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What is a transfer on death deed?

On Behalf of | May 13, 2024 | Estate Planning

If someone owns real estate, it may be the biggest asset in their possession. Whether someone owns their own home or a parcel of vacant land they purchased as an investment, that real property can be a difficult asset to address in an estate plan.

When real estate passes through the probate courts, it is at risk as a high-value asset. Creditors including credit card companies and even the Medicaid estate recovery program could try to request repayment using the equity in the home as a source of revenue. Many people, therefore, try to use unique solutions for transferring real estate as part of their estate plans. Some people draft transfer on death deeds to address real property in their Texas estate plans.

What is a transfer on death deed?

As the name implies, a transfer on death deed is a document executed to facilitate the smooth transfer of real property from the initial owner to a chosen beneficiary after their passing. Unlike most other means of transferring real estate after someone dies, transfer on death deeds do not involve the probate courts.

The real property can transfer to a specific individual or multiple co-owners without the probate courts’ involvement. This theoretically protects the property from probate creditor claims and other complications, such as lost value due to the property sitting vacant until the transfer of ownership occurs. The recipient of the home could still face collection efforts brought by creditors of the decedent in some cases.

Texas is one of the states that recognizes transfer on death deeds. A previously executed deed can be a viable solution for real property. However, there are a few complications that could arise. For example, the loss of the deed might result in a challenging situation in which someone’s estate plan does not address one of their most valuable resources. There could also be a conflict between someone’s will and the deed, which could lead to litigation.

The type of real property, the extent of someone’s estate, the degree of their personal debt and numerous other factors can influence whether a transfer on death deed is the right choice for addressing real property in an estate plan. Discussing assets and personal legacy goals with a skilled legal team can help people create plans that effectively address their most valuable holdings.