The Texas Transfer on Death Deed
Effective September 1, 2015, Texas joined the growing number of states that allow owners of real estate to transfer property to their beneficiaries outside the probate process by creating a Texas Transfer on Death Deed.
The deed works like a beneficiary designation on a retirement plan or an insurance policy. It allows you to name a primary and contingent beneficiary who will inherit your real property after you die.
This is good news for many Texans with modest estates whose only probate asset is their home.
Below are a few things you need to know about the Texas Transfer on Death Deed.
The Requirements of an Effective Transfer on Death Deed
To be effective, the deed must:
- Contain the essential elements and formalities of a recordable deed in Texas;
- It must be in writing
- Contain the legal description of the property
- Include the Name and Address of the designated beneficiary or beneficiaries
- Be signed by the Grantor (the property owner) in the presence of a Notary Public
- State that the transfer of the Grantor’s interest to the designated beneficiary will not occur until the Grantor’s death; and
- Be recorded before the Grantor’s death in the deed records in the county clerk’s office of the county where the real property is located.
Is Delivery and Acceptance of the Deed Required?
Notice or delivery to or acceptance of the deed by the designated beneficiary is not required.
Is it Possible to Name More Than One Beneficiary?
Yes. It is possible to name more than one beneficiary, but you should proceed with caution.
If you name more than one beneficiary, each beneficiary will inherit the property in equal and undivided shares with no right of survivorship.
In plain English, this means that you may not leave varying percentages to several individuals. All will inherit an equal share of the property. For example, if you name two beneficiaries, each would inherit a 50% share. If you name four beneficiaries, each would inherit a 25% share. You can’t give one beneficiary a 50% share and two other beneficiaries a 25% share.
Additionally, the statute specifies that there is no right of survivorship. That means that if you name multiple beneficiaries, and one predeceases you, the deceased beneficiary’s share will not pass to the surviving beneficiaries.
Therefore, it is a still a good idea to have a Will. A Will allows you to specify who will inherit the property if your Transfer on Death Deed beneficiaries predecease you.
Should a Spouse be Named as Primary Beneficiary of Jointly Owned Property?
The answer to this question depends on whether you own your property as tenants in common or joint tenants with rights of survivorship.
Most couples who own property jointly in Texas own the property as tenants in common. If a couple owns the property as tenants in common and one of them dies, the survivor will not automatically inherit the property. Rather, it would be necessary to name each spouse as the primary beneficiary for the deceased spouse’s interest to pass to the survivor.
Can I Revoke a Transfer on Death Deed?
Yes. A Transfer on Death Deed is completely revocable during the life of the Grantor. A grantor can revoke a Transfer on Death Deed in one of the following ways:
- By signing a new Transfer on Death Deed that revokes the prior one or specifies that the property should pass to someone else;
- By signing a separate document that expressly revokes the prior Transfer on Death Deed. Note, however, a Grantor cannot revoke a Transfer on Death Deed by making a contrary provision in a Will.
The Grantor must sign the revocation in front of a notary and record it before the Grantor’s death in the deed records of the county clerk’s office of the county where the property is located.
Additionally, if a Grantor names a spouse as the beneficiary of a Transfer on Death Deed, but the marriage ends in divorce, a final judgment of the court dissolving the marriage will operate to revoke the transfer on death deed as to the divorced spouse only if notice of the judgment is recorded before the Grantor’s death in the deed records in the county clerk’s office of the county where the deed is recorded.
Can Transfer of Death Deed be Created Though Use of Power of Attorney?
No. An agent acting under a power of attorney cannot create a Transfer on Death Deed.
How Does a Transfer of Death Deed Become Effective After the Owner’s Death?
After the Grantor dies, an affidavit of death and a certified copy of the Grantor’s death certificate should be filed in the county clerk’s office of the county where the deed was recorded. This creates a link in the chain of title to show that the beneficiary is now the owner of the property.
The beneficiary takes title subject to all mortgages, liens, judgments, and other encumbrances. The beneficiary does not take the property free and clear.
Does a Transfer on Death Deed Prevent Medical Estate Recovery?
The Medicaid Estate Recovery Program (MERP) can recoup funds Medicaid spent on an individual’s care from his or her estate.
Under current rules, Medicaid can only recover assets included in the deceased individual’s probate estate. A home that is part of a deceased person’s probate estate can be subject to MERP.
However, transfers that avoid probate are not. Therefore, the Texas Transfer on Death deed, which allows property to pass outside of probate, currently avoids MERP.
Texas recognizes that the use of Transfer on Death Deeds can affect the ability of a decedent’s creditors to recover what they are owed. Therefore, the statute specifies that if a Grantor’s estate is not sufficient to the pay the debts of the estate, related taxes, or allowances to the Grantor’s family, the personal representative of the estate can claw a piece of property that the homeowner transferred by transfer on death deed back into the estate.
The personal representative must initiate a proceeding to enforce a liability within 90 days after he receives a demand for payment; otherwise a creditor, an heir of the estate, a surviving spouse, a representative of a minor child or adult incapacitated child, or any taxing authority can initiate a court proceeding to enforce the liability. This means that title companies may be reluctant to insure clear title for two years, until the claims period has expired, absent a court proceeding. In contrast, filing a probate action can significantly reduce claims period against the estate.
Is it necessary to have a Will if you have a Transfer on Death Deed?
Yes. Everyone needs a Will because you may have probate assets other than your real property. Additionally, there is always a possibility that your Transfer on Death Deed beneficiaries will predecease you or die at the same time.
For example, suppose Jill has two adult children, Jack and Annie. Jill creates a Transfer on Death Deed naming Jack as the primary beneficiary of a piece of property and Annie as the alternate beneficiary.
One holiday weekend, Jill, Jack and Annie decide to go to the beach together. On the way there, a tragic accident kills all of them. If Jill dies without a Will, and her beneficiaries die with her, the Texas Intestacy Statutes would control who inherits the property. A Will would have allowed her to choose the beneficiary.
A Transfer on Death deed can be a cost-effective way to transfer property at death without probate. However, it is not a substitute for a Will or the advice of an attorney. Talk to your attorney about whether a Transfer on Death Deed is right for you.
This article was originally posted on August 7, 2015 and updated on May 17, 2022.