Section 114.106 of the Estates Code

Liability for Creditor Claims; Allowances in Lieu of Exempt Property and Family Allowances.

(a) To the extent the transferor's estate is insufficient to satisfy a claim against the estate, expenses of administration, any estate tax owed by the estate, or an allowance in lieu of exempt property or family allowance to a surviving spouse, minor children, or incapacitated adult children, the personal representative may enforce that liability against real property transferred at the transferor's death by a transfer on death deed to the same extent the personal representative could enforce that liability if the real property were part of the probate estate.

(b) Notwithstanding Subsection (a), real property transferred at the transferor's death by a transfer on death deed is not considered property of the probate estate for any purpose, including for purposes of Section 531.077, Government Code.

(c) If a personal representative does not commence a proceeding to enforce a liability under Subsection (a) on or before the 90th day after the date the representative receives a demand for payment, a proceeding to enforce the liability may be brought by a creditor, a distributee of the estate, a surviving spouse of the decedent, a guardian or other appropriate person on behalf of a minor child or adult incapacitated child of the decedent, or any taxing authority.

(d) If more than one real property interest is transferred by one or more transfer on death deeds or if there are other nonprobate assets of the transferor that may be liable for the claims, expenses, and other payments specified in Subsection (a), the liability for those claims, expenses, and other payments may be apportioned among those real property interests and other assets in proportion to their net values at the transferor's death.

(e) A proceeding to enforce liability under this section must be commenced not later than the second anniversary of the transferor's death, except for any rights arising under Section 114.104(d).

(f) In connection with any proceeding brought under this section, a court may award costs and reasonable and necessary attorney's fees in amounts the court considers equitable and just.

Added 84th Leg., R.S., Ch. 841 (S.B. 462)

Editor Comments

Section 15 of the Uniform Real Property Transfer on Death Act provides two alternatives. Texas does not have a statute that comprehensively governs nonprobate transfers with regard to this section's subject matter, so Section 15's "Alternative A" was not appropriate. This section of the Texas Real Property Transfer on Death Act generally adopts Section 15's "Alternative B" and adds several useful substantive provisions. Cf. Section 114.101 ("[d]uring a transferor's life, a transfer on death deed does not . . . affect an interest or right of a secured or unsecured creditor or future creditor of the transferor, even if the creditor has actual or constructive notice of the deed").

Section 101.051 of the Estates Code applies only to probate estate property. It does not apply to property transferred by a legally sanctioned nonprobate method. Cf. Jackson v. Hubert, 234 S.W.2d 414, 416 (Tex. 1950) ("The language used is that the property vests in the devisees, legatees or heirs 'subject however, to the payment of the debts of the testator or intestate'."); Blinn v. McDonald, 46 S.W. 787, 788 (Tex. 1898) ("From this general statement of the condition of the civil and common law modified by English statutes, it may be seen that it was advisable, when our legislature came to enact our probate law in 1848, to make radical departures from both . . . .").

Under this section of the TRPTODA, the real property transferred by a transfer on death deed is liable as a last resort after all available probate estate property is exhausted. Cf. Creditor's Claims in Estate and Guardianship Administrations at 551 ("The estate for MERP purposes is defined as real or personal property (including additions, accretions, and substitutions) that is included in the probate estate, as defined in section 22.012 of the Estates Code. This is a key definition because it does not allow for recovery against nonprobate assets, such as remainder interests and the interests of survivors in multi-party accounts. (i.e., POD or JTROS accounts).").

Note that the "real property transferred at the transferor's death by a transfer on death deed" is liable, not the beneficiary. In other words, the beneficiary is not personally liable. Cf. Background Study: Liability of Nonprobate Transfer for Creditor Claims and Family Protections at 110-11 ("[A] creditor's claim allowed in probate should be deemed allowed for the purpose of nonprobate transfer liability. That would be a straightforward way to validate the claim without the need for a special nonprobate procedure. As a matter of due process, notice to the nonprobate transferee and an opportunity to participate in the proceeding would be necessary.").

The remedy provided by this section, which requires that a personal representative be appointed, is presumably exclusive. Cf. Remembering the Creditor at Death at 869 ("Probate administration must be opened regardless of whether the decedent owned any assets subject to probate because the proceeding must be initiated by presenting the claim and giving notice to the personal representative."); Ansley v. Baker, 14 Tex. 607, 614 (1855) ("Under the law as it now exists we see no legal ground why the plaintiff did not pursue the ordinary remedy by administration, and consequently he is not entitled to the relief in the mode sought in his petition.").

