Transfer on Death Deed: How It Works, Rules and Steps

A transfer on death (TOD) deed is a recorded deed that names who will receive your real estate when you die. You keep full ownership while you're alive, and the property passes to your beneficiary without a probate case. Only some states allow them, the signing rules differ, and the deed has to be recorded to work.

What is a transfer on death deed?

A TOD deed, sometimes called a beneficiary deed, is a deed that takes effect only at your death. Until then, the beneficiary has no ownership rights. You can live in the home, rent it out, sell it, borrow against it or change your mind. Arizona and Minnesota both say the beneficiary's signature, consent or notice is not required during the owner's lifetime.

In California, the statute says a revocable TOD deed transfers all of the owner's interest in the property at death, and it is contingent on the beneficiary outliving the owner. The property passes without covenant or warranty of title, so the beneficiary takes it as it stands. If there are several beneficiaries in California, they take as tenants in common in equal shares.

Which states allow TOD deeds?

Many states allow them, but not all, and each has its own rules. A few examples show how much they differ:

Don't use a generic form from a website. Ask the county recorder or an attorney in your state for the right one. If your state doesn't offer a TOD deed, a local estate planning attorney can talk through other tools, such as a living trust or joint ownership.

How to make a transfer on death deed, step by step

1. Confirm your state allows it and check who can be a beneficiary. Start with the state statute or your county recorder's website.
2. Get a state-approved form or have an attorney draft one. California requires a "Common Questions About the Use of This Form" notice on the deed (Probate Code 5642). Other states have their own required wording.
3. Copy the legal description from your current deed. A street address is not enough. Use the lot, block and other details exactly as they appear in your vesting deed.
4. Name your beneficiaries by full legal name. Say how they'll share the property. Ask whether your state lets you name an alternate in case a beneficiary dies first.
5. Sign it the way your state requires. That may mean a notary only, or witnesses as well. California requires both two witnesses and a notary.
6. Record the deed with the county recorder where the property sits, while you're alive. Pay the recording fee, which varies by county, and keep the recorded copy.
7. Tell the people who need to know. That means the beneficiary, your executor and, if relevant, your family.

What does the beneficiary do after the owner dies?

The details depend on the state, but the beneficiary usually needs to record proof of the death in the county where the property is. California's required notice lists several steps: recording evidence of death, filing a change of ownership notice, giving notice to heirs, and recording an affidavit, along with notifying the state health department if it applies. Some states, including Minnesota, also require a clearance certificate for certain Medicaid claims.

Usually you will need a certified death certificate, a form or affidavit and the county's recording fee. Most counties and title companies can tell you what they expect. If the home will be sold, talk to a title company early, because they may ask for more paperwork than a beneficiary expects. Our guides on selling a house after a death and who gets the house cover what comes next.

What are the tax and mortgage effects?

Capital gains basis. IRS Publication 551 explains that, in general, the tax basis of property inherited from a decedent is its fair market value on the date of death. That is often called a stepped-up basis. If you give a home during your life instead, the recipient generally takes your adjusted basis, so they could owe more tax if they sell. A TOD deed is a transfer at death, so it usually fits the inheritance rule. Check with a tax professional about your situation.

Property taxes. Some states and counties reassess property tax when ownership changes. Ask your county assessor.

Mortgage. The Garn-St Germain Act generally stops lenders from calling a loan due just because a residential property passes to a relative after the borrower's death. The beneficiary still has to make the payments or refinance. See our guide to a mortgage after death.

What are the limits of a TOD deed?

• Debts and liens stay with the property. Minnesota's statute says property passes subject to liens, judgments and other encumbrances that exist at the owner's death. Arizona's Uniform Probate Code version can make people who receive nonprobate transfers liable for valid estate claims if the probate estate is too small.
• Medicaid estate recovery. Federal law lets states define a person's estate for recovery to include assets that pass outside probate, including through living trusts and survivorship arrangements (42 U.S.C. 1396p(b)(4)). Recovery applies to certain benefits paid after age 55 and varies by state.
• It doesn't cover everything. A deed covers one property. Bank accounts, vehicles and other assets need their own plan. See payable on death accounts and our beneficiary update checklist.
• It can conflict with your will. The recorded deed generally controls the property it covers. Make sure your will and deed say the same thing.
• It doesn't help if you become incapacitated. A TOD deed only works at death. You still need a power of attorney for lifetime decisions.

TOD deed compared with other ways to pass a home

Our guides on joint ownership and death, living trust vs will and bypassing probate compare these routes in more depth.

Common mistakes

• Never recording the deed. The most costly error.
• Using the wrong state's form or skipping required witnesses. A deed that misses a formality can fail.
• Not naming a backup. If the only beneficiary dies first, the deed may fail and the home could return to your estate.
• Forgetting the rest of the estate. A deed handles one asset. A simple will covers what's left.

What to do next

1. Check whether your state allows TOD deeds, and get the state's form or an attorney's draft.
2. Sign with the witnesses and notary your state requires.
3. Record the deed with the county recorder and keep the stamped copy with your estate papers.
4. Review it after a marriage, divorce, birth, death or sale, and update your will to match.