Why A Transfer-On-Death Deed Shouldn’t Be Your Only Estate Plan

10.03.17

By Lauren A. Brown, Associate Attorney of Doerner, Saunders, Daniel & Anderson, LLP

A Transfer-On-Death Deed, also known as a Beneficiary Deed, is a “deed that automatically conveys the [real] property to a designated person upon the [real] property owner’s death.”[1] Real property typically refers to a person’s rights in land, such as your residential property. The Transfer-On-Death Deed is used to transfer legal title of real property. The Transfer-On-Death Deed document is intended and designed to avoid the probate process with regard to the real property. Real property that is owned by an individual, titled in his or her name, at the time of his or her death, generally must be probated in order to transfer legal title from the decedent to the new owner.

The Transfer-On-Death Deed is a fairly innocuous looking document and appears to be self-explanatory. An example of the key wording in a Transfer-On-Death Deed follows:

THIS TRANSFER-ON-DEATH DEED IS REVOCABLE. IT DOES NOT TRANSFER ANY OWNERSHIP UNTIL THE DEATH OF THE OWNER. IT REVOKES ALL PRIOR BENEFICIARY DESIGNATIONS BY THIS OWNER FOR THIS INTEREST IN REAL ESTATE. THE GRANTOR HAS THE RIGHT TO WITHDRAW OR RESCIND THIS DEED AT ANY TIME. ANY BENEFICIARY NAMED IN THIS DEED IS HEREBY ADVISED THAT THIS DEED MAY BE WITHDRAWN OR RESCINDED WHETHER OR NOT MONEY OR ANY OTHER CONSIDERATION WAS PAID OR GIVEN.[2]

It seems easy enough to understand, right? But, there are some common misconceptions about these deeds, and one little technical mess-up can force the family members of the Grantor, the party who tried to convey his or her real property through this Transfer-On-Death Deed, to have to probate the Estate of the Grantor in order to pass legal title to the real property. First, the Transfer-On-Death Deed must be filed in the office of the county clerk in the county where the real property is located prior to the Grantor’s death.[3] Second, the Designated Grantee Beneficiary, the party the Grantor named as a Beneficiary in his or her Transfer-On-Death Deed, must accept the real property within nine months of the Grantor’s death.[4] Essentially, having a Transfer-On-Death Deed on file just isn’t enough to actually transfer title of that real property. The Designated Grantee Beneficiary must take affirmative steps to claim the real property. These affirmative steps include executing an affidavit (1) affirming the death of the Grantor by providing the Grantor’s death certificate, (2) clarifying whether the Grantor and Designated Grantee Beneficiary were married at the time of the Grantor’s death, (3) providing a description of the real property, and (4) filing the Affidavit in the office of the county clerk in the county where the real property is located, within nine months[5] of the date of death of the Grantor. Failure to comply with these statutory requirements means that the entire Transfer-On-Death Deed fails and the real property will have to go through a probate proceeding for legal title to pass from the Grantor to the new owners, which may not be the intended owner as designated by the Grantor on the Transfer-On-Death Deed.[6]

Now, if the Designated Grantee Beneficiary misses the nine month deadline, he or she is out of luck. There is no way to correct the legal effect of missing the nine month deadline. The real property that was intended to pass to him or her now ends up in the Grantor’s probate Estate. This is important because if the Grantor had other heirs, such other children or grandchildren, that Designated Grantee Beneficiary’s share in that real property likely will be reduced from 100 percent to a much smaller amount (it may even be reduced to zero), depending on how many heirs share in the proceeds of the Grantor’s Estate. For example, if the Designated Grantee Beneficiary was not an heir of the Grantor, but let’s assume, a close friend, then the Designated Grantee Beneficiary would not receive any interest in the real property through the probate process of the Grantor’s Estate. Worse yet for the Designated Grantee Beneficiary, the Transfer-On-Death Deed is not considered a testamentary instrument.[7] A testamentary instrument is any document that transfers ownership interest at death. Similar to a Last Will and Testament, a testamentary instrument is “[t]he legal expression of an individual’s wishes about the disposition of his or her property after death; [especially] a document by which a person directs his or her estate to be distributed upon death.”[8] What this means for the Designated Grantee Beneficiary is that even though the Grantor intended for him or her to own the real property, as identified in the Transfer-On-Death Deed, in full, the Court will not consider the Transfer-On-Death Deed to effectuate the intent of the Grantor’s dying wishes because the Transfer-On-Death Deed is not treated as a testamentary instrument. It will not act as, or replace, a Last Will and Testament. This could result in the diminished share the Designated Grantee Beneficiary takes from the Grantor’s Estate.

The realistic implications of an ineffective Transfer-On-Death Deed are that (1) the Designated Grantee Beneficiary takes less than the Grantor intended, (2) the Grantor’s Estate must be probated in order to pass legal title of the real property, (3) the Grantor’s heirs will incur more court fees and attorney’s fees than the Grantor intended, (4) the real property could be unsellable for a period of time during the probate process, and (5) the Estate may sell the real property so that the Designated Grantee Beneficiary never even gets to use the real property, as was intended by the Grantor. Even though this Transfer-On-Death Deed appears to be straightforward, it is seemingly deceptive; parties who intend to use it, either as Grantor or as a Designated Grantee Beneficiary, should be extremely cautious and consult an attorney before the Deed is signed, and upon the death of the Grantor. The Transfer-On-Death Deed does not transfer title or ownership of bank accounts, personal property, or other titled assets, such as cars or boats. Even if an individual decides to include a Transfer-On-Death Deed as a part of an estate plan, one should consider having a backup plan in place, such as Last Will and Testament, to dispel of real property and other assets.

The information contained on this web site is provided for informational purposes only and should not be construed as legal advice on any subject matter, nor the creation of an attorney-client relationship between any lawyer in this Firm and the reader. Recipients of content from this site should not take or refrain from taking any action based upon content included in this site without seeking legal counsel on the particular facts and circumstances at issue in the state in which you live.


 

[1] Beneficiary deed, Black’s Law Dictionary (10th ed. 2014).

[2] Oklahoma County Clerk, countyclerk.oklahomacounty.org/files/rod_ucc/Transfer_On_Death_Deed.pdf (last visited Sept. 27, 2017).

[3] “An interest in real estate may be titled in transfer-on-death form by recording a deed, signed by the record owner of the interest, designating a grantee beneficiary or beneficiaries of the interest.” 58 Okla. Stat. Ann. § 1252(A) (emphasis added).

[4] 58 Okla. Stat. Ann. § 1252(B).

[5] The nine month deadline applies to Grantors who died on or after November 1, 2011. Deaths that occurred before that date are not restricted by the nine month deadline. 58 Okla. Stat. Ann. § 1252(D).

[6] 58 Okla. Stat. Ann. § 1252(C).

[7] 58 Okla. Stat. Ann. § 1258.

[8] Will, Black’s Law Dictionary (10th ed. 2014).

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Rebecca D. Bullard

Rebecca D. Bullard

Rebecca represents clients primarily in labor and employment litigation and counsels clients regarding everyday employment matters. 

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