The Transfer on Death (TOD) Deed is a new tool in estate planning in Georgia, designed to simplify the transfer of real estate upon the death of the owner. At first glance, it might seem like an easy way to avoid probate and ensure that your property goes directly to your chosen beneficiary. However, while the TOD deed offers certain conveniences, it comes with significant pitfalls that likely create more problems than it solves for most Bequest clients.
What is a Transfer on Death Deed?
A Transfer on Death Deed allows property owners to designate a beneficiary, who will automatically inherit the property upon the owner's death, without the need for probate. To be valid, the deed must be signed, notarized, and recorded with the county where the property is located while the owner is still alive. Most importantly, the transfer is complete only after the designated beneficiary files the death certificate and an affidavit within 9 months of the deceased property owner’s passing.
A TOD deed does not give the beneficiary any rights to the property during the owner's lifetime. The owner retains full control and can sell, mortgage, or revoke the deed without the beneficiary's consent.
Conveniences of a TOD Deed
Avoiding Probate:
One of the most significant benefits of a TOD deed is the ability to avoid probate where real estate is the only estate asset. By using a TOD deed, the property transfers automatically to the beneficiary upon death (and complying with further requirements) without the delays associated with probate court.
Limited Creditor Avoidance:
Similar to jointly held property, transfers via a TOD deed may pass to the beneficiary even if the estate has creditors. Without a TOD deed, creditors may force the sale of a house before it is transferred to the beneficiary in order to get paid. However, the property still passes subject to the mortgage and is not shielded by Medicaid recovery efforts. This means that even if all requirements are met and the property successfully passes outside of probate, it still may not be shielded from all obligations.
Disclaimers & Dangers of TOD Deeds
While the TOD deed might appear to be a straightforward solution, there are several reasons why Bequest Law believes it could be a bad idea for many of our clients.
The Affidavit Requirement:
The TOD affidavit must be filed with the court within 9 months of the property owner’s death. If the beneficiary fails to file within 9 months, the property reverts back to the estate thereby triggering probate and undermining the goals of the estate plan. If your goal is to avoid probate, a revocable living trust is likely the better approach for most clients.
Revocability and Potential for Conflict:
The TOD deed is revocable at any time by the property owner. If the real property is owned by two people, i.e., a couple, either party can revoke or change the deed without the other's consent. This also means that if one spouse dies, the surviving spouse can entirely revoke the TOD deed.
Therefore, for couples especially, this revocability component of the TOD deed has the potential to create significant uncertainty and legal battles over the true intentions of the deceased.
Should You Consider a TOD Deed in Your Estate Plan?
While the Transfer on Death Deed in Georgia appears to offer a simple way to pass on real estate without probate, it rather carries significant risks that can complicate your estate, leading to unintended and costly consequences. Given these risks, a TOD deed may not be the best choice for your Georgia estate plan. Especially for those with complex family dynamics, significant assets, or concerns about timing and revocability, other estate planning tools such as revocable trusts or more comprehensive wills can provide better protection and clarity.
Before opting for a TOD deed, it is crucial to understand the implications and to consult with your attorney to determine the best fit for your estate. To schedule a free consultation with a Bequest attorney you can submit an inquiry form on the main page of our website (https://www.bequest.law), give us a call at 404.500.7531, or email hello@bequest.law.