A transfer on death deed has clear pros and cons: it is a cheap, revocable way to pass one piece of real estate to a named beneficiary outside probate, but it leaves mortgages, liens, creditor claims, and Medicaid estate recovery untouched, and it quietly fails if the beneficiary dies before you or the paperwork is defective. Whether it is the right tool depends on your state, your property, and what else is going on in your estate.
What a Transfer on Death Deed Actually Does
When you sign and record one of these deeds (sometimes called a TODD), you keep full ownership of the property for the rest of your life. You can sell it, mortgage it, lease it, or live in it without the beneficiary’s permission. The person you name has what the law calls an “expectancy” — no current rights, no authority, nothing to sign.
Title shifts automatically at your death, provided the deed is still in place and recorded. Because the transfer happens by operation of law, your family can skip probate for that property, which otherwise means court supervision, attorney fees, and administrative costs that commonly consume several percent of an estate and can stretch over months.
Your beneficiary still has paperwork after you die. At a minimum they will record a certified copy of your death certificate (and in some states an affidavit) with the county recorder where the property sits. Some states also require notice to your heirs and a change-of-ownership filing with the tax assessor. Until that is done, selling or refinancing is difficult.
The Advantages
It Skips Probate
The property passes directly to your beneficiary without going through the probate court. That is the main reason people use this deed, and for a single home it accomplishes the goal with one document.
You Stay in Control
Unlike adding someone to your deed as a co-owner or making an outright gift, a TODD gives the beneficiary no current rights. You can revoke or change it at any time before you die. That flexibility is a real difference from an irrevocable trust or a completed gift, both of which bind you going forward.
Your Beneficiary Gets a Stepped-Up Basis
Because the transfer takes effect at death rather than during your life, the beneficiary’s tax basis in the property resets to its fair market value on the date you die.1Office of the Law Revision Counsel. 26 USC 1014 – Basis of Property Acquired From a Decedent If you bought the home for $100,000 and it is worth $400,000 when you die, your beneficiary can sell it the next week and owe zero capital gains tax on the $300,000 of appreciation. Gifting the property while you are alive hands over your original, lower basis instead.
No Gift Tax Return
The deed is revocable and transfers nothing until death, so it is not a gift for federal tax purposes. You do not file a gift tax return, which would otherwise be triggered by gifts above the $19,000 annual exclusion in 2026.2Internal Revenue Service. What’s New — Estate and Gift Tax The property remains in your estate for estate tax purposes, but the 2026 federal exemption sits at $15,000,000 per person, so the great majority of estates owe nothing.3Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026
Medicaid Eligibility Is Preserved During Your Life
Signing a TODD is not a completed transfer, so it does not trigger a penalty under Medicaid’s five-year look-back the way gifting the house outright would. You stay the owner, and the deed just sits on record.
The Risks and Drawbacks
Mortgages and Liens Come With the House
A transfer on death deed does not clean the title. Your beneficiary inherits the property subject to every mortgage, home equity line, tax lien, and other encumbrance that was there when you died. If the mortgage goes unpaid, the lender can foreclose.
Federal law does soften one piece of this. Under the Garn-St. Germain Act, a lender cannot call the loan due simply because a home with fewer than five dwelling units passed to a relative at the borrower’s death, or because a spouse or child became the new owner.4Office of the Law Revision Counsel. 12 USC 1701j-3 – Preemption of Due-on-Sale Prohibitions The beneficiary can keep paying under the existing loan terms.
Homeowners Insurance Does Not Follow the Deed
Your policy does not automatically transfer. Coverage usually continues for a short window after a policyholder’s death — often around 30 days — and the beneficiary needs to contact the insurer promptly to transfer the policy or write a new one. A surviving spouse already named on the policy has an easier path. If the home sits vacant during the transition, a standard policy may not cover losses, and a vacant-property endorsement may be needed.
