Texas Transfer on Death Deeds Explained

Texas Transfer on Death Deeds Explained

If you own a home in Texas and want it to pass to someone without going through probate, a transfer on death deed might be the simplest tool available. It's free to create, relatively easy to execute, and revocable at any time during your lifetime. But it's not the right choice for every situation—and getting the details wrong can cause serious problems.

At Dickey Law Group, we help clients decide whether a transfer on death deed (sometimes called a TODD) makes sense for their estate plan, or whether a trust or other approach would serve them better.

What a Transfer on Death Deed Is

A transfer on death deed is a legal document that transfers ownership of real property to a designated beneficiary when the property owner dies. The key features:

• It takes effect only at death. During your lifetime, you retain full ownership and control of the property. You can sell it, refinance it, or change your mind entirely.
• It avoids probate for that property. When you pass away, the beneficiary can claim the property by filing a death certificate with the county clerk. No court proceeding is needed.
• It's revocable. You can revoke or change a TODD at any time before your death, simply by recording a revocation instrument with the county clerk.
• It doesn't affect your property taxes or mortgage. Recording a TODD doesn't trigger a reassessment or accelerate your mortgage.

Texas authorized transfer on death deeds through Section 114.051 of the Texas Estates Code. The statute has been in effect since 2015, and thousands of Texas homeowners have used it since then.

Benefits of a Transfer on Death Deed

For many homeowners, a TODD offers real advantages:

• Probate avoidance. Real property titled solely in the deceased's name normally has to go through probate. A TODD bypasses that entirely, saving your family time and legal fees.
• Simplicity. Unlike a trust, a TODD doesn't require you to retitle the property or create a separate legal entity. You sign the deed, get it notarized, and record it with the county. That's it.
• No cost to the beneficiary. The beneficiary doesn't pay anything during your lifetime and doesn't need to be involved in creating the deed.
• Flexibility. Because it's revocable, you're not locked in. If your circumstances change—new marriage, falling out with a beneficiary, selling the property—you can revoke the TODD and start fresh.
• No gift tax implications. Since the transfer doesn't happen until death, there's no gift during your lifetime. Your beneficiary also receives a stepped-up tax basis in the property.

Requirements for a Valid TODD in Texas

A transfer on death deed must meet specific legal requirements under the Texas Estates Code:

1. It must be in writing. Oral agreements don't work for real property transfers.
2. It must contain specific language. The deed must clearly state that the transfer is effective at the owner's death. Vague language can invalidate the deed.
3. It must be signed by the property owner. If the property is owned by multiple people, each owner must sign.
4. It must be notarized. A notary public must acknowledge the owner's signature.
5. It must be recorded before the owner dies. This is critical. A TODD that sits in a desk drawer is worthless. It must be filed with the county clerk's office in the county where the property is located before the owner's death.
6. It must identify the beneficiary. The deed should clearly name who will receive the property. You can name one person, multiple people, or even a trust as the beneficiary.

If any of these requirements aren't met, the deed may be invalid—and the property will have to go through probate after all.

How to Create, File, and Revoke a TODD

Creating the deed: While you can find templates online, we strongly recommend working with an attorney. A poorly drafted TODD can fail to accomplish its purpose or create title issues that are expensive to fix. The deed must include the correct legal description of the property, the proper statutory language, and clearly identified beneficiaries.

Filing the deed: Once signed and notarized, take the TODD to the county clerk's office in the county where the property is located. Pay the recording fee (usually a small amount), and the deed becomes part of the public record.

Revoking the deed: To revoke a TODD, you execute a revocation instrument—another recorded document that states you're revoking the previous transfer on death deed. Simply destroying the original document isn't enough. The revocation must be recorded with the county clerk. Alternatively, selling or transferring the property during your lifetime also effectively cancels the TODD.

Limitations and Potential Drawbacks

A TODD isn't perfect for every situation. Consider these limitations:

• Only covers real property. A TODD transfers land and buildings. It doesn't cover bank accounts, vehicles, investments, or personal property. You'll still need other tools for those assets.
• Creditor claims survive. A TODD doesn't protect the property from the deceased owner's debts. If you owe money at death, creditors may be able to make claims against the property even though it transferred to your beneficiary.
• No conditions or contingencies. You can't attach conditions to a TODD—like "my daughter gets the house only if she lives in it." It's a straightforward transfer, not a trust with detailed instructions.
• Multiple beneficiary complications. If you name multiple beneficiaries, they'll own the property together as tenants in common. If they disagree about what to do with it—sell versus keep, for example—disputes can arise.
• Medicaid recovery. Texas Medicaid may seek recovery from property transferred by a TODD if the deceased received Medicaid benefits. The TODD doesn't protect against estate recovery claims.
• Title insurance issues. Some title companies are still cautious about TODDs. Your beneficiary may face challenges getting title insurance, which could complicate a future sale.

When a TODD Is Right—and When It Isn't

A TODD works well when:

• You own a single property and want a simple probate-avoidance tool
• Your estate plan is straightforward with one or two clear beneficiaries
• You want flexibility to change your mind later
• You don't have significant creditor concerns

A trust may be a better choice when:

• You own property in multiple states
• You want to attach conditions to the transfer
• You have creditor or Medicaid concerns
• You need to provide for a beneficiary with special needs
• Your estate plan involves complex distributions among multiple heirs

The right tool depends on your specific situation. Sometimes a TODD is all you need. Other times, it's a piece of a larger plan. Either way, it's worth understanding your options.

Contact Dickey Law Group today to schedule a consultation. We serve families throughout The Woodlands, Spring, Conroe, and the Houston metro area. Call (832) 521-4414.