Problems with transfer on death deeds
Transfer on death deeds do exactly one job well: they move a property to named people without probate. Almost every problem with them comes from expecting them to do a second job they were never designed for. Here are the nine failures that actually happen.
1. The beneficiary dies before you
This is the most common failure and the easiest to prevent. If your only named beneficiary predeceases you and you named no alternate, the deed usually lapses entirely and the property goes through probate. The exact thing you paid to avoid. Always name at least one alternate.
2. Multiple beneficiaries who cannot agree
Leave a house to three children and they become co-owners. If one wants to sell, one wants to rent it out, and one wants to move in, the only resolution is a partition lawsuit, which is a court process at least as expensive and slow as the probate you avoided. Consider naming one beneficiary and handling the equalisation elsewhere in your estate plan.
3. The mortgage comes with it
Your beneficiary inherits the property subject to every loan, lien, and judgment against it. If there is a $200,000 mortgage on a $250,000 house, they inherit $50,000 of equity and a monthly payment. Federal law protects an inheriting relative from due-on-sale acceleration, but the loan still has to be paid.
4. Creditors of your estate can still reach it
Most states that authorise TOD deeds allow the estate's creditors to reach the transferred property for a statutory period if the probate estate cannot cover the debts. Your beneficiary may receive a demand months after they thought the matter was closed.
5. Medicaid estate recovery
This one is state-specific and it changes
Some states define 'estate' narrowly for recovery purposes, so a TOD transfer escapes it. Others have expanded the definition specifically to capture non-probate transfers. If you or your spouse might need long-term care, this is a question for an elder law attorney in your state, not a form.
6. Inheriting can cost your beneficiary their benefits
A beneficiary receiving SSI, Medicaid, or other means-tested benefits can be disqualified by suddenly owning real estate. Where that is a risk, the property should go into a special needs trust rather than to the person directly.
7. Recording mistakes that void the deed
- California: the deed is void unless recorded within 60 days of the date it was notarized.
- Oklahoma: the beneficiary must record an acceptance affidavit within nine months of your death.
- Illinois: the transfer on death instrument requires two witnesses in addition to the notary. Ordinary Illinois deeds do not.
- Ohio: an Ohio TOD *deed* has been ineffective since 2009. The correct instrument is a transfer on death designation *affidavit*.
- Any state: recording it after death accomplishes nothing at all.
8. It only covers that one property
A TOD deed is not an estate plan. Bank accounts, investments, vehicles, and personal property all need their own beneficiary designations or a will. People sometimes record one and assume they are finished.
9. Divorce and remarriage do not update it
Some states automatically revoke a beneficiary designation in favor of an ex-spouse on divorce; many do not. Review your deed after any marriage, divorce, birth, or death in the family. It takes one document to change.
When a TOD deed is still the right answer
Despite all of the above, for a single property going to a single beneficiary, or to a couple who agree, a TOD deed remains the cheapest effective probate-avoidance tool in America. The problems above are avoidable, and most of them are avoided by naming an alternate and thinking carefully about who ends up as co-owners.
$69, with alternate beneficiaries, your state's timing rules, and a matching revocation form available.
Common questions
That it does one narrow thing. It moves a single property at death and nothing else. It doesn't handle incapacity, it doesn't cover your other assets, it doesn't clear debt, and it doesn't protect a beneficiary from their own creditors or from losing benefits. People treat it as an estate plan and it is not one.
Yes, on the usual grounds: forgery, lack of capacity, undue influence, or improper execution. It is harder to attack than a will because there is no probate proceeding inviting objections, but a determined heir can still bring an action.
It is more comprehensive and costs ten to forty times more. A trust covers everything, handles incapacity, and stays private. A TOD deed covers one property for $69. Many people sensibly use both. Full comparison.
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Deedly is not a law firm
We provide self-help software and state-specific statutory forms; you make your own decisions about your property. Using Deedly does not create an attorney-client relationship, and nothing here is legal advice. If your situation is complex or contested, talk to a licensed attorney in your state.