Medicaid Estate Recovery Can Still Reach It
Preserving eligibility while you are alive is not the same as protecting the house after you die. Federal law requires every state to seek repayment from the estates of certain Medicaid recipients for nursing facility services and related costs.5Office of the Law Revision Counsel. 42 USC 1396p – Liens, Adjustments and Recoveries What matters is how your state defines “estate.” Some states limit recovery to probate assets, in which case a TODD property is out of reach. Others define estate broadly enough to capture non-probate transfers, and the state can pursue the property anyway. That single state-law question can make or break the deed as a planning tool.
Creditors May Still Have a Claim
In many states that follow the Uniform Real Property Transfer on Death Act, the property remains reachable by the deceased owner’s creditors if the probate estate cannot cover debts, funeral expenses, and administration costs. The beneficiary may have to pay in the value of the house, or surrender it, to satisfy legitimate claims. The exposure is generally capped at one year after death, but the common assumption that a TODD puts the home beyond creditors is wrong.
The Deed Fails If Your Beneficiary Dies First
A TODD only works if the named beneficiary outlives you. If they die first and you never update the deed, the designation lapses and the property drops into your probate estate — the outcome you were trying to avoid. Some states let you name a contingent backup beneficiary on the deed, and where that is allowed, doing so is cheap insurance.
Co-Ownership Complicates Things
If you own as a tenant in common, you can use a TODD for your share, and the other co-owner’s share is unaffected. If you own as joint tenants with right of survivorship, that survivorship right generally wins: when one joint tenant dies, the other automatically takes the deceased owner’s share regardless of what the TODD says. A transfer on death deed is cleanest when you are the sole owner.
A Will Cannot Override It
A recorded TODD operates outside probate, and your will has no effect on it, no matter when you sign it. If your deed names your child and a later will leaves the same house to your spouse, the child gets the house. Changing the beneficiary requires recording a new deed, recording a formal revocation, or transferring the property during your lifetime.
State Availability and What Makes the Deed Valid
Not every state allows this deed. As of 2026, roughly 30 states and the District of Columbia recognize them, many based on the Uniform Real Property Transfer on Death Act. If your state is not among them, a revocable living trust is the usual way to keep real estate out of probate.
Where they are available, the rules differ on witnesses, form, and recording. Most states require the same core elements: the full legal names of the owner and the beneficiary, the legal property description from prior deeds or tax records (not just a street address), the owner’s notarized signature, and recording with the county recorder in the county where the property sits during the owner’s lifetime. A deed that is never recorded, or that is recorded after death, has no legal effect.
One capacity point matters at the front end: in most states, an agent under a power of attorney cannot sign a TODD for the owner. If the owner has already lost the mental capacity to sign documents, this tool is off the table. The capacity standard is generally the same as for signing a will — the owner must understand what they own, who the beneficiaries are, and what the deed does.
Changing Your Mind Later
A recorded TODD stays fully revocable until you die, and the beneficiary has no say. The usual methods:
- Sign and notarize a formal revocation document and record it with the same county recorder’s office that holds the original deed.
- Record a new TODD naming a different beneficiary. In most states the most recently recorded deed controls.
- Sell or give away the property during your life. Once you no longer own it, the TODD has nothing to transfer.
- In several states, a final divorce decree automatically revokes a TODD that names a former spouse.
Whatever method you use, the revocation has to be recorded before you die. An unrecorded revocation generally does not count, and after death the most recently recorded valid document decides who gets the property.
When a Living Trust Is the Better Choice
A revocable living trust is the main alternative, and both tools avoid probate on real estate. The trade-off is scope versus simplicity.
A TODD is cheaper and faster. One document, one filing, done. A revocable living trust requires drafting the trust, retitling the property into it, and managing it over your lifetime, and the upfront legal costs are meaningfully higher.
A trust covers more ground. It can hold real estate in multiple states, bank accounts, and investment accounts under one plan. A TODD covers one parcel in one state, so property in multiple states means multiple deeds. A trust also handles incapacity: a successor trustee can step in if you can no longer manage your affairs. A TODD offers no incapacity protection, and your agent under a power of attorney usually cannot create one for you.
For a single home passing to a straightforward beneficiary, a transfer on death deed is often enough. For larger estates, property in more than one state, blended families, or likely creditor exposure, a revocable living trust usually earns its higher cost.