Texas Transfer on Death Deed Form
What is a Texas transfer-on-death (TOD) deed?
A Texas transfer-on-death deed form is a special type of deed form that transfers Texas real estate to named beneficiaries upon an owner’s death.1 It works much like a transfer-on-death designation on a bank account. A transfer-on-death deed identifies one or more beneficiaries who will automatically receive the real estate when the current owner dies. It may also name alternate beneficiaries who receive the property if the primary beneficiary dies before the property owner.
A Texas transfer-on-death deed may also be called a TOD deed or TODD. In other states, transfer-on-death deeds may be called beneficiary deed, deed upon death, or transfer-on-death instrument. Each of these terms refers to the same type of deed.
What is the purpose of a Texas TOD deed?
The principal purpose of a Texas TOD deed is to avoid probate. TOD deeds are not subject to all the formalities required for wills—though they must meet the requirements for TOD deeds (described below). Texas real estate that passes to a beneficiary under a TOD deed does not become part of the owner’s probate estate.2 Unlike some other methods of bypassing probate, a TOD deed lets the owner keep complete control over the property during life. The control includes the ability to sell, mortgage, or otherwise transfer the property without involving the beneficiaries.3
Texas TOD deeds provide other benefits, as well. Transfer under a TOD deed has the following advantages over other real estate transfer methods used in estate planning:
- Less legal fees. Although the benefits of a transfer-on-death deed can usually be accomplished with a living trust, a transfer-on-death deed was designed to provide a less expensive alternative.
- Homestead protection. The property continues to qualify as a Texas homestead, which can provide favorable property tax benefits and protect the property from creditor claims.
- Medicaid benefits. The transfer is disregarded for purposes of determining Medicaid eligibility and prevents the property from being taken by the state as reimbursement for Medicaid benefits.
- Tax savings. When the property is transferred at death, it qualifies for the “stepped-up basis” under the Internal Revenue Code. By permanently erasing any appreciation that occurred before the owner’s death, the stepped-up basis can result in substantial income tax savings when the property is later sold.
What is the benefit of avoiding probate?
A TOD deed’s automatic transfer of real estate at the owner’s death avoids the need to transfer the property through the Texas probate system. Probate is often an expensive, time-consuming process. Passing property outside probate cuts down on the total costs of administering the owner’s estate. It typically also allows the beneficiary to take title to the property sooner than if it went through the probate process.
What types of property can be transferred using a Texas TOD deed?
An individual who owns an interest in Texas real estate can use a TOD deed to transfer the interest to a beneficiary when the owner dies.4 A Texas TOD deed can transfer any type of ownership interest in Texas real estate—including a part interest—that the owner would otherwise be able to transfer by will.5 Co-owners with a right of survivorship can use a TOD deed, but there are special rules that govern the deed’s effectiveness (discussed below).6
A Texas TOD deed can only transfer a property interest owned by a natural person—or an actual human being. A TOD deed cannot transfer real estate owned by an entity like an LLC or trust.
Real estate transferred through a Texas TOD deed must be physically located in Texas. The owner does not necessarily have to be a Texas resident, as long as the property itself is in Texas. Real estate located in another state and owned by a Texas resident cannot be transferred with a Texas TOD deed. In that scenario, the owner may be able to use a TOD deed designed for the state where the property is located (if that state recognizes TOD deeds).
What is the effect of a Texas TOD deed while the owner Is alive?
A Texas TOD deed has no legal effect on the owner’s rights in the property while the owner is alive. The owner can still sell, transfer, or mortgage the property.7 A TOD deed is revocable until the owner’s death, so the owner can change his or her mind about the TOD deed without involving the beneficiary.8 Recording a TOD deed does not limit the owner’s right to homestead protections and property tax exemptions.9
Along the same lines, the beneficiary receives no rights in the property until the owner’s death.10 A TOD deed does not affect the beneficiary’s eligibility for public assistance during the owner’s life because the beneficiary receives no vested interest.11
A TOD deed also has no effect on creditors’ claims during the owner’s life. The deed does not impair the rights or interests of the owner’s creditors, and it does not give the beneficiary’s creditors a claim against the property.12
Can the owner sell the property after recording a TOD deed?
