TODD transfers Oregon real estate probate-free… in the right situations

An Oregon Transfer On Death Deed, or Oregon TOD deed (or TODD) gives Oregonians a relatively simple, straightforward way to bypass probate and transfer ownership of real property in an estate. When used properly, in the right situations, TODD takes care of a property transfer without the need for a court, personal representative, or even significant expense.

However, TODD isn’t always applicable or possible. The circumstances around a TODD can become problematic, and a TODD doesn’t serve all situations. TODD is a useful, valid estate planning shortcut, but it comes with real pitfalls and limitations, such as the ones below.

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18-month waiting period before sale or transfer

Under an Oregon TOD deed, after the death of the property owner, there’s an 18-month window where the Oregon real property can’t be transferred or sold. During that period, Oregon law has an open period for creditors, including the state, to make claims. That also means that the estate can’t sell the property to free up cash flow, and the beneficiary as the new owner has to hold the property for at least 18 months.

A TODD is intended to make a property transfer to a beneficiary easy. Overall, it can do this. But the 18-month hold window is a side effect that can cause a cash crunch or have a beneficiary feeling stuck.

Medicaid and public assistance clawback

If the deceased was aged 55 or older and/or received long-term care services, then Oregon Health Authority/Department of Human Services may seek reimbursement of services through a process called estate recovery.

The estate may be required to pay back to OHA/DHS the cost of benefits received. Those funds can come from the deceased’s financial assets, whether part of or separate from probate, and they can come from the sale of real estate or other property.

A piece of real property under TODD isn’t exempt from this claim. It’s possible the estate will have to sell the property to satisfy the state’s claim. In such a case, the beneficiary won’t receive the property or the proceeds from a sale.

You can’t revoke TODD with a will

A TODD is a long-term decision. Changing it requires more than simply stating a new preference in a will. The TODD designation will remain in effect, regardless of what the will says otherwise.

In order to revoke or change an Oregon TOD deed designation, the property owner will have to record a new deed with a new beneficiary, or make a legally binding, formal revocation. Stating a preference change in a will, though, will not take effect and isn’t legally binding.

Destroying the deed accomplishes nothing

Just as naming a new TODD beneficiary in a will has no legal effect, destroying the deed won’t revoke a TODD designation either. Destruction of a physical document, such as the classic ripping up of a contract in a movie, changes nothing.

A TODD is an officially recorded legal document. It’ll remain in force. In order to change the designation, the property owner will have to record a new deed.

Bequests can only go to named beneficiaries, not broad class gifts

If you want property ownership to transfer to a group, such as “my siblings” or “my children,” then the TODD must list out the full name of each beneficiary. Generic group terms won’t have any legal effect and will be void.

In order to set up the transfer on death designation, the Oregon TOD deed must name each individual beneficiary.

No anti-lapse protection

A TODD doesn’t have a fallback or secondary beneficiary. If the named beneficiary pre-deceases the property owner, then the beneficiary designation becomes void. There’s no hierarchy of beneficiaries that kicks in. There’s only the named beneficiary. Without other estate planning to establish a beneficiary, the real property will pass through standard Oregon probate.

TODD’s don’t provide what’s known as anti-lapse protection. They name a beneficiary, but have no flexibility to change automatically to a different beneficiary if circumstances change.

Joint ownership overrides TODD

Especially with Oregon real property co-owned by spouses, any property with joint ownership isn’t effective with TODD. Rights of survivorship, or when a joint owner survives the deceased, take precedence of TOD designations. The joint owner will receive ownership of the property, even if the TOD made another designation.

If joint tenancy or tenancy by the entirety are a consideration, TOD deeds will be irrelevant, unless the owner is the last surviving current joint owner.

Power of attorney has only narrow authority over TODD

When considering incapacitation, it’s important to know that a power of attorney (POA) doesn’t have power over a TOD. That includes not being able to change or revoke a TOD designation, unless the TOD explicitly granted such power in advance.

Agents holding power of attorney can’t create a new Oregon TOD deed either.

Capacity and undue influence challenges

Elder abuse, undue influence, capacity concerns, and other factors all can invite legal challenges to wills, and they can to TODD statements too. People involved in the estate who want to challenge a TODD have 18 months in which to file a claim or challenge.

No title warranty

Under a transfer on death deed designation, the property goes to the new beneficiary with no consideration of problems with the property or title. There’s no warranty, and no protection or stops in the case of liens, encumbrances, or other problems. Whatever the status is for the deed and the property, it becomes the new owner’s responsibility.

Multi-county properties require multiple recordings

If the property crosses count lines, the TODD must be filed in all relevant counties. If there’s not a proper filing for any of the counties, then the TODD will be ineffective for that portion of the property. That can cause legal and financial headaches, not to mention delays, in order to resolve the problems.

Divorce revokes the spousal designation automatically

When spouses hold TODD, a completed divorce automatically revokes the designation. If a couple is separated but still legally married, that means that the TOD designation remains valid and in effect too.

TODD can ease Oregon real transfer transfers, but it’s not without its pitfalls

A TOD deed or designation can streamline the transfer of property ownership when someone passes away. However, the process isn’t flawless or foolproof. Depending on the situation, TOD could be a hindrance or cause further problems, instead of a simple solution to what to do with a piece of Oregon real estate.

As you consider your estate, a TOD designation could be the right choice for your real property in Oregon. Let’s talk that over:

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