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

A transfer on death deed is a deed that names who gets the home at death, skips probate, stays revocable anytime, and leaves the owner in full control. Five rules protect everyone involved. I’ll walk through those five rules, the states that allow it, and the math when an heir sells.

What a Transfer on Death Deed Actually Does

Most owners I talk to treat the form like adding a name to the title today. The form does no such thing. Cornell LII calls a transfer on death deed a deed that automatically transfers property to a designated beneficiary upon the death of the property owner without probate. You stay the owner. The person you name owns nothing until you die.

Texas writes the lifetime piece even more bluntly. During a transferor’s life, the deed doesn’t create a legal or equitable interest in favor of the designated beneficiary. You can still sell, refinance, or keep the homestead exemption on the house. Homestead, in plain terms, is the tax break and the creditor shield that sit on your home. The deed waits in the clerk’s file and does nothing else.

Revocation is just as clean. A transfer on death deed is revocable regardless of whether the deed or another instrument contains a contrary provision. I treat that as the working rule anywhere these deeds exist. Some states call the same paper a beneficiary deed or a TOD deed. The label changes. The job does not.

Stack that against the two tools people mix it up with. A will also names who gets the house, but a will goes through probate, the court process that proves the will and moves title. A quitclaim today actually gives the house away now, and later I’ll show why that gift can hand the heir a tax bill they didn’t need.

5 Transfer on Death Deed Rules That Protect Everyone Involved

I keep these as five rules because each one protects a different person at a different moment. Miss the recording rule and the heir gets nothing. Miss the tax rule and they get the house plus a bill from the IRS.

1. Record it before death, in the right county, or it’s void. A signed paper in a desk drawer doesn’t move title. Texas Estates Code 114.055 requires the deed be recorded before the transferor’s death in the deed records in the county clerk’s office of the county where the property sits. I’ve sat with heirs who found a signed form after the funeral and learned the courthouse never saw it. Recording is cheap. Travis County charges $25 for the first page and $4 for each additional page.
2. You keep total control while you’re alive. Under Texas 114.101 the deed doesn’t affect your right to transfer or encumber the property, your homestead rights, or your tax exemptions, and it doesn’t trigger a due-on-sale clause, the lender’s right to call the loan when title changes. Combined with 114.052, you can revoke it no matter what the deed itself says. Sell the house tomorrow and the recorded form simply points at nothing. The buyer takes clean title from you, not from your beneficiary.
3. It only exists where a statute says it exists. LegalZoom’s running list names 29 states plus the District of Columbia, and that list is already out of date. Georgia’s transfer-on-death deed law took effect July 1, 2024. Michigan uses a different instrument, the lady bird or enhanced life estate deed. Check your state’s statute before you rely on a downloaded form. A form from a state that allows it does nothing in a state that doesn’t.
4. The beneficiary takes the house with its baggage. Texas 114.104 says the beneficiary takes subject to all conveyances, encumbrances, assignments, contracts, mortgages, liens, and other interests at the transferor’s death. An encumbrance is any recorded claim, usually a mortgage or a tax lien. Under 114.106, estate creditors can reach the property for up to two years after death if the estate can’t pay its debts. The heir owns the house on day one. They don’t own it free of the last owner’s problems.
5. The tax prize is the stepped-up basis, so don’t quitclaim the house away early. Property acquired from a decedent takes a basis equal to fair market value at the date of death under 26 U.S.C. 1014. A lifetime gift carries over the donor’s old basis under 26 U.S.C. 1015. Take a house worth the NAR July 2026 median of $434,100. Quitclaimed today, the heir is taxed on the whole gap above your old basis at the federal capital gains rates. Inherited through the deed, the basis steps up to $434,100 and the gain on a sale near that value is roughly zero. I run the full numbers below.

Transfer on Death Deed vs Will vs Quitclaim Deed

Owners pick among these three as if they do the same job. They don’t. I put them next to each other because the differences show up at two moments: the day you sign, and the day the heir tries to sell.

	TOD deed	Will	Quitclaim now
Avoids probate	Yes	No	Yes, because the house already left
Revocable	Yes, anytime before death	Yes, until death	No. The gift is done
Owner keeps control during life	Yes	Yes	No. You gave the house away
Heir’s cost basis	Stepped-up to $434,100	Stepped-up to $434,100, after probate	Carryover of your old basis
When it takes effect	At death, if it was recorded	After the probate court is done	The day the quitclaim records
Works in every state	No. Only where a statute allows it	Yes	Yes

The will loses on probate and wins on the messy family facts a bare deed can’t handle. The quitclaim loses on basis and on control, which is why I tell living owners to leave it alone unless they mean to make a gift. The gift-tax and carryover-basis traps on a quitclaim during life are their own problem, and they sit on top of the $434,100 math above.

The 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. The tax side is the reason I push people toward a transfer on death deed instead of a living gift.

