Texas Transfer on Death Deed

Senate Bill 462

Summary: Article, targeted to non-lawyers, provides general information regarding the Texas Transfer on Death Deed.

In 2015, Texas approved legislation authorizing a new method of transferring real property that is located within the state.

The Texas Real Property Transfer on Death Act (TRPTODA) allows an owner to name a beneficiary to receive the property.

The property passes to the beneficiary outside the regular probate process by means of a transfer on death deed (TODD).

Until death, the owner retains the absolute right to revoke the deed or sell, mortgage or otherwise encumber the property.

This article, in question-answer format, addresses some of the various legal and practical issues raised by the TRPTODA.

Its purpose is to assist non-lawyers investigating whether a Texas TODD is an appropriate estate planning device for them.

The information is necessarily general and not a substitute for advice from an attorney concerning a particular fact situation.

Attorney Steve Smith

Why is a Texas TODD a popular estate planning device?

Because it is a statutorily authorized method of bypassing Texas probate. Avoiding probate saves legal fees and court costs.

A Texas TODD can also be useful for Medicaid. For example, it is disregarded for purposes of determining program eligibility.

But note that a transfer on death deed has a few serious limitations. For example, it often doesn't handle contingencies well.

What is real property for purposes of the TRPTODA?

The "real property" that can be conveyed with a transfer on death deed includes land, buildings, fixtures, and mineral rights.

A Texas TODD cannot be used to transfer "personal property" such as household items, motor vehicles, or financial assets.

Can I use a Texas TODD for property located in another state?

No. The TRPTODA applies only to Texas property. Note that non-residents may use a Texas TODD for land they own in Texas.

Texas residents who own real property in another state must research the law in that state to determine if it has a similar deed.

Can any individual or legal entity make a Texas TODD?

Only individuals (i.e., natural persons) can make a Texas TODD. Legal entities like corporations cannot use this will substitute.

An individual who owns real property jointly can make a Texas TODD. However, such deeds raise some additional legal issues.

What, in general terms, is the legal effect of a Texas TODD?

At the owner's death, a transfer on death deed conveys the real property subject to any mortgages, liens or other encumbrances.

It has no effect until the owner's death. The owner can revoke it for any reason. The owner is also free to encumber the property.

A fundamental feature of a Texas TODD is that, like a will, it has no effect during the owner's life on the legal rights of any person.

Does a Texas TODD affect the rights of unsecured creditors?

With one key exception, no. Under the TRPTODA, the property is secondarily liable for various claims against the owner's estate.

However, because the property is not deemed part of the estate, it is not liable for a Medicaid Estate Recovery Program claim.

What are the state and federal tax consequences of a Texas TODD?

A transfer on death deed has no legal effect during the owner's life so state ad valorem property tax exemptions are not affected.

Property conveyed by a Texas TODD is treated the same as probate property so beneficiaries receive a stepped-up federal basis.

Is a statutory Texas TODD form available for the public?

No. The transfer on death deed form enacted in 2015 was completely repealed in 2019. See Section 114.151 for the details.

The legislation that repealed the statutory form also tasked the Texas Supreme Court with promulgating a new official form.

The matter was delegated to a forms committee but reliable sources report that limited progress has been made at this time.

A basic Texas TODD form is available on this website. If you have questions or concerns about its use, contact the author.

What are the minimum requirements for a Texas TODD?

To be effective, a transfer on death deed must:

  • contain a sufficient legal description of the real property;
  • designate one or more beneficiaries to receive the property;
  • state that the conveyance will occur at the owner's death;
  • be in English and subscribed (i.e., signed) by the owner;
  • be acknowledged before an authorized officer; and
  • be recorded in the deed records before the owner's death.

Do beneficiaries or witnesses have to sign a Texas TODD?

No. A transfer on death deed does not have to be signed by or delivered to beneficiaries and it does not require consideration.

Moreover, a Texas TODD does not require the execution formalities of a will or have to be filed and proven valid in probate court.

But because secrecy can create practical problems, it is recommended that the owner inform someone of the deed's existence.

What is the hardest step in completing a Texas TODD?

Obtaining the property description. This information is different from both the physical and the mailing address for the property.

