Texas Transfer-on-Death Deed Form – Summary
The Texas transfer-on-death deed form allows property to be automatically transferred to a new owner when the current owner dies, without the need to go through probate. It also gives the current owner retained control over the property, including the right to change his or her mind about the transfer.
Special language is required to ensure that the deed qualifies as a transfer-on-death deed. This language is automatically included by our deed preparation service and valid in all Texas counties.
How a Texas Transfer-on-Death Deed Works
A Texas transfer-on-death deed form is a special type of deed form that transfers property to designated beneficiaries upon an owner’s death. It works much like a transfer-on-death designation on a bank account. A transfer-on-death deed identifies beneficiaries who will inherit the real estate at death. The deed may name more than one beneficiary. It may also name alternate beneficiaries to inherit the property if the primary beneficiaries are deceased. On the death of the current owner, the property passes automatically to the named beneficiaries.
Because transfer-on-death deeds do not transfer property until the current owner’s death, the owner retains broad control over the property during his or her lifetime. The beneficiaries named in the deed have no rights to the property while the owner is still alive. A Texas transfer-on-death deed is effective even if the designated beneficiaries do not know it exists. During the current owner’s life, he or she may revoke the transfer-on-death designation or name different beneficiaries.
Benefits of Transfer-on-Death Deeds
Texas transfer-on-death deeds have several benefits that make them an attractive option for people that own Texas real estate.
- Probate Avoidance – The automatic transfer of property at death avoids the need to transfer the property through the Texas probate system.
- Retained Control – The owner keeps complete control over the property during life. This control includes the ability to sell, mortgage, or otherwise transfer the property without involving the beneficiaries.
- 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.
- Homestead Protection – Property continues to qualify as Texas homestead, which can provide favorable property tax benefits and protect the property from creditor claims.
- 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.
- 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.
Other Names for Texas Transfer-on-Death Deeds
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.
Although a Texas transfer-on-death deed serves a similar purpose to a Texas lady bird deed, the two deed forms are different. See our discussion of using deeds to avoid probate for a detailed explanation of the various deeds that can avoid probate.
Relationship of Transfer-on-Death Deed Form to Warranty of Title
Many deeds are named after the warranty of title they provide (or don’t provide). Texas warranty deeds, special warranty deeds, quitclaim deeds, and deeds without warranty are all named after the warranty of title. Texas transfer-on-death deeds are different. Instead of being named after a warranty of title, a Texas transfer-on-death deed is named after its estate planning feature (the at-death transfer).
As a matter of law, a Texas transfer-on-death deed transfers real estate with no warranty of title. The form of the deed cannot change this result. If the deed is altered to include a provision that grants a warranty of title, the provision is invalid. A transfer-on-death deed transfers the property without warranty, even if the deed itself contains a contrary provision.
Revoking a Transfer-on-Death Deed
A transfer-on-death deed is revocable, even if it contains a contrary provision. This feature distinguishes Texas transfer-on-death deeds from traditional life estate deeds, which cannot be changed without consent of the beneficiary. Texas transfer-on-death deeds can be unilaterally revoked by the owner without involving the remainder beneficiaries.
If the owner transfers the property to someone else after creating a transfer-on-death deed, the transfer-on-death deed is disregarded. Texas law is clear that an otherwise valid transfer-on-death deed becomes void if the property is transferred 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. This allows the owner to transfer real estate without formally revoking the transfer-on-death deed.
Leaving Property to Multiple Beneficiaries
A transfer-on-death deed may leave property to multiple beneficiaries, as long as each beneficiary inherits an equal interest in the property. For example, the owner could name a spouse as a primary beneficiary and children as alternate beneficiaries. If the spouse outlives the owner, he or she would own the entire property. But if the spouse predeceases the owner, the children would own 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.
Using TOD Deeds for Property with Rights of Survivorship
Texas property owners often own property jointly with other owners with a right of survivorship. A right of survivorship allows the property to pass automatically to the surviving owner upon the death of the first owner to die. This raises questions about how a TOD deed works when property is held by multiple owners with right of survivorship.
