Transfer on Death Deed: 5 Rules to Protect Heirs in 2026

A transfer on death deed names who gets your house when you die, skips probate, and changes nothing while you’re alive. You can still sell, refinance, or revoke it. Five rules protect the heir who takes the house. I’ll cover those rules, which states allow the deed, the tax math when the heir sells, and when to skip it.

What a Transfer on Death Deed Actually Does

Most owners I talk to treat the form like adding a child to the title today. It does no such thing. Cornell’s legal encyclopedia has the cleanest definition. A transfer on death deed “automatically transfers property to a designated beneficiary upon the death of the property owner without probate.”¹ Some states, Arizona among them, call the same paper a beneficiary deed.² You stay the owner, and the person you name owns nothing until you die.

Texas spells out the lifetime piece in a list, and it is worth reading once. During your life the deed does not touch your right to sell or mortgage the house. It leaves your homestead rights and property tax exemptions alone, including the over-65 exemption.³ It does not trigger a due-on-sale clause, which is the lender’s right to call the loan when title changes. And it creates no “legal or equitable interest” for the beneficiary, so the deed just sits in the county’s file and waits.³

The Uniform Law Commission wrote the model act that most of these state laws copy, and it names the alternative people reach for. Some families add an heir to the title as a joint tenant instead. In the commission’s words, “joint titling exposes the property to the joint tenant’s creditors.” It also “gives the joint tenant the power to approve or disapprove a sale.”⁴ A TOD deed does neither.

That is why I’d rather see a parent record one of these than add a child to the deed. Add the child today and the child’s divorce, lawsuit, or tax lien can land on a house the parent still lives in. I’ve watched a refinance die because a co-owner son had a judgment against him. The deed avoids all of that by giving the child nothing until the funeral. If you already share title, our guide to joint tenants with right of survivorship covers what you can and can’t undo.

5 Transfer on Death Deed Rules That Protect Heirs

I keep these as five rules because each one protects a different person at a different moment. Miss the first and the heir gets nothing. Miss the last and the heir gets the house plus a bill from the IRS.

1. Record it before death, in the county where the house sits. A signed form in a desk drawer moves nothing. Texas requires the deed to be “recorded before the transferor’s death in the deed records in the county clerk’s office of the county where the real property is located.”³ Arizona says a beneficiary deed “is valid only if” it is recorded with the county recorder before the owner dies.² Recording is cheap. Travis County, Texas charges $25 for the first page and $4 for each additional page, so a two-page deed costs $29.⁵ Arizona charges $30 per instrument.⁶
2. Revoke it on paper, not in your will. Texas says a will “may not revoke or supersede a transfer on death deed.”³ Arizona says a recorded beneficiary deed “is not revoked by the provisions of a will.”² To change your mind, you record a revocation or a new deed before you die. Sign a will that leaves the house to someone else and the recorded deed still wins.
3. Name a backup, and decide what happens if the heir dies first. In Texas the beneficiary has to outlive you by 120 hours, or their share lapses.³ Arizona’s form makes you tick a box: the gift to a beneficiary who dies first either becomes void or passes into that beneficiary’s estate.² Leave that blank and a court decides for you.
4. The heir takes the house with its debts attached. Texas passes the property “subject to all conveyances, encumbrances, assignments, contracts, mortgages, liens, and other interests” on it at death.³ An encumbrance is any recorded claim, usually a mortgage or a tax lien. If the estate can’t pay its bills, the executor can reach the house for up to two years after death.³ The model act says the same and adds that those claims include Medicaid reimbursement.⁷
5. Don’t gift the house early, because the deed keeps the stepped-up basis. Property acquired from a person who has died takes a basis equal to “the fair market value of the property at the date of the decedent’s death.”⁸ A lifetime gift does the opposite. The basis “shall be the same as it would be in the hands of the donor.”⁹ Quitclaim the house now and the heir inherits your old purchase price as their tax basis. I run the numbers below.

