SHOULD I USE A TRANSFER ON DEATH DESIGNATION AFFIDAVIT TO TRANSFER REAL PROPERTY?
Short answer: It depends.
Transfer on Death Designation Affidavits are often times
referred to as Transfer on Death Designations, and abbreviated as TODDA, TODD,
or TOD, for the purposes of this article we will refer to them as TODs.
TODs are a relatively easy way to pass real property after
one’s death. In its most simple terms, a
TOD is an affidavit where the owner designates beneficiary(ies) to receive
property upon the death of the owner.
Upon death of the owner, the TOD is triggered and the ownership interest
in the property is transferred to the beneficiaries.
The benefits of a TOD are clear; it’s a quick, inexpensive
way to pass property and avoid the probate process. The ease and apparent straightforwardness of
using a TOD as an estate planning device has likely led to their overuse. While the benefits are clear, the potential
drawbacks are more subtle, especially when used to convey real property or real
This article will discuss two drawbacks of using a TOD to
transfer real property, insurance coverage lapse and Ohio’s dower rights. Both need to be considered before using a
TOD. Every situation is different, when
in determining whether a TOD is appropriate for you to use it is important to
consult an estate planning attorney for professional advice.
A recent Ohio Court of Appeals decision put estate planning
practitioners on notice of a significant drawback of TODs – the potential for a
lapse in insurance coverage.
The case, Walker v. Albers Insurance Agency, had
nothing to do with TODs, however the ruling and the lesson certainly
applies. The story in Walker is a
tragic one for the Walkers. Ms. Walker inherited
a partial interest in her childhood home.
She then lived there alone for some years and was the only named person
on the homeowner’s insurance policy.
She passed away without a will. The estate was opened by probate court and
her sister was appointed executor. Ms.
Walker’s interest in the house was transferred to the her heirs, the other
remaining property was distributed, and subsequently the estate was closed. Two weeks later, before anyone had taken
physical possession of the house, a fire burned the house down.
The deceased homeowner’s insurance policy had not yet
expired, but coverage was denied because neither the descendants nor the heirs
qualified as an “insured” under the policy when the loss occurred. The appeals court agreed with the insurance
company affirming the trial court’s determination that coverage was rightfully
Who is an “insured” person under the insurance policy? All policies differ, though most use similar
language, but in the Walker’s case an insured person was:
- Up until death:
- residents of the household who are relatives or
certain other dependents are the insured persons.
- Upon death of the named insured
- any household member living in the premise at
the time of death; or
- any person having temporary custody until a
legal representative is appointed.
- Once in the probate process – the legal
In Walker, there was no dispute that the sister was a legal
representative at one point in time.
However, once the probate estate was closed – two weeks prior to the
fire – she ceased to be a legal representative.
Thus, at the time of the loss there was no person insured under the
This illustration is exacerbated when applying it to a
TOD. Because under a TOD, the transfer
happens immediately at the time of death, it leaves little time for the
beneficiary to seek insurance coverage. Further, depending on the relationship
with the deceased, lapsed insurance coverage may not be a top priority days or
weeks after the death.
Additional protective measures should be taken, whether it
is reconsidering your estate planning method, putting the property into a
trust, or adding the beneficiary to the existing insurance policy during the
life of the donee. Using a TOD to
transfer real property and failing to protect the property is playing with fire,
Another issue with TODs is the potential to cause a logistical nightmare. Ohio still recognizes dower rights which are statutory rights and interests in marital property held by the non-owning spouse. If Spouse A is the only title owner of real property, Spouse B still has to sign off on any sale of the property to waive their dower rights. (More on dower rights can be read here)
Because Ohio recognizes dower rights, each beneficiary’s
spouse also has a legal interest in the property. In order to transfer the property, each
spouse needs to sign the deed and waive their interest in the property. The potential logistical nightmare is best
illustrated by example:
T leaves, by TOD affidavit, real property to children A, B,
C, D. T then dies. At time of T’s death, child B has predeceased
T. B had three children X, Y, Z. Assume everyone has a spouse. Depending on the drafting of the TOD document
X, Y, and Z may or may not receive B’s interest in the real property. Let’s assume B’s interest pass to X, Y, and
At this point there are 6 individuals that are beneficiaries
of T’s real property. If the property is
to be sold, all 6 beneficiaries and their spouses will have to sign the purchase
agreement and power of sale. At closing,
dower would require all 6 descendants of T and their spouses to be present to
sign the power of sale. That’s 12
people! The logistics behind this
potential situation make these transactions less than desirable.
A much simpler solution would be a sale through a probate
estate or a trust, where a sale of the real property can be made through the estate
or trust and distributions can be determined accordingly. While many intend their TODs to make things
simpler for their heirs, there are certain instances where one could complicate
TODs can be an effective and inexpensive way to transfer
property without the need for the probate process, however in addition to the
above illustrations, there are numerous drawbacks to consider. These potential pitfalls demonstrate the
necessity to consult an experienced estate planning attorney.
planning attorneys at Spitler Huffman law firm have substantial experience in
creating an estate plan to fit their clients’ needs. Located in Bowling
Green and Rossford, Ohio we are dedicated to serving clients in Northwest Ohio
including Wood, Henry, Hancock, and Sandusky Counties. If you live in
Bowling Green, Findlay, Perrysburg, Napoleon, Port Clinton, Fremont, Rossford,
or other areas in Northwest Ohio and need estate planning assistance, contact