If you own your home, you'll probably want to take steps to keep your house—likely one of your most valuable assets—out of probate when you die. A living trust works well, but you might not want to go to the trouble and expense of creating one. (See Transfer-on-Death Deeds vs. Living Trusts.) Here's good news: Most states now offer transfer-on-death deeds (TOD deeds), an easy and effective alternative for transferring real estate upon your death.
A TOD deed is like a regular deed used to transfer real estate, with a crucial difference: Instead of taking effect immediately, a TOD deed doesn't take effect until your death. In some states, this deed is called a "beneficiary deed" because it's a deed that names the beneficiary of the property when you die. A few states use a term unique to that state, such as "deed upon death" in Nevada or "transfer on death designation affidavit" in Ohio, but regardless of terminology, the document has essentially the same function.
Check whether your state is one of the states that allow transfer-on-death deeds. If your state doesn't currently allow TOD deeds, it might in the near future. Several more states are actively considering adopting them.
Here are some of the benefits of transfer-on-death deeds:
If you're thinking about ways to keep your home out of probate, and TOD deeds are an available option in your state, they are well worth considering. Unless you have a complex situation or have specific concerns, you likely won't need a lawyer to create a TOD deed. But you will need to make sure that the TOD deed you make is valid in your state, since each state's rules are a little different. WillMaker (a service that helps you make estate planning documents) can walk you through the process of creating a transfer-on-death deed that works for your situation and state.
Using a transfer-on-death deed is a lot like using a payable-on-death (POD) designation for a bank account. You name one or more beneficiaries now, and they inherit the property at your death without the need for probate court proceedings. You keep complete ownership of, and control over, the property while you're alive. That means you pay the taxes on it, and it's not protected from your creditors. You can also decide to sell it, give it away, or mortgage it during your lifetime.
A TOD deed looks similar to other real estate deeds; it names the current owner, provides the exact legal description of the property, and designates someone to receive the property (known as the "grantee" or "beneficiary"). But a TOD deed also contains an additional statement, making it clear that the deed does not take effect until the current owner's death.
The beneficiary you name to inherit the property doesn't have any legal right to it until your death—or, if you own the property with your spouse or someone else, until the last surviving owner dies. The beneficiary doesn't have to sign, acknowledge, or even be told about the deed, though it's usually a good idea to give the beneficiary a heads up.
In the deed, you can often also name an alternate beneficiary who will inherit the real estate if your first choice isn't alive at your death. If you don't name an alternate, and your first choice doesn't survive you, the property will go through probate.
Most states require that you sign the deed, have it notarized, and then record (file) the deed with the land records office in the county where your property is located. This office goes by different names depending on your county, but it's often called a recorder of deeds or register of deeds, or is part of the county clerk's office. Don't procrastinate on recording your TOD deed, as your deed won't be valid if it isn't recorded with the county land records office, even if you've signed it before a notary public. A few states have additional rules, such as requiring witnesses to sign the deed as well, or meeting deadlines for filing the deed in the land records office.
At your death, ownership passes immediately—and automatically—to the beneficiary or beneficiaries you named in the deed. If a mortgage or other debt is attached to the property, that debt goes along with the property.
For more information on the nitty-gritty of creating a TOD deed, see How to Prepare a Transfer-on-Death Deed.
Later, if you change your mind about whom you want to inherit the property, you're not locked in. You can revoke the TOD deed or simply record another TOD deed leaving the property to someone else. See How to Revoke a Transfer-on-Death Deed for more details.
Although ownership of the property passes to the beneficiary when you die, there's still some paperwork to get the property into the name of the new owner. The new owner will probably need to file a simple sworn statement (affidavit) and a copy of your death certificate in the land records office. (See How the New Owner Claims Transfer-on-Death Real Estate.) But the exact details will vary by state, and even by county. Although the TOD beneficiary has these few steps to take, the process is still usually much simpler, quicker, and less costly than going through probate.