Transfer on Death Beneficiary for Property

Most people want to avoid probate when it comes to estate planning. The probate process can be expensive and time-consuming. Fortunately, there are several ways to transfer property without going through the probate process.


Methods for transferring property include:

  • Living trusts
  • Joint tenancies
  • Life estate deeds
  • Transfer on death (TOD) deeds

A TOD deed as an estate planning tool is very efficient. It is allowed by 31 states to transfer property to a beneficiary.

A transfer on death deed is also called a beneficiary deed. In Michigan, a Ladybird deed accomplishes the same thing. Read on to discover whether a transfer on death deed is an option for you.

What Is a Transfer on Death Deed for Property?

In some states, a house or real estate comprising a small estate can be common assets to transfer to an heir using a transfer on death deed rather than a last will and testament. To create a transfer on death deed (also called a beneficiary deed), the deed should state the following details:

  • The name of the owner of the property (the grantor)
  • The legal description of the property as found in tax records
  • The named beneficiary who will receive ownership of the property
  • A statement that the deed does not become effective until the owner's death

To ensure validity, the transfer on death deed must be signed before a notary public. Then, the owner must record the deed with a county clerk. The county clerk maintains the deed with the land records at the local county recorder's office. The deed is invalid if the owner fails to sign, notarize, or record the deed.

The owner may wish to specify an alternate beneficiary if the named beneficiary dies before the owner.

After filing the real estate deed, the grantor retains full power over the property during their lifetime. The grantor can revoke the deed at any time by filing a revocation document. Some states have a revocation form for owners to use. Or they have a sample of an acceptable form in their statute. The grantor must file the revocation form in the office where the grantor filed the original deed.

Transfer on Death Deeds and Joint Ownership

A transfer on death deed is subservient to shared ownership rights.

Community Property States

A surviving spouse inherits the shared property if you live in a community property state like California.

Joint Tenancy

The decedent's property interest transfers automatically to the joint tenant. This is the case for properties owned by family members or friends as joint tenants with rights of survivorship. A TOD deed may still make sense if both parties are willing to list the same person on the deed as their beneficiary.

Tenants in Common

In this form of joint ownership, each party has an interest in the property, but the other party's interest is inherited by their heirs or beneficiaries, not by the co-owner. These joint owners can use a TOD deed to transfer their share of interest in the property to a beneficiary. The beneficiary becomes a co-owner.

Advantages of Transfer on Death Deeds

There are several benefits to transfer on death deeds for the transferor:

  • You can change the beneficiary at any time during your lifetime. In essence, it is a revocable transfer on death deed.
  • The beneficiary does not have any legal interest in the property until you pass away. The beneficiary's creditors won't be able to place a lien on the property until the deed becomes effective.
  • Expenses related to the transfer on death deed are less than other methods of transferring property, such as drafting a trust or probating a will.
  • Probate is not required to transfer the property. Avoiding probate can be a big benefit as the probate process can be time-consuming and costly if you own property.
  • If you hold property in another state, it's easier to transfer property using a TOD deed than to have to open an ancillary probate proceeding.

Disadvantages of Transfer on Death Deeds

Nineteen states do not allow a transfer on death deed. Be sure yours does.

If the deceased person's estate has unsatisfied debt, debtors can force the sale of the property to pay the debt. It is part of the original owner's estate and does not automatically transfer to the new owner.

TOD properties don't count toward probate, but they may still be part of the valuation of an estate for estate tax purposes.

TOD properties don't count toward Medicaid spend-down because the property hasn't left your control. Furthermore, it may or may not protect your property from Medicaid estate recovery after you die.

Like most forms of inheritance, an interested party can challenge a transfer on death deed in probate court. A loved one who thought they would inherit a family property in a will may be surprised to discover joint ownership in a TOD deed. They could challenge the deed's validity or argue that you lacked full mental capacity when you drafted the TOD deed.

Unlike joint tenancy with the right of survivorship, the transfer on death beneficiary for property does not automatically transfer the title to the designated beneficiary.

If there is another co-owner, most states give that joint tenant a certain amount of time to challenge the title on the property.

State Laws on Transfer on Death Deeds

When you name a beneficiary who will obtain title to the property upon your death, you must do so according to your state's laws. Be especially aware of the rights afforded to married couples, which can supersede other instructions.

Transfer on death deeds are allowed in these states:

  • Alaska
  • Arizona
  • Arkansas
  • California
  • Colorado
  • District of Columbia
  • Hawaii
  • Illinois
  • Indiana
  • Kansas
  • Maine
  • Michigan (a Ladybird Deed)
  • Minnesota
  • Mississippi
  • Missouri
  • Montana
  • Nebraska
  • Nevada
  • New Mexico
  • North Dakota
  • Ohio
  • Oklahoma
  • Oregon
  • South Dakota
  • Texas
  • Utah
  • Virginia
  • Washington
  • West Virginia
  • Wisconsin
  • Wyoming

Getting specific guidance for your unique family circumstance will go a long way. You may want to contact an attorney familiar with your state laws. They can explain how various estate planning tools could help your family.

Need Legal Advice? Ask an Estate Planning Attorney About a TOD Deed

Creating a valid transfer on death deed for real property transfer requires several requirements. If you fail to comply with your state law, your transfer on death deed can be invalid. Depending on your situation, a living trust may be a better way to transfer real property.

If you have questions, take the time to get accurate legal advice. Call an estate planning attorney in your area.

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