Rule one is the one I’d tattoo on the form. I’ve sat with heirs who found a signed, notarized deed after the funeral and learned the county never saw it. That paper was worth nothing, and the house went through probate anyway. One more Texas detail: the deed can’t be signed through a power of attorney, so a parent has to sign it while they still can.³

Which States Allow a Transfer on Death Deed in 2026

Missouri allowed the first one in 1989. The Uniform Law Commission approved its model act, the Uniform Real Property Transfer on Death Act, in 2009.⁴⁷ By the commission’s own wording, “more than half of the states” now allow a TOD deed.⁴ I won’t give you an exact count. Every numbered list I’ve checked was stale within months, and a stale list sends someone to record a form their state won’t honor.

Maryland is the newest: Senate Bill 651 was approved by the governor on May 26, 2026, as Chapter 750, and takes effect October 1, 2026.¹⁰ It even reaches deeds signed before that date, as long as the owner dies on or after October 1.¹⁰ Texas has had its statute since September 1, 2015.³ Arizona runs the same tool under the beneficiary deed name.²

Two things I’d tell anyone reading a state list. First, read your own statute before you download a form. A Texas form recorded in a state with no statute is a piece of paper that does nothing. The heir finds that out at the worst possible time.

Second, a state that skipped the uniform act may still have a tool. Some use an life estate deed to do a similar job. When the time to sell comes, owners in those three states can start with our Texas, Arizona, and Maryland listing pages.

The Tax Math When the Heir Sells

Once the owner dies, the heir owns the house outright. No probate file, no executor’s deed. Two costs then decide what they keep: capital gains tax and the listing commission. Only one of them is avoidable, and it isn’t the one people worry about.

Start with the tax, and say the house was bought for $150,000 and is worth the national median at death. NAR puts the July 2026 median existing-home price at $434,100, up 2.0% from $425,700 a year earlier.¹¹

Quitclaimed during life, the heir keeps the $150,000 basis. Sell at $434,100 and the taxable gain is $284,100. At the 15% rate the IRS says applies to most people, the bill is $42,615.¹² The 0% rate only reaches taxable income up to $48,350 single or $96,700 joint, and a $284,100 gain blows through that.¹²

Inherited through a transfer on death deed, the basis steps up to $434,100. The gain on a sale near that price rounds to zero. Same house, same heir, same sale, and the difference is $42,615.

Now the commission, which the heir can still choose. At $434,100, a 3% listing agent costs $13,023 and a 2.5% agent costs $10,852.50. HomeRise lists the house on the MLS for $95 up front plus $495 at settlement, or $590 in total.¹³

I push families toward the deed over a lifetime gift every time. The gift hands the heir a $42,615 tax bill for gains that happened on someone else’s watch. The commission is the second bill, and the heir controls it.

A flat fee MLS listing puts the house in front of the same buyers. Our guide to selling an inherited house walks through the paperwork that comes first. Heirs who are comfortable running the sale can sell without an agent once title is in their name. If the heir moves in and sells years later, the normal capital gains rules on a home sale take over.

When a Transfer on Death Deed Is the Wrong Tool

I write about these deeds for a living, and I still tell a lot of people not to use one. Start with the obvious case. If you need money out of the house while you’re alive, the deed moves zero dollars. The only way equity becomes cash while you live there is to sell.

The deed is a death instrument. It is not a cash instrument.

Naming more than one heir turns them into co-owners. Texas hands the shares over “in equal and undivided shares with no right of survivorship.”³ Every one of them has to sign before anyone can sell, the same stall I see with tenants in common. One sibling who wants to keep the house can block three who need the money.

Then come the situations a one-page deed handles badly: a minor heir, a blended family with kids from two marriages, an heir on disability benefits. A trust can put one person in charge and set conditions, and the deed can’t. Here I’d rather you pay an estate attorney than save the fee. I say that knowing HomeRise earns its money when a house gets listed. A $95 listing years from now can’t fix a title fight between siblings. A properly drafted trust today can prevent one.

