Virginia Transfer-on-Death Deeds vs. Living Trusts vs. Wills
If you die owning real estate solely in your own name, that property will almost certainly need to be probated before ownership can be passed on to your heirs and beneficiaries. If the time and the expense required to create a trust do not make sense for your situation, but you still want your property to bypass probate, a transfer-on-death deed may be the solution.
What is a Transfer-on-death Deed?
A transfer-on-death deed (TODD), also known as a beneficiary deed, does exactly what it sounds like it does: it transfers your real property to a selected beneficiary or beneficiaries upon your death. Similar to a pay-on-death designation for a bank account or transfer-on-death registration for an investment account, a TODD works to automatically convey ownership of real property to named beneficiaries upon your death, without it having to go through probate.
In Virginia, A TODD can be created or revoked by simply filling out an Optional form of transfer-on-death deed, then recording it in the land records division of the circuit court of the city or county where the property is located. As long as it is recorded before you die, a TODD enables ownership of your real estate to transfer to the named beneficiary without it needing to go through probate.
Transfer-on-death Deed Pros & Cons
There are several good reasons why you might want to use a TODD to convey property upon your death:
TODDs avoid probate
By enabling ownership of your real estate to pass by TODD, you allow it to skip probate as it passes to a named beneficiary, which can save your estate and its beneficiaries a significant amount of time and money.
TODDs avoid joint tenancy concerns
Conveying real estate by TODD avoids the property being subject to creditor claims and other judgments against the beneficiary, which is always a possibility whenever a parent conveys ownership of real estate to a child by adding the child’s name to the deed as a joint tenant.
A TODD is a simpler and more cost-effective way to bequeath real property to someone when you die
A TODD is simpler and more cost-effective than a Will, and does not need to be funded or managed like a trust.
A TODD only takes effect after you die
You can still do things like selling the property or using it as collateral to secure a loan during your lifetime.
A TODD has no effect on any creditor claims against the property
You can still record a TODD if you already have a lien or mortgage on the property. However, the beneficiary will receive the property together with the debt.
Nevertheless, conveying ownership of real estate by TODD is not a good fit for all estate plans. In some cases, the disadvantages of recording a TODD can outweigh the advantages:
TODDs can only be recorded for real property
This means that, unlike a Will or trust, a TODD cannot be used to convey ownership of personal property, like automobiles, furniture, jewelry, etc.
The things you can do with a TODD are limited
Unlike a Will, a TODD does not allow you to name guardians for your minor children. Furthermore, recording a TODD does not allow real estate to be left in trust to protect it from being squandered by the beneficiary or lost to his or her creditors.
TODDs can result in unintended consequences
As is often the case when people convey ownership of bank accounts and investment accounts by beneficiary designations, it is easy to forget that you recorded a TODD, and attempt to convey ownership of the property by other means as part of your global estate plan. This can result in unwanted consequences since the beneficiary designated in the TODD will override any beneficiary you subsequently name in your Will or trust as it relates to the specified property.
Recording a TODD subjects your estate to public scrutiny
A Will only becomes public when it is admitted to probate and a trust never has to become public. On the other hand, a TODD must be recorded as a public land record that can be searched, accessed, and scrutinized by anyone interested in your estate’s affairs. Furthermore, amending or revoking a TODD requires another deed or revocation to be recorded in the public land record.
TODDs are not ideal for multiple beneficiaries
Because of inherent limitations, a TODD works best when there is a single beneficiary. If you intend to pass ownership of your property to multiple beneficiaries upon your death, a Will or trust may be a better solution.
A TODD may be unnecessary
In Virginia, real estate “drops like a rock” to the decedent’s legal heirs when the decedent’s Will is probated, and even when there is no Will to be probated. So while it’s nice to have the option to use a TODD to convey ownership of your real estate after you die, if the property is located in Virginia, a TODD is not necessary.
Conclusion
If your biggest asset is real estate, and the rest of your estate will pass to your heirs and beneficiaries outside of probate, then a TODD might be the best way to enable your real estate to bypass probate. However, if your estate includes significant assets other than real estate that you would like to have pass outside of probate, or if you intend to convey ownership of the property to multiple beneficiaries after you pass away, a Will or trust is probably a better solution.
Contact a Knowledgeable Virginia Estate Planning Attorney
A transfer-on-death deed is a convenient estate planning tool that can be used to easily convey ownership of real property to named beneficiaries upon your death, without it having to go through probate. However, a transfer-on-death deed should be used with a great deal of caution, and only as part of a well-advised global estate plan.
To learn if a Virginia transfer-on-death deed is right for your estate plan, call us today at (703) 553-2577 or use the contact form to speak with a knowledgeable Virginia estate planning attorney.
The information on this site is for general informational purposes only. The information presented in this site is not legal advice or a legal opinion. You should seek the advice of legal counsel of your choice before acting upon any of the information in this site.