Transfer on Death Deeds transfer real property upon your death without the need of a Will. If you have a Will, the Transfer on Death Deed means the real property covered in the Deed does not pass under the Will; and the probate court has no ability to award the property. The property passes as you have designated in the Deed. The real property passes outside of probate, and court costs associated with wrapping up an estate are avoided with respect to the real property.
What does Texas law define as real property? Real property includes land and improvements, which are objects built on and attached to the land. Houses are an example. Real property also includes mineral rights.
The Transfer on Death Deed allows individuals age 55 or older to avoid the Medicaid Estate Recovery Program. This program allows Medicaid to seek reimbursement from your probate estate (the part that passes under a Will) for nursing facility services, in-home care, and related hospital and drug services. Current law provides property passed by a Transfer on Death Deed is exempted from Medicaid estate recovery.
A Transfer on Death Deed does not replace a Will. A Will may still be important for you, especially if you want to give specific things to specific people or you own a lot of personal property. A Transfer on Death Deed can only transfer real property – or real estate – not personal property.
If you have both a Transfer on Death Deed and a Will, make sure they are consistent as to who receives your real estate. If they are inconsistent, the Transfer on Death Deed controls.
A Transfer on Death Deed does not change your ownership rights. The Deed does not take effect until you die. Before you die, you can still sell the property, get loans on it, and maintain your tax exemptions.
Equally as important, you may revoke a Transfer on Death Deed by several methods. To be effective, a Transfer on Death Deed must be recorded with the County Clerk before the death of the grantor in the county in which the real property is located. If you file a new Deed after you have filed the first one, then the first one is revoked. You also can record a Cancellation of Transfer on Death Deed before the death of the grantor. All filings must be made in the county where the real property is located. Likewise, a divorce decree filed before the death of the grantor will invalidate a Transfer on Death Deed as to a spouse beneficiary.
As for taxes, property transferred with a Transfer on Death Deed will be treated the same way as real property transferred through probate. Most estates incur no state or federal estate tax, but I would advise checking with me or your accountant to make sure for your individual circumstances. The beneficiaries of the Deed also should get the “stepped up basis” (value on the date of death) in the real property and may owe no tax on receipt.
Transfer on Death Deeds are highly recommended if you want to avoid the probate costs associated with the transfer of real property. They’re also recommended to protect your real estate from being subject to reimbursement from Medicaid. They simplify the estate distribution process and provide flexibility without subjecting the grantor to undue risks or expenses.
If you want to know more, please contact me through my website at www.capertonwallinglaw.com. Now is the time to put your affairs in order, and a Transfer on Death Deed could help you do that.
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