Certain provisions of the Texas Estates Code permit you sign a special kind of deed during your lifetime [a Transfer on Death Deed – TOD deed] in order to leave the property described in the deed to your chosen beneficiary at the time of your death. The real estate will automatically go to the person you named to inherit it — the TOD beneficiary — without the need for probate court proceedings.
Starting the Process. The property owner signs the TOD deed, has their signature acknowledged by a notary public, and files the TOD deed in the county clerk’s office during their lifetime.
The Beneficiary. The person named by the property owner in the TOD deed to inherit the property has no legal right to the property until the owner’s death. The beneficiary does not have to sign the TOD deed or take any other action. It is a good idea to make the beneficiary aware that a TOD deed has been filed.
The Owner’s Rights. The property owner keeps complete ownership of and control over the property while they are alive. They pay the property taxes on it, and have the same rights and responsibilities with regard to creditors as they did before making the deed. The property owner can sell the property, give it away, or mortgage it during their lifetime. Since to property owner is not giving the property away during their lifetime, there is no federal gift tax.
Revoking the TOD deed. If the property owner changes their mind after recording the TOD deed, they are not locked in. The property owner can give or sell the property to someone else, record a revocation of the TOD deed, or record another TOD deed, leaving the property to someone else. However, they cannot use their will to revoke a recorded TOD deed. Also, if the property owner has previously made a will, or a TOD deed, which leaves the property to someone, the new TOD deed will override the earlier document.
Transfer of Ownership. With a recorded TOD deed, at the time of death, ownership of the property passes automatically to the beneficiary named in the TOD deed. Any mortgage or debt attached to the property goes along with it. To register the title to the property in the new owner’s name, the new owner records a sworn affidavit and a copy of the death certificate in the county clerk’s office. This process is quicker and simpler than going through probate.
Property Owner’s Debts. If, after the property owner’s death, there isn’t enough money in their estate to pay debts, the property owner’s creditors have two years to bring a court proceeding, seeking payment from any real property transferred by a TOD deed. The executor or administrator of the property owner’s estate may, however, start a court proceeding to resolve the claim earlier, which would allow title to the property to be settled more quickly.
Community property. If the property being transferred by a TOD deed is community property [property acquired by a married person during the marriage, other than by gift or inheritance] certain other slightly more complex rules apply, and an attorney can explain these added rules.