Transfer on death deeds (TODDs), sometimes also called ladybird deeds, enhanced life estate deeds, or beneficiary deeds, can be useful components of a comprehensive estate plan. Still relatively new, they are gaining acceptance across the US; as of 2013, they are valid in more than twenty states. These instruments, when lawfully executed and recorded, allow owners of real estate to pass the property to named beneficiaries after the owner’s death, and without the need for probate.
The most notable feature about transfer on death deeds is the fact that, unlike standard deeds, the potential future interest, beneficiary, or other details about the conveyance under a TODD may be changed or revoked whenever the owner wishes, and with no obligation to notify the beneficiary. This flexibility is possible because TODDs create no present legal or equitable interest for the beneficiary. Like the transfer on death deeds, themselves, any changes or revocations must be executed and recorded during the owner’s lifetime or they have no effect. The owner may also sell, mortgage, or otherwise convey the land to anyone they choose. In other words, the living owner retains absolute control over and use of the property, with no penalty for waste.
In general, transfer on death deeds are fairly straightforward documents when there is only one property owner. What happens, then, in the case of joint tenants? Joint tenants are two or more people who share ownership of real property, and when one dies, the survivor(s) gains full title by function of law. As with a TODD, there is no need for probate and the transfer is not affected by provisions in the deceased owner’s will. The only current exception to this is in Alaska, where joint tenancy is currently abolished (See AS § 34.15.130 (2012)).
The Uniform Real Property Transfer on Death Act, which serves as the model for the real property transfer on death statutes in many states, addresses the question of joint tenancy in Sec. 13(c):
If a transferor is a joint owner and is:
(1) survived by one or more other joint owners, the property that is the subject of a transfer on death deed belongs to the surviving joint owner or owners with right of survivorship; or
(2) the last surviving joint owner, the transfer on death deed is effective.
The New Mexico Bar explains that a joint tenancy “is not affected by a TOD Deed. If joint tenants record a TOD Deed, the property does not go to the grantee beneficiary when the first joint tenant dies. The surviving joint tenant becomes the sole owner of the property. The property goes to the grantee beneficiary once the last joint tenant dies unless that joint tenant does a new TOD Deed.”
The same rules apply to revocations. For example, the Code of Virginia states that if two or more people execute the transfer on death deed, revocation by one of them only affects his/her interest, while the other tranferor’s intentions remain intact (§ 64.2-630(B)).
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In short, if only one owner of real estate held in joint tenancy executes and records a transfer on death deed, the way to ensure the designated beneficiary will actually end up with the property is if all joint tenants join in the deed as grantors. The same rule holds for any modifications or revocations of the recorded TODD. Standard inter vivos deeds convey a present interest, so if a joint tenant conveys his/her ownership rights to someone else, the joint tenancy breaks and the new owners become tenants in common, with each controlling independent shares. Because transfer on death deeds contain no guarantees, the joint tenancy remains intact. So, if only one owner executed the TODD, and that owner dies before one or more of the co-owners, that owner’s share is distributed among the survivors, and the designated beneficiary receives nothing.