Apr 24, 2017

Posted in Blog - "Altman Speaks"

Beware of “Transfer on Death” Deeds

A lot has been written about a “transfer on death” or TOD deed. The concept, as written into various state laws, is that a person owning real estate can do a new deed to their real property that basically says “when I die, give the property to X, without any probate or other proceeding”. In other words, like a POD bank account, presumably a TOD deed would immediately vest in the person designated as TOD.

Recently, the legal counsel for one of the major title insurance companies wrote the following about TOD deeds:

“Please note that TOD deeds pose a lot of problems in terms of insurability. The property is subject to claims of creditors of the decedent which might be filed in an estate proceeding.  Therefore, we would make inquiry as to the existence of a will, the terms of the will, and the existence of heirs of the decedent if an estate had not been opened.

We would require a thorough review the estate proceedings as if it were a standard estate transfer, and have a confirmatory deed executed by the PR of the estate vesting fee simple title in the beneficiary of the TOD deed.”

In other words, a TOD deed would not allow for the easy sale of the property and could cause major problems.  For example, Mom does a TOD deed to give her house to her son. Mom dies, the son knows he was given the house by the TOD deed and does nothing. 25 years later, the son dies, and his children want to sell the house.  They open a probate proceeding for their dad, believing that is all to be done. Instead, the title insurance company refuses to issue a title insurance policy because nothing was done 25 years earlier when mom died.  What a mess!

If the goal is to avoid probate at death, there are other, more secure and guaranteed methods to avoid probate, rather than the unsettled law related to TOD deeds.

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