What Does A Transfer On Death Deed in Texas Do?

There is a snappy little document called a “transfer on death deed” that is very much in vogue right now.  You can use it to transfer your real property in Texas upon your death, making it a valuable tool if your estate plan is geared toward avoiding probate.

If you are leaping to your computer to download an internet form of the deed, you may want to hold off for a moment.  There are a few unsavory details you may want to consider first.

Texas does not have an approved statutory form.  There used to be one, but it was removed during this last legislative session.  Use extreme caution if you decide to use an internet form or one that is from canned software.

There is a bit of trickery associated with land owned by you and your spouse.  Texas is a community property state and the real property is presumed to be community property.  That means the deed may need to be accompanied by a community property survivorship agreement, or at least include wording to that effect.

A  TOD deed names one or more beneficiaries who will receive title to the property upon your death.  That part of “upon your death” is important.  Your beneficiary has absolutely no rights to the property during your lifetime.  You do not have to even tell your beneficiary about the TOD deed.

The TOD deed has to be in writing (of course) and signed by you (and any other owner) before a notary.

The TOD deed must be recorded in the deed records of the county where the property is located before your death. An unrecorded TOD deed is worth nothing.

The TOD deed does not keep you from selling your property.  You can sell it at any time.  A sale during your lifetime just voids the TOD deed.

If you later decide to revoke your TOD deed, then there is a right way and a wrong way.  The right way is to put the revocation in writing, sign the document in front of a notary after the date of the TOD deed, and record it in the deed records.  Any other procedure is the wrong way.

Unlike most documents, the TOD deed is not valid if it is signed by your power of attorney agent.

Divorce is another interesting twist.  Unlike almost every other type of beneficiary designation, the TOD deed is not automatically invalidated if you named your spouse as a beneficiary and then get a divorce.  The final divorce decree must be recorded in the real property records before your death for the divorce to act as a revocation.

Now for the really bad news.  Your beneficiary will have trouble selling the property for two years after your death.  That is because most buyers require title insurance, and they will not be able to get it on the property.  Title companies will be gun-shy about insuring title, because your unpaid creditors can drag the property back into your estate to get payment of your debts.

A Transfer on death deed can be a very good tool for estate planning.  It is just a lot more complicated than advertised.