer on Death Deeds?

There is only one type of Transfer on Death (TOD) Deed, but variations exist based on state-specific laws and how the deed is structured. These variations affect how property ownership is transferred upon the owner’s death.

1. Single Beneficiary TOD Deed – Transfers property to one designated beneficiary upon the owner’s death. This is the simplest and most common form.
2. Multiple Beneficiaries TOD Deed – Names two or more beneficiaries. The property is divided among them equally or according to specified shares. If one beneficiary dies before the owner, their share may pass to the remaining beneficiaries or lapse, depending on state laws.
3. Contingent Beneficiary TOD Deed – Includes a backup (contingent) beneficiary who inherits if the primary beneficiary dies before the owner. This ensures a clear transfer path if the first choice is no longer available.
4. Joint Owner TOD Deed – Used when multiple owners (such as spouses) hold property jointly. The TOD deed takes effect only after the last surviving owner dies. Until then, the surviving owner retains full control.
5. State-Specific TOD Deeds – Some states impose unique restrictions, requiring additional steps such as beneficiary acceptance, creditor claim resolution, or notarization standards beyond the usual requirements.

While the general function of a TOD deed remains the same, state laws dictate how these variations operate. Proper execution ensures a smooth transfer without probate.

Which States Allow Transfer on Death Deeds?

Yes, 31 states and the District of Columbia allow Transfer on Death (TOD) deeds. These states include:

• Alaska
• Arizona
• Arkansas
• California
• Colorado
• District of Columbia
• Hawaii
• Illinois
• Indiana
• Kansas
• Maine
• Michigan (via Lady Bird Deed)
• Minnesota
• Mississippi
• Missouri
• Montana
• Nebraska
• Nevada
• New Mexico
• North Dakota
• Ohio
• Oklahoma
• Oregon
• South Dakota
• Texas
• Utah
• Virginia
• Washington
• West Virginia
• Wisconsin
• Wyoming

New York introduced TOD deeds in July 2024. Some states, like Michigan, use a Lady Bird Deed, which functions similarly. The availability and requirements of TOD deeds vary by state, so checking local laws ensures compliance.

What Are the Advantages of Using a Transfer on Death Deed?

The advantages of using a Transfer on Death (TOD) Deed include:

1. Avoids Probate – A TOD deed allows property to pass directly to beneficiaries without probate, reducing court involvement, costs, and delays.
2. Maintains Owner Control – The owner retains full ownership rights, including selling, refinancing, or revoking the deed at any time before death.
3. Simple and Cost-Effective – Creating a TOD deed is typically easier and cheaper than establishing a trust or going through probate.
4. Immediate Transfer – Property ownership transfers automatically upon the owner’s death, requiring only the filing of a death certificate.
5. Protects Beneficiaries from Debt – The property is not subject to the owner’s debts unless state laws allow creditors to make claims.
6. No Impact on Property Taxes – The transfer does not trigger reassessment for property tax purposes in most states.
7. No Gift Tax Consequences – Since the transfer occurs after death, it does not count as a taxable gift during the owner’s lifetime.
8. Flexible Beneficiary Designation – Multiple or contingent beneficiaries can be named, ensuring clear property distribution.
9. Preserves Medicaid Eligibility – The property remains under the owner’s control, preventing disqualification from Medicaid benefits during their lifetime.

A TOD deed provides an efficient way to transfer real estate while avoiding legal complexities and maintaining control over the property.

How Can You Create a Transfer on Death Deed?

To create a Transfer on Death (TOD) Deed, follow these steps:

1. Confirm State Eligibility – A TOD deed is only valid in states that recognize it. Check state laws to ensure it is an option.
2. Obtain the Correct Form – Use the official TOD deed form required by the state where the property is located. Forms are available from county recorder offices, legal websites, or attorneys.
3. Complete the Deed Accurately – Fill in the required details, including:

• Property owner’s full name and address
• Legal description of the property (from the existing deed)
• Full name and address of the designated beneficiary
• Any contingent beneficiary, if applicable

A properly executed and recorded TOD deed ensures the property transfers smoothly upon the owner’s death without probate.

What Are the Common Issues with Transfer on Death Deeds?

The common issues with Transfer on Death (TOD) Deeds include:

1. State Limitations – TOD deeds are not recognized in all states, making them invalid in certain jurisdictions.
2. Beneficiary Disputes – Multiple beneficiaries may disagree on property management or division, leading to legal conflicts.
3. Creditor Claims – In some states, the deceased owner’s debts may still attach to the property, forcing the beneficiary to settle outstanding liabilities.
4. Failure to Record the Deed – A TOD deed is ineffective if not properly recorded with the county before the owner’s death.
5. Unclear Beneficiary Designation – Naming multiple beneficiaries without specifying ownership shares can create confusion and disputes.
6. Incapacity Before Revocation – If the owner becomes incapacitated, they may lose the ability to revoke or modify the TOD deed without a valid power of attorney.
7. Conflicts With Other Estate Plans – If a TOD deed contradicts a will or trust, legal challenges may arise over rightful ownership.
8. Medicaid Estate Recovery – Some states may require repayment of Medicaid benefits from the transferred property, reducing the beneficiary’s inheritance.
9. Unintended Disinheritance – If a beneficiary dies before the owner and no contingent beneficiary is named, the property may pass through probate.
10. Restrictions on Joint Ownership – In cases where multiple owners exist, TOD deeds may not work as intended unless properly structured.

