On September 1, 2015, owners of real property in Texas gained access to a useful estate planning tool: the statutory transfer on death deed (TODD). Modeled after the Uniform Real Property Transfer on Death Act and located at Chapter 14 of the Texas Estates Code, the Texas Real Property Transfer on Death Act governs the use of transfer on death deeds in the State of Texas.
Texas land owners seeking a simple, relatively inexpensive way to transfer property rights after their deaths previously used instruments called Ladybird deeds. More formally known as enhanced life estate deeds, these documents allow the owners to record a deed transferring title to one or more beneficiaries, but retaining a life estate with specific language giving the owners the power to sell, transfer, revoke, or otherwise use the property as they wish, without consent from the beneficiaries. This is possible because the beneficiaries do not gain a present interest in the property while the owner is alive. As long as the deed is lawfully recorded during the owner’s lifetime, the title transfers to the beneficiary when the owner dies, but without the need for probate because the transfer happens independently of a will.
Ladybird deeds have been in use since the 1980s, but they were never directly authorized by Texas law. In the years since their introduction, a number of other states began accepting similar instruments, and many of them codified the process by entering them into the state statutes. This gave all parties under those laws greater protection by defining the rules, content, and restrictions associated with nonprobate transfers. Now Texas is extending that same protection to its land owners.
Transfer on death deeds are nontestamentary instruments, meaning they are independent from the owner’s will (if any). As with Ladybird deeds, TODDs allow transferors/owners to retain absolute ownership of and control over their land during their lives – they may sell, mortgage, rent, or otherwise use the real estate as they desire, with no penalty for waste or obligation to notify the beneficiaries (114.101).
To be lawfully executed, a TODD must fulfill three minimum standards, set out in 114.055:
1) Meet all state and local standards for recordable deeds, including appropriate content and format.
2) State that the transfer will take place at the owner’s death.
3) Be recorded, during the owner’s natural lifetime, in the deed records in the county clerk’s office for the county where the property is located.