In any event, the rights provided to unsecured creditors and others by this section reduce the usefulness of a transfer on death deed in certain situations. For example, if the transferor's probate estate is insolvent, the claims, expenses and other payments specified in Subsection (a) can result in a cloud on the beneficiary's title for two years or more. Cf. Death Without Probate: TOD Deeds—The Latest Tool in the Toolbox at 3-4 ("As a practical matter, this means that after John takes title under the TOD Deed, he cannot sell the property until the statutory claim period has run or he convinces a title company to insure over the potential creditor claims.").

Finally, nothing in this section affects the special rules that govern homestead properties. Cf. Grant v. Marshall, 280 S.W.2d 559, 561 (Tex. 1955) ("That statute is not ambiguous; its provisions are clear. Upon the death of Mr. Grant, his estate being insolvent, the homestead descended to his widow and children exempt from liability for the claims of all unsecured creditors."); Thompson v. Thompson, 236 S.W.2d 779, 788 (Tex. 1951) ("The homestead forms no part of the estate to be administered by the probate court, and an attempted sale by the probate court of the homestead for any purpose other than that permitted by the Constitution is void.").

—Steve Smith

Court Decisions

No appellate court decision has interpreted any section of the TRPTODA.

Legal Commentaries

• Home Sweet Home: Making Sense of Medicaid Recovery at 1 ("As of May 2016, the Texas Health and Human Services Commission will allow a properly drafted and filed Transfer on Death Deed in lieu of a Lady Bird deed to protect a Medicaid recipient's homestead from a MERP claim. Notice we said properly drafted and filed.")

• How A Transfer On Death Deed Affects Medicaid Benefits at 1 ("An insolvent estate means that at the time of death, the person’s debts . . . . If so, under certain circumstances, a probate court may enter an order cancelling the TODD and ordering that the real property be transferred into the probate estate so the debts can be paid off.")

• Real Estate Transactions and Probate: What's Legal v. What's Insurable at 8 ("Most underwriters [] will require proof of death (a death certificate) and will usually want to have the public record evidence the death of the grantor and the absence of claims by affidavit. An example of such an affidavit is contained in Appendix D.")

• Texas Elder Law (Vol. 51, Texas Practice Series) at 434 ("With both types of deeds (Lady Bird Deeds and TODDs) the interest transferred is unmarketable [during the transferor's life], so there is no transfer penalty. In addition, with both types of deeds, the interest passes outside the probate estate, so it is not subject to the Medicaid Estate Recovery Program.")

• Transfer on Death Deeds: A Texas Primer at 4 ("Because the property subject to a TODD is not part of the probate estate, it should be unreachable for Medicaid recovery. Of course, this could change because federal law authorizes states to seek recovery from nonprobate assets such as TODDs.")

Uniform Act Text

Section 15. Liability for Creditor Claims and Statutory Allowances.

Alternative A

A beneficiary of a transfer on death deed is liable for an allowed claim against the transferor's probate estate and statutory allowances to a surviving spouse and children to the extent provided in [cite state statute or Section 6-102 of the Uniform Probate Code].

Alternative B

(a) To the extent the transferor's probate estate is insufficient to satisfy an allowed claim against the estate or a statutory allowance to a surviving spouse or child, the estate may enforce the liability against property transferred at the transferor's death by a transfer on death deed.

(b) If more than one property is transferred by one or more transfer on death deeds, the liability under subsection (a) is apportioned among the properties in proportion to their net values at the transferor's death.

(c) A proceeding to enforce the liability under this section must be commenced not later than [18 months] after the transferor's death.

Approved by ULC in 2009 (Uniform Act)

Uniform Act Comment

The official comments to the Uniform Act provide authoritative commentary regarding the drafters' intent.

For example, the comment to Section 15 states in part:

Alternative B provides an in rem liability rule applying to transfer on death deeds. The property transferred under a transfer on death deed is liable to the transferor's probate estate for properly allowed claims and statutory allowances to the extent the estate is insufficient.

The full comment is available on the Uniform Law Commission website.