During the 84th session of the Texas Legislature, a new law was passed authorizing the use of a new legal instrument called a Transfer on Death Deed. This law goes into effect September 1, 2015 and can be found in the Texas Estates Code §114. Texas joins a growing number of states that authorize the use of this deed, sometimes called a Beneficiary Deed, POD Deed or Payable On Death Deed, which acts as a will substitute for transferring real property. This means that a properly drafted, correctly executed and recorded Transfer on Death Deed avoids the need for probate to dispose of that specific parcel of real property.
In order to ensure that the transfer is effective, specific requirements must be met. The Transfer on Death Deed must “[…] contain the essential elements and formalities of a recordable deed; state that the transfer of an interest in real property to the designated beneficiary is to occur at the transferor’s death; and be recorded before the transferor’s death […].” (see Texas Estates Code §114.055) A transferor can designate a single beneficiary or multiple beneficiaries and can also designate an alternate beneficiary or beneficiaries if they so choose.
Revoking the Transfer on Death Deed can be done by a written Revocation, which must be recorded before the transferor’s death, or by subsequent sale of the property by the transferor. The transferor keeps the ability to sell the property, use the property as collateral, claim the property as homestead and retain ad valorem tax exemptions. The beneficiary does not gain any rights to the property during the transferor’s lifetime.
As with all new instruments, there will be questions as to how the Transfer on Death Deed interacts with a will, a durable power of attorney, a divorce decree, deeds with rights of survivorship and claims of creditors or beneficiaries. It is vital to discuss the potential use of this new instrument in your succession plan given your specific goals, requirements and desires. The attorneys at Beard & Lane can counsel you to ensure your interests are protected and your objectives are met.
Good to know about this! As a Realtor, it is something I can share with clients! Or just good information to share with friends.
ReplyThank you Melissa, feel free to call us with any questions.
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