A property owner has all the same rights to sell the property after recording a Texas TOD deed that he or she enjoyed before recording the deed.13 A TOD deed is effectively void if the owner records a deed or other instrument that transfers the property to another person before the owner’s death.14
Is a Texas TOD deed revocable?
A Texas TOD deed is always revocable while the property owner is still alive.15 An owner can revoke a Texas TOD deed in any of the following ways:16
- Later TOD deed. The owner can revoke a TOD deed by recording a later TOD deed that expressly revokes the earlier TOD deed or that implicitly revokes the TOD deed by making an inconsistent transfer of the property.
- Instrument of revocation. The owner can revoke a TOD deed by recording a signed, notarized document that expressly revokes the TOD deed.
- Transfer of the property. An otherwise valid TOD deed becomes void if the owner transfers the property before death—as long as the second deed (the deed transferring the property to someone else) is recorded in the land records before the owner’s death.
- Divorce. A divorce order automatically revokes a TOD deed that names the owner’s former spouse as beneficiary if the divorce order is recorded before the owner’s death.
An owner cannot revoke a TOD deed by will. A provision in the owner’s will that expressly revokes a valid, recorded TOD deed is ineffective.17
What Is the effect of a Texas TOD deed when the owner dies?
The beneficiary named in a Texas TOD deed automatically takes title to the property when the owner dies.18 Unless the TOD deed says differently, the beneficiary must outlive the owner by at least 120 hours to acquire the property.19
Property passes to the beneficiary subject to any mortgages, liens, or other third-party claims affecting the property as of the owner’s death.20 If there is a lien or mortgage on the property, the personal representative of the owner’s estate gives notice to the creditor. The creditor may be able to attach the property if the owner’s estate is insufficient to satisfy the creditor’s claim.
The estate’s personal representative may attach the property if the owner’s estate is insufficient to pay estate claims, administrative expenses, estate tax, or a family allowance for the owner’s surviving spouse or children.21
Other types of estate-planning deeds used in Texas—such as a traditional life estate deed or a Texas lady bird deed—may provide a warranty. Thus, a Texas life estate deed or lady bird deed may sometimes also be a warranty deed or special warranty deed, but a Texas TOD deed can never provide a warranty. A TOD deed is its own distinct form of deed, and it passes title more like a quitclaim deed or deed without warranty.
Can a Texas TOD deed leave property to multiple beneficiaries?
A transfer-on-death deed may leave property to multiple beneficiaries. Texas law assumes that a TOD deed that names multiple beneficiaries transfers the property to the beneficiaries in equal shares as tenants in common.23
An owner can name primary and alternate beneficiaries in a TOD deed. For example, an owner could name a spouse as a primary beneficiary and children as alternate beneficiaries. If the spouse outlives the owner, he or she receives the entire property. If the spouse dies before the owner, the children receive the property in equal shares as tenants in common.
The designation of beneficiaries as either primary or alternate beneficiaries applies as a class. There is one class of primary beneficiaries and one class of alternate beneficiaries. If there is no surviving primary beneficiary, all of the alternate beneficiaries inherit as a group. For example, if the deed named four alternate beneficiaries and no primary beneficiary survives, each named alternate beneficiary would inherit a 25 percent interest in the property.
Can joint owners sign a Texas TOD deed?
Co-owners of Texas real estate can transfer property using a TOD deed. The effect of the deed depends on which form of co-ownership the co-owners are using. A co-owner who is a tenant in common can use a TOD deed to pass to the beneficiary the part interest that otherwise would have gone through probate. It works similarly to a solely-owned property, but the deed specifies the percentage or fraction of the property’s title that the co-owner owns.
