Law Office of John S. Palmer Attorney at Law

Transfer on Death Deeds

Posted Friday, May 23, 2014 by John S. Palmer

The Washington Uniform Real Property Transfer on Death Act was signed into law in March and takes effect June 12.

The Act permits an individual to transfer real property to one or more designated beneficiaries automatically upon the transferor’s death by a new type of deed to be known as a transfer on death deed, or TOD deed. In addition to the elements and formalities required of all deeds, a transfer on death deed must be recorded while the transferor is alive and state that the transfer is to occur upon the transferor’s death. No consideration is required and the designated beneficiary need not be notified of the pending interest during the transferor’s lifetime in order for the deed to be effective.

Transfer on death deeds will be a “nonprobate asset” which RCW 11.02.005 defines to be “those rights and interests of a person having beneficial ownership of an asset that pass on the person’s death under a written instrument or arrangement other than a person’s will.”

So long as the transferor is alive and has the requisite mental capacity, transfer on death deeds will remain revocable even if the deed or another instrument contains a provision to the contrary. The capacity required to make or revoke a transfer on death deed will be the same as the capacity required to make a will, and revocation may be made by recording an instrument of express revocation or a new deed that revokes the TOD deed, in whole or in part, expressly or by inconsistency.

In the case of community property co-owned by spouses or domestic partners, a transfer on death deed must be revoked by both spouses or partners, except that if one is deceased, the survivor may revoke the deed.

A transfer on death deed does not affect the ability of the transferor to sell, convey or mortgage the property during his or her lifetime. It does not affect the eligibility of either the transferor or beneficiary for any form of public assistance. Nor does it give the designated beneficiary a legal or equitable interest in the property or render it subject to creditors of the designated beneficiary prior to the transferor’s death.

Upon the transferor’s death, the beneficiary need only record a certified copy of the death certificate in order to perfect title in his or her name. The beneficiary takes the property subject to any outstanding liens or encumbrances, including those recorded within 24 months of the transferor’s death.

If the designated beneficiary fails to survive the transferor, then the beneficiary’s interest will lapse. If the designated beneficiary is the spouse or domestic partner of the transferor, the beneficiary designation will automatically be revoked upon divorce or termination of the partnership, unless the TOD deed or a valid court decree or order provide otherwise. A beneficiary may disclaim his or her interest in the property within nine months of the interest becoming effective, in which case he or she is treated as having predeceased the transferor. If there are multiple beneficiaries, the deceased beneficiary’s share will be distributed to the surviving beneficiaries. Otherwise, disposition of the property may end up being controlled by the residuary clause of the transferor’s will due to the lack of a surviving nonprobate beneficiary.

Until now, Washington residents who own real property but wished to avoid probate could either create a revocable living trust or add co-owners as “joint tenants with right of survivorship,” which carries gift tax consequences and other risks. The availability of TOD deeds creates an opportunity to avoid probate without the expense of setting up a trust or giving a present ownership interest to individuals who are really just intended to be future beneficiaries.

If you have any questions or would like to schedule an appointment, please call us at (425) 455-5513, toll free at (877) 455-5513, or info@palmerlegal.com.