Transfer on Death Deeds

In 2024, Georgia joined a handful of other states that have transfer-on-death deeds (sometimes called “Ladybird deeds”). These deeds have the potential to provide an easy and revocable way to pass real property upon death without probate.[1]

Although this new type of deed may become a very useful tool for estate planning, there are issues and limitations in the new law that may limit, for now, how widely it is used.

What is it?

A transfer-on-death deed (or TODD) is a new type of deed that allows a property owner to give property to another person immediately and automatically upon the Grantor’s death, simply by executing and recording a deed.

Why use it?

Before TODDs were introduced, Georgia had a few options to allow someone to pass their property to someone after their death: Wills, adding someone to title, and trusts.

Each of these has benefits and drawbacks, with the main differences being:

·       how much control over the property the owner maintains or shares during their life,

·       whether the owner can change their mind later and revoke the gift,

·       the cost and complexity of the solution, and

·       whether the property has to go through the probate process.[2]

Wills maintain lifetime control of the property, are revocable, and can be simple. However, Wills must go through the probate process, which takes time and has additional costs.

Adding someone to title avoids probate and can be relatively simple and inexpensive to do. But adding someone to title makes them a co-owner immediately, and the original owner loses sole control of the property and cannot change their mind and remove the new owner. This issue is discussed in more detail in our article here.

Trusts combine the benefits of both Wills and joint ownership, while avoiding most of the problems. They avoid probate, allow the owner to maintain lifetime control, and are revocable. However, trusts usually cost more and can be complex, requiring multiple documents at creation and additional steps throughout the life of the trust.

TODDs seem to provide the same benefits as trusts: they avoid probate, are revocable, and allow the owner to maintain lifetime control. In addition, TODDs can be a simpler and less expensive alternative to a trust, requiring a single deed to create.

How does it work?

To make someone a transfer-on-death beneficiary of real property, the owner (called the “Grantor”) needs to execute and record a TODD. Unlike some other deeds, a TODD must be recorded in order to be effective; an unrecorded TODD, even if executed correctly, has no effect.

The language for the deed itself is contained in a statute at O.C.G.A. § 44-17-3. Like other deeds, the TODD must meet the Georgia legal requirements for a deed, including being signed by the Grantor and two witnesses, one of which must be a notary.[3]

Once the TODD is recorded, the beneficiary relationship exists. When the Grantor dies, the beneficiary has the ability to receive the property without having to go through the probate process (more details on this are below).

After recording a TODD, the Grantor retains as much control of the property as they had the day before. Unlike adding someone to title as a joint tenant or tenant in common, with a TODD, the beneficiary does not own any interest in the property until the Grantor dies.

Revoking

If the Grantor changes their mind after recording the TODD, and no longer wants the beneficiary to receive the property, the Grantor can revoke the TODD without the beneficiary’s permission, cooperation, or knowledge

To revoke the TODD, the Grantor needs to sign and record an affidavit, which must reference the TODD being revoked, and be signed by the Grantor and three witnesses, one of which must be a notary. The revocation can either be a stand-alone document or be included in another deed (including another TODD that names a different person as the beneficiary).

Similar to the TODD, the revocation must be recorded in order to be effective; an unrecorded revocation does nothing.

After the death of the Grantor, if the TODD has not been revoked, the beneficiary must claim the property by executing and recording an affidavit within nine months of the Grantor’s death. The requirements for this affidavit are given in O.C.G.A. § 44-17-2 and include a redacted copy of the Grantor’s death certificate, a description of the property, and a statement of whether the Grantor and beneficiary were married at the time of the Grantor’s death.

If the beneficiary fails to record this affidavit by the nine-month deadline, the property reverts back to the Grantor’s estate, and probate will probably be required to deal with the property.

What about joint tenancy?

If the Grantor owns the property with another person as joint tenants with right of survivorship, then the property will only go to the beneficiary after the death of the last surviving joint tenancy owner. Upon the death of the first joint tenancy owner, the property passes to the surviving joint tenancy owner, just like it would if no TODD had been recorded.

What about a Last Will and Testament?

A TODD overrides the Grantor’s Will, whether that Will is made before or after the TODD is recorded. Even if the Grantor’s Will says the property goes to someone else, the beneficiary named in the TODD will receive the property.

Also, on its own, a Will also cannot revoke a TODD, even with express language in the Will. The only ways to revoke a TODD are described above.

What are the problems with TODDs?

The laws regarding TODDs are new. There are ambiguities and questions that have not been answered yet.

One issue is that, under the current law, if a beneficiary dies before the Grantor, the property will not go to the beneficiary’s heirs or estate. Instead, the gift “lapses” and is essentially treated as if the TODD never existed. If two or more people are named as beneficiaries and one of them dies before the Grantor, then only the survivor(s) will receive the property.

If you want anything more nuanced or complex, then we recommend using a Will or a Trust. Because of this issue, our office is currently only preparing TODDs for one beneficiary.

Another issue is how many witnesses are required on a document revoking a TODD. The current law requires a notary and two additional witnesses for a document that only revokes the TODD. But it also allows a TODD to be revoked in another deed or by recording a new TODD. Those documents usually require only a notary and one witness.

Therefore, we recommend having two additional witnesses on any document that tries to revoke a TODD.

Perhaps the biggest issue is the status of the property after the Grantor dies but before the beneficiary accepts it. Is it part of the Grantor’s estate? If so, does the Executor need to keep the property in the estate for nine months to see if the beneficiary accepts? What happens if the Executor needs to sell the property to pay estate debts? Until the beneficiary accepts, who is legally responsible to pay the mortgage, utilities, insurance, etc.?

To avoid these issues, we recommend recording a TODD only to a beneficiary who knows that the TODD exists, understands the process, and can be relied on to accept the property quickly.

If you’d like to discuss these pros and cons and see if a TODD is a good fit for your estate planning needs, please give us a call to set up a consultation with one of our attorneys, we’d be happy to help.

[1] This article assumes that an owner wants to avoid probate, which is not necessarily an un-alloyed good.

[2] There are also potential tax consequences that vary among these methods, which this article does not address. This article is not tax advice.

[3] This is not a comprehensive list of Georgia’s legal requirements for drafting, executing, or recording deeds.