A death deed is an instrument that allows a real property owner to transfer property to a designated beneficiary at the owner’s death without the property having to go through probate. Transfer on death deeds or TOD deeds are a relatively newer instrument in the realm of property.

Not all states recognize or permit these transfers so it is important to check with your state laws to see if a TOD deed is available to you in your state. The TOD deed allows the beneficiary of such a deed to immediately take ownership of real property upon the death of the owner.

What are the Pros and Cons of Executing a Death Deed?

Some of the benefits to executing a death deed include the following:

  • Avoiding Probate: The most significant advantage to the TOD deed is the ability to avoid probate. The probate process can be expensive after the death of an owner, however, the TOD deed allows the beneficiary to skip this process in taking possession of their new property after submitting an affidavit and death certificate to the appropriate records office.
  • Property Interest Remains with the Original Owner Until Death: Many owners may consider transferring the property before death with instruments such as a joint tenancy interest where the beneficiary becomes an actual owner with the original owner. However, the original owner then is subject to joint ownership which can become burdensome if a disagreement occurs. 
    • TOD deeds offer the ability to legally promise the property to the future beneficiary without actual ownership changing hands. This advantage may also protect vulnerable elders with manipulative relatives. Since the property still belongs to the owner a manipulative adult child cannot threaten to kick out a vulnerable parent when they have no legal ownership of the property until the death of their parent.
  • Protection of the Property from the Beneficiary’s Debts: Because the beneficiary of a TOD deed does not have a present interest in the property, any debts or bankruptcy actions involving the beneficiary do not harm the property while the original owner is living. Thus, creditors of the beneficiary cannot place a lien on such a property.
  • TOD Deeds are Revocable: Another important characteristic for owners is the ability to change their mind while they are still alive. A beneficiary can be changed exclusively by the owner regardless of the beneficiary’s consent and a new TOD deed can be drafted to assign a new beneficiary.

Some of the disadvantages to a TOD deed include the following:

  • Fails to Avoid Taxation: TOD deeds are subject to property taxation just the same as property included in a will or other transfers of real property.
  • Property Not Protected from Owner’s Debts: While the beneficiary’s creditors cannot touch the property, the owner’s creditors certainly can. This is certainly a challenge for the beneficiary if the owner is unable to straighten out any debts affecting the property before death as the beneficiary will inherit any liens or burdens on the property.
  • May Not Prevent Conflicts Between Beneficiaries: If the owner drafts a TOD deed for multiple beneficiaries it can be burdensome to complete the transfer after death if the beneficiaries want to sell the property. Another potential conflict is if a relative challenges the validity of the deed which is a similar concern with wills. If there is a claim that the owner did not have the capacity to sign the deed during life, it can take time to sort out the claim after their death.

What Happens If a Death Deed is Executed for the Same Property in a Will to Different Beneficiaries?

In most states where the death deed is recognized, the deed controls over the will. Thus, if an owner of a home provides a death deed for the home to their child and then designates their spouse for the home in the will; the child will likely receive the home. While owners should avoid such a conflict, most decisions have resulted in the deed controlling the transfer. 

How is Title Insurance Affected on a Death Deed?

Because death deeds are relatively new instruments and not all states permit them, some insurance companies may be concerned about providing title insurance to a death deed.

However, these deeds are growing in popularity and in states that have allowed such deeds for some time have seen this concern go away.

What Happens If the Beneficiary Dies Before the Owner?

If the beneficiary dies before the owner, the owner will need to draft a new deed for a new beneficiary.

If the owner failed to list a secondary beneficiary for such a circumstance and dies before a new deed is drafted, then the property will be controlled by the state’s probate laws.

When Should I Consult a Lawyer About a Death Deed?

The first step is to determine if TOD deeds are available in your state. Once you have determined it is available, then you can contact a local estate lawyer who can assist in drafting the deed to ensure it is done properly and cover any gaps that may be helpful in listing beneficiaries.