Legal Briefs: What is a transfer-on-death deed?

Most people are familiar with deeds. Though they come in many different varieties, deeds convey (transfer) interests in real estate. Generally speaking, a conveyance is effective as soon as a deed is signed. With a transfer-on-death deed, however, the conveyance is effective only after the grantor (the person conveying the real estate) dies.

What are the benefits of a transfer-on-death deed?

The main benefit of a transfer-on-death deed is that the conveyance can avoid probate. Let's say Joe wants to leave his house to his son, Dan. If Joe provides in his Will that the house should go to Dan, the Will must still go through probate before Dan can get the house. But if Joe signs a transfer-on-death deed, all Dan will need to do is file an affidavit (and a death certificate) with the county clerk to obtain title to the house.

(A living trust can also avoid probate. Read about the differences between a will and a trust.)

You are not limited to just one beneficiary, either. If Joe had two children, Dan and Mary, he could list both of them as grantees (the people receiving the property) on the transfer-on-death deed. He could also leave them the house as joint tenants or as tenants in common. So there is some degree of flexibility with a transfer-on-death deed.

What are the problems with a transfer-on-death deed?

Transfer-on-death deeds can lead to several potential problems. First, if the beneficiary (grantee) named on the transfer-on-death deed dies before you, then the real estate could be subject to probate. Second, a transfer-on-death deed doesn't provide a plan in the event of your incapacity. Without someone to manage your property, a guardianship may ultimately be necessary in the event you lacked capacity to transfer or encumber the real estate during your lifetime. Third, it does not allow you to limit the flow of property to beneficiaries who may be too immature or irresponsible to manage their assets.

(Read more about how a transfer-on-death deed can avoid probate.)

In short, a transfer-on-death deed does not offer the same scope and flexibility as other estate planning documents such as a Last Will and Testament or a Living Trust. That said, it is still a great tool to effect a deathtime transfer outside the probate process. To discuss whether a transfer-on-death deed may be right for you, contact the estate planning attorneys at Postic & Bates for a free, no-obligation consultation appointment.

[As with all our posts, the contents of this article do not constitute legal advice and are subject to our site-wide disclaimer.]