In General
A Transfer on Death Deed (“TODD”) allows a property owner to designate who will receive his or her real property upon the owner’s death, so that the property conveyance does not have to go through the owner’s probate proceeding. The Estates Code was amended in 2015 to formally recognize TODDs in Texas. The law applies to a TODD executed and acknowledged on or after September 1, 2015.
The key elements of Texas law governing TODDs are as follows:
- Effective at Death: The TODD is not effective until the death of the grantor (referred to as the “transferor” in the TODD statutes.)
- Recording Requirement: In order to be effective upon the transferor’s death, a TODD must be executed, acknowledged, and recorded in the correct county before the transferor’s death.
- Grantee/Transferee Has No Rights: Until the transferor’s death, the transferee has no interest or rights in the property. The transferor retains the ability to use, possess, sell, and encumber the property.
- Revocable: A TODD may be revoked at any time before the transferor’s death, either expressly or through a conveyance in a subsequent deed, recorded before the transferor’s death.
- No TODD through a Power of Attorney: A TODD created under a power of attorney by an agent (attorney-in-fact) is not effective. A TODD must be signed by the property owner—not his or her agent.
- Subject to Creditor Claims: Property transferred through a TODD may be subject to claims from creditors of the decedent transferor.
Underwriting Requirements
To insure a sale when the vested owner acquired title via a TODD, NITIC requires the following:
1. Confirmation of the following:
- a. title was vested in the transferor prior to the TODD being recorded in the deed/real property records and remained so until transferor’s death;
- b. the TODD was never revoked, rescinded or superseded by some other subsequent documentation that was recorded prior to transferor’s death;
- c. the TODD was recorded prior to the transferor’s death; and
- d. the transferee in the TODD survived the transferor by more than 120 hours.
2. An affidavit signed by a person with personal knowledge, stating:
- a. there are no unpaid debts of the estate except those secured only by the subject property; and
- b. the estate is not subject to federal estate tax.
3.
Review and approval of the transaction by underwriting.
Policy for TODD Transferee
NITIC will not insure the owner (transferee) whose interest will vest under a TODD because it is not a present transfer of title, but a future potential transfer. Never prepare a commitment or provide a commitment that creates or requires the execution of a TODD.
No Separate Revocation Requirement
A property owner who executes and records a properly drafted TODD has the right to “change his mind” and either
sell the property
to someone other than the transferee in the TODD or to
encumber the property
with a loan.
If a transferor decides to revoke a TODD, the transferor does not need to obtain the consent of nor give notice to the transferee. The transferee has no interest in the real property as long as the transferor is alive, so the transferee has no right or need to be involved in the revocation.
If the vested owner previously executed a TODD and is now selling or encumbering the property, no separate revocation document is required. Also, the transferee in the previously-recorded TODD does not have to participate in the transaction.
MERP
Because the property does not go through probate, it is not subject to Medicaid estate recovery.
Form
The current statutory TODD form, which was updated in 2017, can be found
here
.
