As of July 1, 2013, you can record a Transfer on Death (“TOD”) deed for real property located in the Commonwealth of Virginia. Va. Code Ann. §§ 64.2-621 et seq. is Virginia’s new codification of the legislation modeled after the Uniform Real Property Transfer on Death Act (“URPTODA”).
Recording a TOD deed allows a real property owner to pass real estate directly to a beneficiary upon death by operation of law similar to a joint tenancy with rights of survivorship but without the complications that a lifetime transfer may include. By allowing real property to pass by a transfer on death transaction, the property owner effectively keeps the property out of probate without subjecting the property to the beneficiaries’ creditors and other claims during the original owner’s lifetime as is often seen when parents decide to add a child as a joint owner in hopes of easing transfer at their death.
As simple as the act of recording a TOD deed is, it is by far not a panacea to all estate planning needs. In fact, it might create more problems than it solves. If TOD deeds pattern the experience with TOD bank and investment accounts, many landowners will fail to recall that a TOD deed was recorded against the property and may attempt to bequeath the property as part of a more global estate plan. The automatic transfer that occurs at death under a TOD scheme, however, does not allow for alteration by testamentary instrument. Thus, the TOD deed will govern if there is a conflict between the deed and a will or trust.
Recording a TOD deed also removes an element of privacy associated with most estate plans. A will does not become “public” until it is admitted to probate and a trust may never become public. A TOD deed, on the other hand, is contained in the land records of the jurisdiction in which the property is located and can be searched as part of public records, most of which are accessible online. People make changes to their wills and trusts with regularity and often do not want beneficiaries to be aware of the changes. Alterations to TOD deeds are not only exposed to the public eye but are also more cumbersome because the only way to alter a recorded TOD deed is to record either another deed or a revocation of the prior-recorded TOD deed.
Owners may also end up with unintended results if assets are sold, or if one asset appreciates or depreciates in value disproportionately to other assets. Similarly, TOD deeds cannot accomplish the goal of leaving assets in trust to avoid beneficiaries’ creditor claims and spendthrift tendencies.
In short, by enacting the URPTODA, the Virginia Legislature has provided us with another tool in our estate planning kits. This new tool, however, should be used with caution and only in conjunction with a well-advised plan.
If you can utilize the services of a trusts and estates attorney, we invite you to contact Autumn McCullogh at (703) 934-1191.