Texas law allows multiple owners to name someone else to receive the property after both of them die. For example, a husband and wife may own property jointly with right of survivorship during life and create a TOD deed that transfers the property to named beneficiaries on the death of the last of them to die. Section 114.103(b) of the Texas Estates Code provides:
If a transferor is a joint owner with right of survivorship who is survived by one or more other joint owners, the real property that is the subject of the transfer on death deed belongs to the surviving joint owner or owners. If a transferor is a joint owner with right of survivorship who is the last surviving joint owner, the transfer on death deed is effective.
Under this provision, as long as one owner survives, the property will pass to that owner and not to the beneficiaries named on the deed. But when both owners die (i.e., when there is no remaining owner with right of survivorship), the property will pass to the beneficiaries named on the deed.
Example: Ashley and Brett are married and own Texas property as joint tenants with right of survivorship. The spouses want the property to pass to the surviving spouse if one of them dies, then pass to their children on the death of the surviving spouse.
Ashley and Brett could create a TOD deed that names their children as beneficiaries. If Brett dies first and is survived by Ashley, the property will pass to Ashley. After Ashley dies (when both spouses are deceased), the property would pass automatically to the children under the TOD deed.
As this example illustrates, 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. But this does not prevent the surviving spouse from revoking the deed. In the example above, Ashley could revoke the deed after Brett’s death and leave the property to someone else.
If the joint owners have the same objectives, the surviving spouse’s ability to revoke the deed is usually not a problem. For example, a married couple on their first marriage will usually want to leave property to their children from the marriage. Because their goals are aligned, there is less risk that the widow or widower will disinherit the children after the first spouse’s death.
The risk increases, however, 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.
Restriction on Use of Powers of Attorney
A TOD deed may not be created using a power of attorney. Powers of attorney often involve the risk of self-dealing, especially when used to directly or indirectly benefit the agent named in the power of attorney. The Texas legislature preemptively resolved these issues by clearly providing that a TOD deed may only be created by a person with mental capacity, not by his or her agent under a power of attorney.
Relationship of TOD Deed to Last Will and Testament
Unlike a will, a Texas transfer-on-death deed is not a testamentary instrument. This distinction has two important consequences:
- A TOD deed need not comply with the “testamentary formality” requirements or mental capacity requirements associated with Texas wills. As long as the deed meets the requirements of the TOD statute, it will be recognized.
- Property conveyed by will must go through probate. Property conveyed by TOD deed does not. When the owner dies, the property passes to the beneficiaries named in the deed without the need for Texas probate.
Texas law is clear that a will may not revoke or supersede a transfer-on-death deed. The deed will trump the terms of the will. If a person signs a TOD deed and also names someone to inherit the same property under his or her will, the will is disregarded. The person named in the TOD deed inherits the property.
How to Create a Texas Transfer-on-Death Deed
The Texas Real Property Transfer on Death Act authorized transfer-on-death deeds on September 1, 2015. A Texas transfer-on-death deed must include the essential elements and formalities of other types of Texas deeds. This means, for example, that the deed must be written, contain a precise legal description of the property, and be properly signed and notarized. Unlike other forms of deeds, there is no consideration requirement. The deed must also state that the transfer of the interest in real estate will occur at the owner’s death. It must also be recorded before the transferor’s death in the deed records in the county clerk’s office of the county where the real property is located.
Because the form of deed was authorized by statute, all Texas transfer-on-death deed forms should be carefully drafted to meet the requirements of the authorizing statute. Failure to meet these requirements could invalidate the deed or create title problems that require legal action to resolve. Our Deed Generator creates Texas transfer-on-death deeds designed specifically to meet the requirements of the Texas Real Property Transfer on Death Act. It uses a step-by-step interview to collect the information required, then creates the Texas transfer-on-death deed based on the information provided. It also creates a specific set of instructions for completing the transfer.
Texas Transfer-on-Death Deed Form. Our Texas transfer-on-death deed form includes options to create the right deed for most common real estate transfers. It was designed by a licensed attorney and can be used in all Texas counties. We also provide step-by-step instructions for signing and notarizing the deed and filing it in the land records to complete the transfer.