Virginia’s Transfer on Death Deed: What You Need to Know
Virginia residents who own real estate property can use a transfer on death deed (TODD) to automatically transfer property directly to beneficiaries upon the owner’s death. This can be a good estate planning strategy, especially for those whose primary asset is their house and they do not have much other property.
With a transfer on death deed, beneficiaries obtain immediate ownership of real property without the need for the property to go through probate. For a TOD deed to be valid, however, special language must be added to the deed in accordance with VA Code 64.2-621. To ensure that this is done properly, it is best to work with a reputable Virginia estate planning lawyer.
How Does a Virginia Transfer-On-Death (TOD) Deed Work?
Transfer-on-death deeds for real estate were authorized by the Virginia legislature in 2013. Real estate TOD deeds are similar to payable-on-death bank accounts, transfer-on-death registrations for investment accounts, and transfer-on-death registrations for vehicles, all of which are allowed in the Commonwealth.
TOD deeds for real estate transfer of the current owner’s interest in the property to a designated beneficiary upon death. But while the owner is alive, the transfer-on-death designation has no impact on the deed.
Virginia TOD deeds for real estate are revocable, so the owner can change the beneficiary or remove the designation altogether at any time. In addition, there is no requirement to notify a beneficiary that the ownership interest in the property will be transferred to them upon death.
Here are some other important things to know about transfer-on-death deeds for real estate in Virginia:
- The current owner retains the right to do what they want with the property. For example, they can mortgage the property, sell it, and/or revoke the beneficiary designation without getting the approval of the beneficiary or even notifying them.
- Even if the beneficiary is aware of the TOD designation, they have no legal rights to the property while the current owner is alive. For example, they cannot sell or mortgage the property or make any changes to it on their own.
- If there are any current loans against the property, a TOD deed has no effect on the creditor’s legal rights with regard to the loan.
- A TOD designation does not give the beneficiary’s creditors any rights in the property while the current owner is still alive.
Using a Real Estate TOD Deed for Estate Planning
There are several potential benefits that make real estate transfer-on-death deeds a strong estate planning strategy in some cases. These include:
- Simplified Probate Procedures: A TOD deed allows individuals to take one of their largest assets out of the probate process. Not only does this mean that the owner’s interest in the property can go directly to his/her designated beneficiaries upon death, but it might also mean that the estate would now qualify as a “small estate” if the total value of the remaining assets is under $50,000, in which case Virginia’s simplified probate process can be used.
- Maintain Flexibility and Control: Since the TOD deed has no effect on property ownership and related matters while the owner is alive, this strategy allows the owner to maintain the same level of control over the property that they currently have. The owner can still do whatever he/she wants with regards to the property without permission from the beneficiary, so for all practical purposes, nothing really changes until the current owner passes away.
- Retain Benefits of Property Ownership: Related to the last point, since there are no practical changes with a TOD deed while the owner is alive, they continue to enjoy the benefits of property ownership. This could include homestead exemptions, property tax deductions and refunds, and the ability to deduct home mortgage interest.
It is important to point out that while there are a number of advantages that come with real estate TOD deeds, may not always be the best solution. For example, setting up a revocable trust might make more sense in some cases, especially if the owner has a more complicated estate that includes a substantial amount of assets outside of the real estate property that they want to transfer. As always, speak with an experienced attorney to determine the estate planning strategies that are right for you.
Contact Our Skilled and Knowledgeable Virginia Estate Planning Attorneys
For strong legal guidance with estate planning matters in Virginia, contact Buck, Toscano & Terezkerz for assistance. Call our Charlottesville, VA office today at (434) 977-7977 or message us online to schedule a consultation with a member of our legal team.