The rules are more nuanced for joint owners—defined by the TOD law as co-owners who share a right of survivorship that automatically passes a deceased owner’s share to the surviving owner.24
A joint owner can record a TOD deed that names a beneficiary. However, the other joint owner still receives the property via the right of survivorship if the joint owner who recorded the TOD deed dies first.25 In other words, a surviving joint owner’s right of survivorship takes precedence over a beneficiary’s right to receive the same property under a TOD deed. That means that a TOD deed recorded by one joint owner transfers the property to the named beneficiary only if the joint owner who recorded the deed is the last surviving joint owner.
The Texas TOD deed rules for joint owners can work well for married couples with children. A married couple can create a TOD deed that allows them to continue to own property with rights of survivorship during life while passing the property to children once both spouses are deceased.
Example: Ashley and Brett are married and own Texas property as joint tenants with right of survivorship. They want the property to pass to the surviving spouse if one of them dies, then pass to their children on the surviving spouse’s death.
Ashley and Brett record a TOD deed that names their children as beneficiaries. Brett dies first and is survived by Ashley. Ashley becomes the property’s sole owner through the right of survivorship. After Ashley dies (when both spouses are deceased), the property passes automatically to the children under the TOD deed.
Can joint owners revoke a Texas transfer-on-death deed?
If co-owners who are tenants in common create a TOD deed, each owner has the right to revoke the deed as to his or her portion of the property. Revocation by one owner does not revoke the TOD deed as to the other co-owner’s interest.26
A TOD deed signed by joint owners with a right of survivorship may be revoked only by all living joint owners.27 The last surviving joint owner keeps the right to revoke the deed until his or her death. A survivor’s right to revoke the TOD deed is usually not a problem if the joint owners have the same goal. The risk increases if the joint owners have different goals. In a second marriage, for example, each spouse may want to leave property to his or her own children instead of the other spouse’s children. In that situation, the surviving spouse might revoke the deed after the first spouse’s death and leave the property to his or her children instead of the deceased spouse’s children.
What happens If the beneficiary named in a Texas TOD deed dies before the owner?
The beneficiary named in a TOD deed must still be alive at least 120 hours after the owner’s death to receive the property. If a beneficiary dies before the owner, that beneficiary’s interest under the TOD deed lapses—which means it fails and the property passes through probate.29
Texas’ lapse rule for TOD deeds is a default rule that a property owner can modify in the TOD deed.30 A property owner can create a TOD deed that avoids a lapsed interest using one or more of the following strategies:
- Alternate beneficiary. A TOD deed can name one or more alternate beneficiaries—also called contingent beneficiaries—to receive the property if no primary beneficiary survives the owner.
- Multiple primary beneficiaries. A Texas TOD deed can name multiple beneficiaries and state that surviving beneficiaries receive a deceased beneficiary’s share.
Must the owner notify the beneficiaries of the Texas TOD deed?
An otherwise valid Texas TOD deed is effective regardless of whether the beneficiary receives notice of the deed while the owner is living.31 Likewise, there is no need for the beneficiary to accept the deed during the owner’s life. After the owner’s death, a beneficiary may choose to disclaim the property interest a TOD deed passes.32
Can a Texas TOD deed be used when the property is mortgaged?
An outstanding mortgage on the property does not prevent the owner from recording a TOD deed. Mortgage agreements often include due-on-sale clauses that require the lender’s consent to transfer the property. However, Texas TOD deed law unambiguously declares that a transfer-on-death deed recorded during the owner’s life does not trigger a due-on-sale or similar clause.33 Federal law also forbids enforcement of due-on-sale clauses in response to “a transfer to a relative resulting from the death of a borrower.”34
A recorded TOD deed does not impair a creditor’s mortgage or lien while the owner is living, and liens and mortgages survive the transfer to the beneficiary when the owner dies.35
Must a Texas TOD deed be recorded?
