The Texas Real Property Transfer on Death Act, found under Chapter 114 of the Texas Estate Code, provides that after September 1st, 2015 the State of Texas will recognize a deed which transfers property upon the death of an individual. This opens new possibilities to Estate Planning which allows an individual to create a deed which will transfer property which may limit the need from a probate.
Real Estate is the major reason for the probate of an estate. Many Texans pass only a homestead as an asset they pass on to his or her loved ones. A Transfer on Death Deed will allow that individual to transfer his or her property upon his death and avoid a need to do a costly probate.
Why not just do a regular deed? (Why do a Transfer on Death Deed?)
A deed transfer property upon signing. Transferring property while an individual is alive can cause unnecessary taxation and might cause the fraudulent transfer rule to be triggered if the individual is on Medicaid. (Please note that a Transfer on Death Deed will not avoid Medicaid lien on a property. An Enhanced Life Estate Deed should still be used to avoid the Medicaid Fraudulent Transfer Rule). In addition, a divorce or other change in a family relationship can cause someone not to want a piece of property to transfer to a person.
What are the requirements of a Transfer on Death Deed?
- Must meet the essential elements and formalities of a recordable deed;
- Must state the transfer happens upon the death of the transferor; and
- Must be recorded before the transferor’s death in the county where the real property is located. (Warning: this is very important because this is not a formality of a regular warranty deed. Estate planning attorney pay close attention to this formality).
What revokes a Transfer on Death Deed?
There are many ways a Transfer on Death Deed can be revoked; however, there are many mistakes which can be made by failure to properly revoke a Transfer on Death Deed. If there is more than one transferor on a Transfer on Death Deed, then an instrument to revoke a Transfer on Death deed only revokes the interest of the transferor who acknowledges such revocation document. In addition, a Transfer on Death Deed which is made by joint owners with rights of survivorship must be revoked by all parties. The following instruments or events can revoke a Transfer on Death Deed:
- An instrument that expressly revokes the transfer on death deed or part of the deed (Warning: Code seems to suggest that subsequent Transfer on Death Deed needs revocable language in deed);
- (Warning: A Will CANNOT revoke a Transfer on Death Deed.)
- A final judgment from a divorce can dissolve the marriage; (Warning: The final judgment must be recorded in the county where the deed is recorded!!!!!)
Can a Transfer on Death Deed avoid creditors?
A Transfer on Death Deed does not affect the rights of a creditor to the property. This could be an issue for title companies which may require affidavit that the estate of a deceased person does not have any debts. These issues could also require title companies to demand that an estate be probated to clear all potential creditors.
If I do a Transfer on Death Deed, can I still sale or refinance a property?
Yes, you still have a right to encumber a property even though you have filed a Transfer on Death Deed. However, a mortgage company may require you to remove a Transfer on Death Deed to refinance a property. The Transfer on Death Deed does not trigger the “due on sale” or similar clause in your mortgage.
Will a Transfer on Deed affect my ad valorem tax exemption or homestead exemption?
No. Transfer on Death Deed will not affect any tax exemptions.
The Transfer on Death Deed is an interesting estate planning tool but it is not for all people. You should consult with an attorney about whether or not you should use it as part of your estate plan.
To know more about Transfer on Death Deed Process in Texas call now at (214) 250-4407
