The Limitations of Transfer on Death Deeds

Transfer on Death Deeds allow an owner of property to transfer the property on his or her death without a will or trust. Transfer on Death Deeds are revocable until the Transferor’s death. A Transfer on Death Deed can be used to transfer: a parcel of property that contains one to four residential units, a condominium unit, or a parcel of agricultural land that is 40 acres or less and has a single family residence. The Transferor must have the capacity to contract. The beneficiary must be identified by name and must be a person. The deed must be recorded within 60 days of its execution.

You must identify each beneficiary by name, and it’s also a good idea to state their relationship to you. If you named multiple beneficiaries, they will hold the property in equal shares as tenants in common. An important aspect of a Transfer on Death Deed you should consider is that if one of your named beneficiaries predeceases you, that share will be divided among the remaining living beneficiaries. For example, if you have three children who each have children, and one of your children predeceases you, your grandchildren from your deceased child will not inherit. Instead, your deceased child’s share will be split between your remaining two living children. That may be an unintended consequence of using a simple Transfer on Death Deed as your estate planning tool.

Finally, you should know that you cannot use a Transfer on Death Deed if you hold your property as community property with right of survivorship or as joint tenants. Before you decide to execute a Transfer on Death Deed as part of your estate plan, you should contact an attorney and make sure it will achieve the result you desire.