Because it is usually incomplete, do not use the description of the subject real property listed on your county property tax bill.

A description is sufficient if it furnishes the means or data by which the real property may be identified with reasonable certainty.

The deed will fail if the description is insufficient. If you are not absolutely sure, do additional research and/or consult a lawyer.

Where can I find the required legal description of the property?

This information would be on a deed of conveyance that you received when you became an owner of the subject real property.

If you did not receive such a deed or have misplaced it, the required legal description may be found in the county deed records.

What types of real property description are common in Texas?

Urban property is usually described by "lot and block" (e.g., Lot 2, Block J, Section 1, of Westwood Ranch, a subdivision in ....).

For an example of how that type of property description appears on an actual Texas deed, see Sample L&B Description Deed.

Rural property is usually described by "metes and bounds" (e.g., Being 5 acres of the Jim Fox Survey, Abstract No. 234, in ....).

For an example of how that type of property description appears on an actual Texas deed, see Sample M&B Description Deed.

Who can be designated a beneficiary under a Texas TODD?

There is no legal restriction under the TRPTODA on who may be a beneficiary. You can designate any individual or legal entity.

But a conveyance to a minor (or other contractually incompetent person) or to multiple beneficiaries creates practical problems.

Is a Lady Bird Deed the same thing as a Texas TODD?

No. A Lady Bird Deed (a.k.a. Enhanced Life Estate Deed) conveys the property interest immediately upon execution and delivery.

A transfer on death deed does not convey the property interest until the owner's death. See Section 114.004 for more information.

Can I sign a Texas TODD for another person using a power of attorney?

No. The owner must sign. The TRPTODA prohibits the creation of a transfer on death deed "through use of a power of attorney."

The Act also provides that the capacity required to make a Texas TODD is the same as the capacity required to make a contract.

How do I acknowledge a legal instrument like a Texas TODD?

To acknowledge a legal instrument, you appear before an authorized officer (e.g., a notary public) and state that you executed it.

Local financial institutions normally provide notary services. A notary public may or may not be available at the county courthouse.

How do I record a Texas TODD in the deed records?

File the Texas TODD in the county clerk's office of each county in which any part of the property is located. There will be a filing fee.

After recording it, the county clerk's office will return the original to you. Retain it among your important papers for future reference.

The transfer on death deed must be recorded in the deed records before your death. If not properly recorded, it will be null and void.

Does an inconsistent will prevail over a Texas TODD?

No. And the order is irrelevant. The TRPTODA expressly states that "[a] will may not revoke or supersede a transfer on death deed."

The Act provides several effective ways to revoke a Texas TODD. The most straightforward is to record an instrument of revocation.

What happens if a beneficiary dies before or soon after the owner?

The answer depends on the complex interplay between the text of the Texas TODD, the TRPTODA, and general Texas probate law.

By default, the real property passes according to the Texas antilapse statute if a beneficiary fails to survive the owner by 120 hours.

Many of the numerous rules governing the effect of a transfer on death deed at the owner's death are subject to the text of the deed.

For example, the survival rule can be modified and alternate beneficiaries can be added. See Section 114.103 for more information.

What paperwork must a beneficiary record after the owner's death?

As a legal matter, none. The conveyance is automatic. But it is recommended that the beneficiary record the owner's death certificate.

The beneficiary should also notify the county tax office. This will ensure that property tax statements are issued to the proper person.

Note that a beneficiary is not required to accept. For various reasons, the beneficiary may choose to execute and record a disclaimer.

Do beneficiaries have to wait two years before their title is clear?

For two years after the owner's death, the property is liable for various claims against the estate to the extent the estate is insufficient.

Nevertheless, a beneficiary may be able to assemble information demonstrating that the estate has the assets to pay all valid claims.

In that circumstance, most Texas title companies have been willing to insure transactions occurring within the two-year liability period.

Should I consult with a lawyer before using a Texas TODD?

There are a variety of estate planning devices, from a transfer on death deed to a will to a trust to a life estate or a survivorship estate.

Each has its own advantages and disadvantages. For example, a trust typically handles contingencies better but it is more expensive.

A Texas TODD may or may not be the best choice, so you should consult with a knowledgeable lawyer before making a final decision.