A beneficiary deed, often known as a transfer on death deed or TOD deed, is a legal document that allows a property owner to transfer real property to a new owner outside of a will. Use of a TOD deed enables transfer of ownership upon death of the owner without going through the probate process.
To help you decide whether a beneficiary deed is right for your situation, this in-depth article will explain a little more about:
- What a beneficiary deed is
- How beneficiary deeds work
- What states recognize beneficiary deeds
- Pros and cons about using beneficiary deeds
Let’s start with what a beneficiary deed is. But before we do, please note that this is not intended to be legal advice. This article was written strictly for educational purposes.
Since estate planning law differs from state to state, you should consult with an estate attorney in your state to learn if a transfer on death deed might be right for you.
What is a beneficiary deed?
A beneficiary deed is a special type of deed that enables the original owner of the property to maintain ownership rights to the property until death. This includes the right to change the new owner by replacing the TOD deed and changing the name of the beneficiary on the new deed.
How does a beneficiary deed work?
Since a beneficiary deed is a deed, you would use it to replace the current property deed. However, there is no real change simply because a new deed replaced the original one.
Upon the owner’s death, the transfer of property bypasses probate court and goes directly to the named beneficiary.
How does a beneficiary deed work with joint tenants?
In the case of joint tenancy, such as for a married couple, each of the joint owners maintains right of survivorship. The ownership of real estate does not pass to the designated beneficiary until the death of the last joint owner.
In states with community property laws, the surviving spouse also maintains survivorship rights. The property is then passed upon the second owner’s death to the named beneficiary.
Can a beneficiary deed bypass probate?
Beneficiary deeds are intended to bypass the probate process. Much like a lady bird deed, or life estate deed, TOD deeds are intended to facilitate real property transfer without going through a probate proceeding.
Where can you use beneficiary deeds to transfer real estate?
Not all states allow the use of beneficiary deeds. According to legal encyclopedia NOLO, at the time of this writing, the following states allowed ownership of property to transfer by use of beneficiary deeds:
District of Columbia
Why can’t you use a revocable trust?
A revocable living trust, also known simply as a revocable trust, is another means to facilitate a nonprobate transfer of title for real property. But if you feel as though the only reason you’re creating a trust in the first place is to transfer your real estate, then it might not make sense for you to do that when a beneficiary deed can have the same effect.
Conversely, a trust might give you more control over the timing of property transfer. With a beneficiary deed, the primary transfer mechanism is upon the death of the transferor. With a trust, you can build in restrictions on transferring full control of the property.
Challenges when using beneficiary deeds
There are some challenges when using transfer on death deeds.
Title companies don’t like working with them.
Given the number of scenarios that can happen in end-of-life situations, a last minute change in a beneficiary deed can lead to unintended consequences. Not the least of which includes confusion and quarreling between family members while the property is in dispute.
And title companies do not want to be in the middle of this. Many title companies require additional paperwork to meet legal requirements should the property become disputed after the owner’s death.
You may need to file the deed with your county clerk in advance.
Generally speaking, a TOD deed is required to be filed with the county assessor and be reflected in the county records. If an owner has a sudden change of heart on his or hear deathbed, it might be a very difficult task to update the county records with the new recorded deed before the owner’s death.
You might lose Medicaid eligibility.
Depending on state law, residences with a beneficiary deed may or may not be considered as part of the net worth for Medicaid purposes. You’ll need to discuss your specific situation with an elder care attorney in your state to see if the value of the property is included for Medicaid purposes.
Advantages of using beneficiary deeds
Here are some of the common advantages of using TOD deeds for property transfer.
Revocable transfer of real property.
As the current owner of your property, you can document how you want your property to transfer upon your death. Of course, you have the right to change your mind at any point. Simply replace the deed with a new deed and alternate beneficiary.
Nonprobate transfer of real property upon owner’s death.
The appeal of a transfer on death deed is that upon death, the owner’s interest is transferred directly to the named beneficiary. Unless there are unexpected circumstances, the transfer should bypass the probate process.
Changing the ownership is usually straightforward.
The owner maintains the right to transfer the property to anyone he or she chooses. Generally speaking, this can happen by:
- Replacing the beneficiary deed with a new deed and new beneficiary designation
- Selling the property to a new owner
On the flip side, there are also disadvantages of using TOD deeds.
Disadvantages of using beneficiary deeds
Here are some of the disadvantages of using a beneficiary deed to transfer real estate.
Might not be the best available option in your state.
There are 30 states that recognize beneficiary deeds, which means 20 states do not. Some states, like Florida, recognize ladybird deeds as a means to transfer property outside the probate process. Others, like Texas, recognize both types of deeds.
In either case, you’ll want to seek expert advice from an attorney so you can decide which is the best option in your situation.
Might be more difficult for married couples than for a sole owner.
For a single individual, a transfer on death deed can make property transfer very straightforward. For couples, there might be more challenges, particularly for blended families with different sets of beneficiaries.
Might remain subject to creditors.
Because the rights remain with the owner until death, your real estate might be subject to creditors. In many states, a primary residence might be afforded creditor protection. However, this creditor protection normally doesn’t extend to second residences or investment properties, such as rental real estate.
A power of attorney probably won’t be able to revoke a beneficiary deed.
A common scenario is that an original owner creates a TOD deed to maintain the right to change beneficiaries until death. Then circumstances change, warranting a new beneficiary. But by then, the owner might no longer be able to make decisions on their own.
In such a case, the family may be helpless to help do the right thing.
Finding the right way to effectively transfer property upon death is one of goals of proper estate planning. While transfer on death deeds might be an appropriate way to bypass the probate process in some cases, they certainly are not a one-size-fits-all solution. You should consult an experienced estate attorney in your area for in-depth legal advice regarding beneficiary deeds.
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After retiring from a 24-year career as a Naval officer in 2017, Forrest became a financial planner to help people achieve success in managing their personal finances. In 2022, he sold his partnership stake in his financial planning firm to focus on helping people full-time through his writing.
Featured in: Forrest’s writing has been featured in the following publications: Forbes,, NerdWallet, Yahoo Finance, The Military Guide, The Military Wallet, Christian Science Monitor, and many other publications.
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