With the stepped-up $434,100 basis, a sale near the date-of-death value means roughly zero federal gain. IRS long-term rates are 0%, 15%, or 20% by income. The quitclaim path is the avoidable disaster, because the heir is taxed on appreciation that happened on someone else’s watch. Say the house was bought for $150,000. Quitclaim it during life and the heir keeps that $150,000 basis; sell at $434,100 and the taxable gain is $284,100, which runs about $42,615 at the 15% rate. Inherit the same house through the deed and that bill rounds to zero.

Commission is the cost the heir can still choose. At the NAR July 2026 median existing-home price of $434,100, up 2.0% from $425,700 a year earlier, a 2.5% listing agent costs $10,852 and a 3% agent costs $13,023. A $95 flat-fee MLS listing keeps $10,757 to $12,928 of that in the heir’s pocket, which is why I send people to the step-by-step on selling an inherited house before they sign a listing agreement. Heirs who want to handle the sale themselves can also sell without an agent once title is in their name.

Texas heirs should read the Texas listing page alongside the statute sections above, because the two-year creditor window can follow the house into a sale. Georgia heirs have a clock of their own. If the owner’s death was on or after July 1, 2024, they must record an acceptance affidavit within nine months of death or the interest reverts to the estate. The Georgia location page is the practical next stop for that filing.

When a Transfer on Death Deed Is the Wrong Tool

A transfer on death deed is the wrong tool surprisingly often, and it does nothing for a living seller. If the goal is getting equity out of the house, a TOD deed moves zero dollars. The only way to convert the home to money while you’re alive is still to sell it. I say that as someone who writes about these deeds for a living. The form is a death instrument. It is not a cash instrument.

Naming more than one beneficiary turns the heirs into co-owners. Every one of them has to agree before anyone can sell, which is the same stall I see with tenants in common. One sibling who wants to keep the house can block the ones who need to sell. A will or a living trust can put a single person in charge of that decision. A bare transfer on death deed cannot.

Texas adds another wrinkle I wish more owners heard before they recorded. Under 114.106 the transferred property stays reachable by estate creditors for two years after death if the estate can’t pay. That can complicate an early sale, even when the heir already holds title. My own read, not a published figure, is that title companies ask more questions when a sale happens inside that creditor window. I’ve watched closings slow down over affidavits and holdbacks that nobody budgeted for.

Wills and living trusts also handle the contingencies a one-page deed handles badly. Minor beneficiaries. A beneficiary who dies first. Blended families with kids from two marriages. I’d skip the deed and use a trust when any of those are on the table. The deed is cheap and clean for one adult beneficiary 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.

Transfer on Death Deed FAQ

What are the disadvantages of a transfer on death deed? It does nothing for a living owner who needs cash out of the house. Multiple beneficiaries become co-owners who must all agree to sell. In Texas, estate creditors can reach the property for two years after death if the estate can’t pay. It also handles minors, a beneficiary who dies first, and blended families badly. A will or a trust covers those facts. The deed does not.

What states allow transfer on death deeds? LegalZoom’s list names 29 states plus the District of Columbia, and that list is already behind the statute book. Georgia’s law took effect July 1, 2024. Michigan uses a lady bird or enhanced life estate deed instead. I tell every owner the same thing: read your state’s statute before you record a form you downloaded. Presence on a national list is not the same as a recorded, valid deed.

Can I sell my house after recording a transfer on death deed? Yes. During your life the deed doesn’t affect your right to transfer or encumber the property, and it doesn’t trigger a due-on-sale clause. You can sell tomorrow. The recorded deed then points at nothing, because you no longer own what it describes. Revocation is available anytime before death, even if the deed itself says otherwise.

Does a transfer on death deed avoid probate? Yes, if you recorded it before death in the county where the property sits. Cornell LII’s definition is the clean one: it automatically transfers property to a designated beneficiary upon the owner’s death without probate. An unrecorded deed is void in Texas under 114.055. The courthouse has to see the paper while you’re still alive, or the heir is back in probate anyway.

Does the beneficiary get a stepped-up basis when they sell? Yes, when they take the house at death. 26 U.S.C. 1014 sets the basis at fair market value on the date of death, so a sale near the $434,100 NAR July 2026 median produces roughly zero federal gain. A lifetime quitclaim does the opposite. 26 U.S.C. 1015 carries over the donor’s old basis, and the 15% rate then applies to the gap. That’s the tax reason I tell people not to gift the house early.

How much does it cost to record a transfer on death deed? Recording is a clerk fee, not a lawyer’s project fee. Travis County charges $25 for the first page and $4 for each additional page. A typical deed is two pages, which comes to $29. Other counties set their own schedules, so I always send people to the clerk in the county where the house sits. The recording rule still comes first: if it isn’t recorded before death, the deed is void.

The Bottom Line

A transfer on death deed is the cheapest probate-avoidance tool in most states that allow it. Travis County’s $25 first page and $4 extra page are the whole public cost. It only ever helps the person after you. Whoever ends up selling, the commission is the biggest cost they can still control, and the $95 flat-fee route keeps that slice of the $434,100 median sale in the family. Equity in a house you still live in only becomes money one way: you sell it.