One more thing: the deed passes title “without covenant of warranty.” The heir gets no promise about the title’s condition, unlike a buyer under a warranty deed.³

Medicaid is the last thing to check. The deed itself doesn’t affect eligibility for public assistance during your life; Texas says so in the statute.³ But the model act is blunt that the heir can owe estate claims when the estate can’t pay, “including claims for Medicaid reimbursement.”⁷

In Texas, estate recovery covers long-term care services received after age 55. The state does not pursue the claim when a spouse survives, a child is under 21, or the estate is worth $10,000 or less. Debts like a mortgage get paid before the state’s claim.¹⁴ If a parent is heading into a nursing home on Medicaid, get advice before you count on the house.

The deed is cheap and clean for one adult heir and a house with a simple title. Stretch it past that and you’re asking a one-trick instrument to do estate-planning work it wasn’t built for. Record it for the simple case. Hire the lawyer for everything else.

Frequently Asked Questions

What are the disadvantages of a transfer on death deed?

It does nothing for a living owner who needs cash out of the house, and it only works in states with a statute. Several heirs become co-owners who must all agree to sell. In Texas, estate creditors can reach the house for two years after death if the estate can’t pay.

Does a transfer on death deed avoid probate?

Yes, when it was recorded in the county where the house sits before the owner died. Title passes to the named beneficiary at death without a court file. An unrecorded transfer on death deed is not effective in Texas, so the courthouse has to see it while you’re alive.

Can I sell my house after recording a transfer on death deed?

Yes. The deed doesn’t affect your right to sell or mortgage the house, and it doesn’t trigger a due-on-sale clause. Sell the house and the recorded deed points at nothing, because you no longer own what it describes.

Does a transfer on death deed override a will?

In Texas and Arizona, yes: a will cannot revoke or supersede a recorded transfer on death deed. To change the beneficiary, record a revocation or a new deed before you die. A will that says otherwise loses to the recorded deed.

How much does it cost to record a transfer on death deed?

It is a clerk’s fee, not a legal bill. Travis County, Texas charges $25 for the first page and $4 for each additional page, so a two-page deed costs $29. Arizona charges $30 per instrument, and other counties publish their own fee schedules.

Does the heir get a stepped-up basis with a transfer on death deed?

Yes. Property acquired from a person who has died takes a basis equal to its fair market value on the date of death under federal tax code section 1014. A lifetime gift keeps the donor’s old basis instead, so gifting a $150,000 house that sells for $434,100 costs the heir $42,615 in tax.

Sources

1. Cornell Law School, Legal Information Institute, Wex: transfer-on-death deed (reviewed September 2021)
2. Arizona Revised Statutes § 33-405, Beneficiary deeds; recording; definitions
3. Texas Estates Code, Chapter 114, Transfer on Death Deed (§§ 114.051–114.106)
4. Uniform Law Commission, Why Your State Should Adopt the Uniform Real Property Transfer on Death Act (PDF)
5. Travis County Clerk (Texas), Recording fee information
6. Arizona Revised Statutes § 11-475, County recorder fees
7. Uniform Law Commission, The Uniform Real Property Transfer on Death Act: A Summary (PDF)
8. 26 U.S.C. § 1014, Basis of property acquired from a decedent
9. 26 U.S.C. § 1015, Basis of property acquired by gifts and transfers in trust
10. Maryland General Assembly, SB 651 (2026), Real Property – Transfer-on-Death Deed – Establishment, Chapter 750
11. National Association of REALTORS, Existing-Home Sales Report, August 11, 2026
12. IRS, Topic No. 409, Capital gains and losses
13. HomeRise, flat fee MLS listing plans and pricing
14. Texas Health and Human Services, Your Guide to the Medicaid Estate Recovery Program