As a real estate owner in Washington state, you have various estate planning options available to you. One such option is the transfer on death deed (TODD), which serves as a convenient tool for managing the distribution of your real estate assets. This article explains what a TODD is and provides an overview of how it works in Washington state, allowing you to make informed decisions about your estate plan. Lucent Law’s estate planning attorneys are experienced with advising clients in the use of transfer on death deeds as a part of their estate planning services.
Understanding Transfer on Death Deeds
A transfer on death deed is considered a “non-testamentary” estate planning device, meaning it allows for the transfer of property ownership without the need for a will or the probate process. This simplifies the process of distributing real estate assets. For example, a TODD may be suitable for a surviving spouse who solely owns a home and has designated payable-on-death beneficiaries for financial accounts, with no other property requiring a will or probate. It’s important to review your unique circumstances and existing will, if any, with an estate planning lawyer before executing a TODD to avoid conflicting outcomes.
Requirements for Transfer on Death Deeds in Washington
To execute a lawful transfer on death deed in Washington, certain requirements must be met. The capacity required to make or revoke a TODD is the same as that required to make a will, referred to as “testamentary capacity.” The deed must contain the essential elements and formalities of a properly recordable inter vivos deed, such as a warranty or quitclaim deed. Additionally, the TODD must clearly state that the transfer to the designated beneficiary is to occur upon the transferor’s death. It must be recorded before the transferor’s death in the auditor’s office of the county where the property is located. While not required, providing notice of the TODD and acceptance by the transferee is advisable. Finally, no consideration is necessary for the TODD to be effective.
Beneficiary Rights and Obligations
Under a TODD, the named transferee (beneficiary) does not gain present rights to the property but rather a potential future interest. The transferor retains full control of the property during their lifetime, including the ability to sell, transfer, modify, or revoke the TODD. The transferee’s interest becomes effective upon the transferor’s death. However, if the transferee is not alive at the time of the transferor’s death and no successor or alternate transferee is named, the property returns to the estate and may be distributed according to the transferor’s will or the laws of intestate succession.
Modifying or Revoking a Transfer on Death Deed
The maker of a TODD can modify or revoke it before their death. To do so, the transferor must record another TODD that revokes or modifies the previous deed, record an instrument expressly revoking all or part of the TODD, or record a deed that explicitly revokes the TODD. These documents must be signed by the transferor, notarized, and recorded in the county’s auditor’s office where the property is located.
Excise Tax and Transfer on Death Deeds
Under Washington state law, the transfer of real property through a TODD is generally not considered a sale and is not subject to excise tax, unless the transfer is made to satisfy a contractual obligation of the transferor, such as paying off a debt.
Creditors of the Estate and Transfer on Death Deeds
The transferee’s interest in the property is subject to any lawful claims of the transferor’s creditors. If there are outstanding debts, the transferee may need to contribute a portion of the property’s value to satisfy the estate’s creditors, similar to other non-probate assets.
What Happens Upon the Transferor’s Death
Upon the transferor’s death, the transferee automatically receives title to the property described in the properly prepared and recorded TODD. However, according to Washington law, a Real Estate Excise Tax Affidavit must be signed by the transferee (acting as both the grantor and the grantee) and filed with the Treasurer’s Office of the county where the property is located. This filing, along with a certified death certificate for the transferor, completes the transfer of title to the transferee.
Here are some frequently asked questions regarding TODDs in Washington state:
Q: Can a joint tenant make a TODD?
A: Yes, a joint tenant can execute a TODD. However, the TODD will only become effective upon the death of the last surviving joint owner if the joint tenancy includes the right of survivorship.
Q: Can community property owned by a married couple be transferred by a TODD?
A: Yes, if the deed is signed by one spouse but not both, the signing spouse’s interest transfers to the beneficiary upon the signing spouse’s death, resulting in a tenancy-in-common with the surviving spouse. If the deed is signed by both spouses, the TODD becomes effective upon the death of the last spouse.
Q: Does the transferee receive any warranties of title in a TODD?
A: No, Washington’s TODD law explicitly states that the transferee does not receive any conveyances or warranties of title. For information on warranties of title in other types of deeds, such as a Statutory Warranty Deed, refer to our article discussing the different types of deeds in Washington state.
Q: Does a TODD affect creditors who may have an interest in the transferor’s property?
A: No, a TODD does not affect creditors who hold an interest or claim to the transferor’s property, including deeds of trust or mortgages. This also includes unsecured creditors of the transferor.
Q: What happens if a TODD transfers the property to multiple transferees?
A: A TODD can transfer interests to concurrent transferees. For example, if John and Jane are designated beneficiaries and both are alive at the transferor’s death, they will hold the property as tenants-in-common. However, if only Jane survives, John’s interest lapses, and Jane will own the entire interest in the property.
Transfer on death deeds in Washington state offer a flexible and convenient estate planning tool for real property owners. However, due to the uniqueness of each situation, it is advisable to consult with an experienced Washington attorney specializing in estate planning and transfer on death deeds before executing this type of instrument. Our Spokane estate planning attorneys can provide advice regarding transfer on death deeds to owners with property located anywhere in Washington.