Problems with "Transfer on Death Deed"
By Jim Palmer Jr.

    A Transfer on Death Deed is a legal document signed by a property owner while they are still living, which enables them to transfer ownership of their asset to a named beneficiary automatically when they pass, thus allowing them to bypass the time consuming and costly probate process. If a property owner has executed a Transfer on Death Deed, the property shifts to the person nominated as soon as the owner dies.  The beneficiary is the immediate owner of the property, with no requirement to appear in court.
   
 While such deeds can be a useful tool in estate planning, they do have potential pitfalls which can create unintended complications such as unintentional disinheritance, joint tenant problems, and conflicts with other estate planning documents.  Title companies and other closers are leery of this method of transfer because of recent lawsuits from potential heirs and lien holders that have disputed the validity of such transfers. 

     In a recent case, one sibling out of four received a property by Transfer on Death Deed when the property owner died.  The beneficiary had planned this method of transfer with the competent legal owner of the property ahead of time, specifically to avoid probate.  The property was listed for sale and a purchase agreement was soon signed.  When the title company issued the preliminary title policy they demanded the other siblings sign a document that waived their right to contest the property conveyance to the named beneficiary.  Two of them willingly signed the document, knowing the intent of their deceased parent.  The remaining disgruntled and disinherited sibling refused to sign the document, causing a trip to court and a lengthy delay to the closing.

     The title company seemed like the bad guy in this scenario, but they are in the risk management business and were only covering their bases.  It’s their job to insure the title for the new buyer so there are no claims that can possibly arise after the closing that dispute the new buyer’s ownership.  They are also careful to confirm the legal description of the property to be accurate and complete. A deed can be declared invalid if the legal description is incomplete or wrong.

     When this type of deed was approved for use in WA State, it seemed too good to be true, but as time has passed the pitfalls of using this method of transfer have been exposed.  When engaged in estate planning, owners should consult with an informed attorney and exercise great care.