Code of Virginia § 64.2- 621, et. seq.
May 1, 2025
This article is a product of the Virginia State Bar Real Property Section.
Most people who have a retirement account and/or a bank account are aware of the forms they completed that direct who gets the money on their death. Completing the form is a simple process and allows the assets to be paid directly to the designated person without involving the probate court, saving time and money. A transfer-on-death deed (TOD deed) serves that function for real estate. The TOD deed is for people whose house is their single largest asset and have relatively uncomplicated family situations. A deed is recorded that only takes effect once the owner has died, still owning the real estate conveyed by the TOD deed.
TOD deeds are an alternative to putting real estate in a trust during the owner’s lifetime, establishing a life estate, or drafting a complicated will. Each alternative has positive and negative aspects related to real estate.
With a revocable living trust, people frequently forget they have one. They convey their interest as individuals rather than as trustees, so no interest is transferred. Popular since the 1990s as an estate planning device, attorneys and financial planners have encouraged people to put title to real estate in a living trust that can be changed during their lifetime. It’s important to remember that title has to be in the names of trustees rather than the trust, that it doesn’t protect assets from creditors, that beneficiaries have to locate the trust after death of the owner, and that tenancy by the entirety protection doesn’t apply if the trustees originally take title rather than having a deed to the married couple in that form of ownership first.
Life estate – the centuries-old method to convey title but retain an interest in real estate – usually conveys the ownership interest when the deed is recorded, with the life tenant only retaining a right to possession. It makes it difficult, if not impossible, to use the equity in the real estate if it’s ever needed. People forget to have the life tenant sign deeds and deeds of trust.
Everyone should have a will, regardless of other documents used to designate where assets are paid. But often wills become more complicated than necessary. A simple document saying it’s a will, all in the owner’s handwriting or, if typed, witnessed by two people in the same room at the same time, meets the basic requirements. It doesn’t need to be complicated, but if the owner wants to leave assets to someone other than family members, this is a great way to do it. It also serves as a stopgap if family members can’t locate the trust agreement after the owner passes away.
A TOD deed is the newest estate planning tool (since 2013) to help easily transfer title to real estate after the death of the owner, to make sure the intended beneficiary receives title, and to reduce the cost in time and money related to the probate procedure. The details of TOD deeds are below. Basic requirements are to have a deed properly recorded before death, the real estate owned by the decedent at the time of his death, and the TOD deed not revoked by another recorded deed. Consult a real estate attorney to have a TOD deed prepared or to discuss if this is an appropriate course of action.
Effect of the TOD deed during the owner’s (transferor’s) life:
- A TOD deed is only effective after the death of the transferor.
- The TOD deed must be recorded before the death of the transferor.
- A TOD deed does not affect the right of the transferor to sell, gift, or encumber the real estate (e.g., to have a deed of trust recorded). This is an advantage over a life estate, which requires all with any ownership or possessory interest to sign a deed of trust or deed. It’s an advantage over the revocable living trust because often lenders require owners to terminate the trust ownership of the real estate to pledge the real estate as collateral for a loan, then put it back in the trust after the financing is completed.
- The fact that a third party has actual knowledge of the TOD deed does not affect the ownership interest of the transferor – i.e., he can do what he wants with the real estate during his lifetime. He can sell it, give it away, pledge it as collateral for a loan, anything he pleases.
- No interest is vested in the transferee during the life of the transferor. The transferee has no legal or equitable interest during the life of the transferor; his creditors cannot attach any interest in the real estate.
- To establish or change a TOD deed when multiple owners own as tenants by the entirety or as joint tenants with a right of survivorship, all owners must sign the TOD deed.
- Even if the TOD deed says it can’t be revoked, it can.
- The mental capacity for a TOD deed is the same as that for a will, which is a lower level than that for signing a standard deed.
To revoke a TOD deed, in whole or in part, any of the following procedures are allowed:
- An inter vivos transfer of the property (i.e., the transferor (grantor) sells it or gives it to someone else by deed recorded before he or she dies) and the deed specifically revokes the TOD deed.
- A deed of revocation.
- A TOD naming a subsequent beneficiary (though any revocation document must be recorded before the death of the transferor).
- To establish or change a TOD deed when multiple owners own as tenants by the entirety or as joint tenants with a right of survivorship, all owners must sign the TOD deed.
Effect of the transfer-on-death deed after the transferor’s death:
- Property interest conveys at the moment of death to the beneficiary in the most recent, recorded, unrevoked TOD deed.
- The beneficiary must survive the transferor.
- Multiple beneficiaries take title in equal undivided shares with no right of survivorship. However, if one of multiple beneficiaries fails to take title for any reason (predeceased transferor, disclaimer, slayer statute applies, etc.), then surviving named beneficiaries take that beneficiary’s interest in proportional shares. This can be a problem, so the owner must make sure they want this result. For example, if the owner wants their share left to a child to pass to her children if she predeceases them, then don’t use a TOD deed. Have a well-drafted will and make sure the family members know where it is stored.
- Divorce or annulment revokes a TOD deed, unless the deed specifically says otherwise.
- Beneficiaries take subject to “all conveyances, encumbrances, assignments, contracts, mortgages, liens, and other interests to which the property is subject at the transferor’s death” (Va. Code § 64.2- 632. B).
- A TOD deed “transfers property without covenant or warranty of title even if the deed contains a contrary provision” (Va. Code § 64.2- 632. D).
- A beneficiary may disclaim part or all of their interest in the real estate.