Careful planning and legal review help avoid these issues, ensuring the TOD deed functions as intended.

What Are the Alternatives to Transfer on Death Deeds?

The alternatives to Transfer on Death (TOD) Deeds include:

1. Living Trust – A revocable living trust allows property transfers to beneficiaries without probate. The owner maintains control and can modify the trust at any time.
2. Joint Tenancy with Right of Survivorship – Property owned in joint tenancy automatically transfers to the surviving co-owner upon death, avoiding probate.
3. Tenancy by the Entirety – A form of joint ownership available to married couples in some states, ensuring automatic transfer to the surviving spouse.
4. Life Estate Deed – Grants the owner lifetime rights to the property while designating a remainder beneficiary who automatically inherits upon the owner’s death.
5. Lady Bird Deed – Used in some states, this enhanced life estate deed allows the owner to retain control while avoiding probate and Medicaid estate recovery.
6. Payable-on-Death (POD) Accounts – For financial assets, a POD designation allows direct transfer of funds to a named beneficiary without probate.
7. Beneficiary Deeds – Similar to a TOD deed, these are used in specific states for transferring real estate to named beneficiaries outside of probate.
8. Last Will and Testament – A will specifies property distribution but requires probate, making it a more complex and time-consuming option.
9. Gifting Property During Lifetime – Transferring property as a gift before death avoids probate but may have tax consequences, such as gift tax or capital gains tax.

Each alternative has unique benefits and limitations. Choosing the right method depends on state laws, estate planning goals, and the need for flexibility.

What Are the Most Frequently Asked Questions About Transfer on Death Deeds?

The most frequently asked questions about Transfer on Death (TOD) Deeds that have not already been discussed include:

1. Can a Transfer on Death Deed Be Contested?
   Yes, a TOD deed can be contested in court if there are claims of fraud, undue influence, lack of capacity, or improper execution.
2. Does a Transfer on Death Deed Override a Will?
   Yes, a TOD deed takes precedence over a will because it is a direct transfer mechanism that does not require probate.
3. Can a TOD Deed Be Used for Commercial Property?
   Yes, a TOD deed can be used to transfer residential, commercial, or vacant land, as long as state laws allow it.
4. Can a TOD Deed Include More Than One Beneficiary?
   Yes, multiple beneficiaries can be named, but ownership percentages should be clearly defined to avoid disputes.
5. Can a TOD Deed Be Used for Mortgaged Property?
   Yes, a property with a mortgage can be transferred through a TOD deed, but the beneficiary will inherit the responsibility for the debt.
6. Does a Transfer on Death Deed Affect Property Taxes?
   No, a TOD deed does not trigger property tax reassessment in most states, as the transfer occurs upon death.
7. Can a TOD Deed Be Used for Out-of-State Property?
   No, a TOD deed must comply with the laws of the state where the property is located, not where the owner resides.
8. Does a TOD Deed Require the Beneficiary’s Signature?
   No, a TOD deed does not require the beneficiary’s signature or consent, only the owner’s notarized signature.
9. Can a Beneficiary Decline a TOD Deed Inheritance?
   Yes, a beneficiary can disclaim the property, in which case it will pass according to state intestacy laws or to a contingent beneficiary.
10. What Happens If a Beneficiary Dies Before the Owner?
    If a contingent beneficiary is not named, the property may go through probate or pass under state laws of intestate succession.
11. Does a TOD Deed Protect the Property from Medicaid Estate Recovery?
    No, in some states, Medicaid may place a claim on the property after the owner’s death to recover long-term care costs.
12. Can a TOD Deed Be Used for Rental Properties?
    Yes, rental properties can be transferred using a TOD deed, but lease agreements remain in effect for tenants.
13. Does a TOD Deed Need to Be Updated If the Owner Moves?
    No, but if the owner acquires new property in a different state, a new TOD deed must be created according to that state’s laws.
14. Can a TOD Deed Be Created Without an Attorney?
    Yes, but legal assistance is recommended to ensure compliance with state-specific requirements and avoid errors.
15. What Happens If a TOD Deed Is Not Notarized or Recorded?
    The deed is invalid, and the property will go through probate according to the owner’s will or state intestacy laws.

Understanding these details helps property owners and beneficiaries navigate TOD deeds effectively and avoid legal complications.