A beneficiary deed, also commonly known as a transfer on death (TOD) deed, can be used to transfer property to a loved one outside of the probate process. However, this legal instrument is not allowed in all 50 states. This begs the question, which states allow transfer on death deeds? Keep reading to find out if the state you live in allows this convenient estate planning tool.
What is a beneficiary deed?
A beneficiary deed, also often called a transfer-on-death deed, is a legal instrument that allows a property owner to transfer their ownership interest to a beneficiary.
There are several types of deeds that can be used to transfer property ownership, effective immediately.
A beneficiary deed is unique in the sense that it allows you to make future arrangements about how the property should be passed down when you pass away. One day, your passing will trigger an event such that the property is automatically passed down to the beneficiary of your choosing. Be sure to read our full guide on beneficiary deeds to understand how they work.
A major benefit of utilizing a beneficiary deed through the estate planning lens is keeping the property out of the probate process. Because the transfer of the property takes place automatically in the event of your death, it is kept out of your estate and thus out of probate.
If you are interested in making use of a beneficiary deed, or transfer on death deed, you should first make sure that it is allowed in your state. We provide the list of states that allow this legal tool next.
Which states allow transfer on death deeds?
There are several strategies that can be used to transfer property upon death, such as through your Will, your Trust, or holding property in joint tenancy. Some community property states also provide survivorship rights to the spouse.
However, in more recent years, some states began to provide an alternative method of transferring property upon death outside of the probate process: the beneficiary or transfer on death (TOD) deed. (The terminology is subject to the state you live in.)
For example, the transfer on death deed became available to Californians in 2016. Today, 29 states, plus the District of Columbia, allow transfer on death or beneficiary deeds.
Here is the list of the states that currently allow transfer on death (TOD) or beneficiary deeds:
District of Columbia
Create a Transfer on Death Deed in your state
The process of estate planning includes many important decisions, such as how you plan to pass down your hard-earned assets and property, and who you plan to pass them down to. Because the probate process can be costly and time-consuming, most individuals are interested in bypassing probate as much as possible.
Luckily, there are several legal instruments that can help you do exactly that. Today, we talked about how a beneficiary deed or transfer on death deed will allow you to transfer property to a loved one when you pass away. However, this tool is not available in all states. Be sure to reference our list above to make sure that it is allowed in the state in which the property is located.
If it’s not allowed in your state, don’t worry. There may be other tools that serve a similar function, such as joint tenancy or community property with the right of survivorship. Last but not least, you always have the option of transferring property to a Living Trust, which allows you to manage the distribution of property outside of probate.
Last but not least, don’t forget to create and update your Estate Plan to make sure that your affairs are in order. Regardless of how you decide to pass down property to your loved ones, you’ll want to make sure that your wishes will be honored. Establishing your Will and/or your Trust to make your wishes known should always be your priority. Click here to learn more about creating your Estate Plan with Trust & Will.
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