True Story: Husband and wife get divorced. Husband gets the house. Husband does a TODD (transfer on death deed) to his niece. Husband dies. Former wife deliberately burns down the house. State Farm Insurance denies coverage because their contract was with Husband – or his estate – but not with the niece. Result: No insurance coverage for the house or the niece. (Strope-Robinson v. State Farm Fire & Cas. Co., Feb. 5, 2021)
Transfer on Death Deed
These are a wonderful tool for passing real estate on after death without having to go through probate. They’re like a chain saw – quick, easy, complete – and dangerous, even if you know what you’re doing
Here’s the deal: If you still own the property when you die, the Transfer On Death Deed immediately transfers ownership over to the named grantees. No probate needed, and whatever’s in your Will doesn’t control it. But:
1. Are the new owners all able to agree what to do with the property? If they want to sell or mortgage the property, whoever they are married to will have to sign too. What about if one of them has died? Who should get that share? Kids, spouse, or the other named recipients?
2. Unless YOU name the recipients on your property insurance policy as additional owners while you are still living, your coverage does NOT cover them for damage to the property or any accidents on the property.
3. There is NO protection against Medical Assistance claims for nursing home or other benefits provided to you or your spouse.
4. If any of the named recipients is in the middle of a divorce, bankruptcy, or has a judgment against them, that’s a problem for everyone, and it will have to be resolved before the house can be sold. 5. More than one or two recipients leads to multiple problems in managing and selling the property.
Another story: Mom did a TODD (transfer on death deed) to all five of her kids. Four lived in other states. Four were married; one had a judgment for back child support against him; one didn’t trust any of the others. It would have been cheaper to have a probate – with just one person able to handle the sale, closing, and division of the money.