A TOD deed is effective only if it is recorded in the land records before the owner’s death.36 The signed, notarized TOD deed must be recorded with the county clerk for the county where the property is located.
Can a Texas TOD deed be signed by an agent under a power of attorney?
Texas law does not allow an agent acting under a power of attorney to create a TOD deed for the property owner.37 Powers of attorney often involve the risk of self-dealing—especially if used to directly or indirectly benefit the agent named in the power of attorney. The Texas legislature preemptively resolved these issues by authorizing TOD deeds to be created only by an individual property owner with sufficient mental capacity—not by his or her agent under a power of attorney.
What are the requirements for a Texas TOD deed?
The Texas Real Property Transfer on Death Act authorized transfer-on-death deeds for Texas real estate beginning on September 1, 2015. A Texas transfer-on-death deed must include all the essential elements and formalities of other types of recordable Texas deeds.38 This means, for example, that the deed must be in writing and contain a precise legal description of the property. The owner must sign the deed, and it must be notarized.
A TOD deed must also state that the real estate transfer will occur at the owner’s death.39 And it must be recorded in the county clerk’s office of the county where the real estate is located. Recording in the land records must occur before the owner’s death.
Unlike other forms of deeds, a TOD deed does not need to have consideration.40 The beneficiary need not provide anything of value for the property, and there is no need for a statement of consideration within the TOD deed.
Transfer-on-death deeds were authorized by Texas statute. Therefore, all Texas TOD deed forms should be carefully drafted to meet the requirements of the TOD deed law. Failure to meet these requirements could invalidate the deed or create title problems that require legal action to resolve.
Need a transfer-on-death deed that meets Texas recording requirements?
Our deed creation software creates Texas transfer-on-death deeds designed specifically to meet the requirements of the Texas Real Property Transfer on Death Act. The step-by-step interview collects the necessary information. Then the software creates the Texas transfer-on-death deed based on the information provided, along with a specific set of instructions for completing the transfer.
- Tex. Est. Code § 114.051.
- Tex. Est. Code § 114.053.
- Tex. Est. Code § 114.101.
- Tex. Est. Code § 114.051.
- Tex. Est. Code § 114.002(5).
- Tex. Est. Code §§ 114.103(b)-(c).
- Tex. Est. Code § 114.101(1).
- Tex. Est. Code § 114.052.
- Tex. Est. Code §§ 114.101(1)(B) and (C).
- Tex. Est. Code § 114.101(2).
- Tex. Est. Code § 114.101(4).
- Tex. Est. Code §§ 114.101(3) and (8).
- Tex. Est. Code § 114.101(1).
- Tex. Est. Code § 114.102.
- Tex. Est. Code § 114.052.
- Tex. Est. Code § 114.057.
- Tex. Est. Code § 114.057(b).
- Tex. Est. Code § 114.103.
- Tex. Est. Code § 114.103(a)(2).
- Tex. Est. Code § 114.104.
- Tex. Est. Code § 114.106.
- Tex. Est. Code § 114.103(d).
- Tex. Est. Code § 114.103(a)(3).
- Tex. Est. Code § 114.002(3).
- Tex. Est. Code § 114.103(b).
- Tex. Est. Code § 114.057(d).
- Tex. Est. Code § 114.057(e).
- Tex. Est. Code § 114.002(3).
- Tex. Est. Code § 114.103(a)(2).
- Tex. Est. Code § 114.103(a).
- Tex. Est. Code § 114.056.
- Tex. Est. Code § 114.105.
- Tex. Est. Code § 114.101(5).
- 12 USC 1701j-3(d)(5).
- Tex. Est. Code §§ 114.101(3); 104.
- Tex. Est. Code § 114.055.
- Tex. Est. Code § 114.054.
- Tex. Est. Code § 114.055(1).
- Tex. Est. Code § 114.055(3).
- Tex. Est. Code § 114.056(2).