Transfer on Death Deeds: Using the Statutory Form

by Jennifer L. Fischer on January 9, 2018

Transfer-On-Death-Deed-Post.jpgTransfer on Death Deeds were created by statute to serve as a vehicle for transferring interest in real estate at the death of the Grantor outside of a probate, and thus avoiding the cost and length of those proceedings.

However, and quite commonly, potential decedents and their counsel use Transfer of Death for other purposes, that subsequently can create clouds of title that require a probate proceeding or quiet title suit to cure. As a result, they end up creating the very lengthy, costly proceeding they were intending to avoid. In the world of real property, Transfer of Death Deeds are a very new statutory creation. The body of law surrounding these instruments is still in its formation. Practitioners should carefully consider what a client wants to accomplish and the risks associated with using Transfer on Death Deeds for those particular circumstances, especially if they differ from the intended purpose of the statute. The best way to avoid the costs associated with a probate proceeding or quiet title suit is to use the transfer on death deed only for the limited purpose for which it was intended (and, often, the best choice is simply not to use on at all).

Transfers on Death Problems Prior to the Statutory Form

Existing in the public record are many versions of transfer on death conveyances, where the intention appears to be to transfer the interest in real estate at death, however the result is something else. For example, “I, Grantor, grant, bargain, sell, and convey to my beloved children on my death, however I reserve the rights to buy and sell the property, and enter into leases during my lifetime.” The granting language above is ambiguous and creates a question as to whether the Grantor intended to create a transfer on death deed, which would transfer the property to their children at the time of the Grantor’s death, or whether the Grantor intended to create a life estate, which would allow the Grantor to convey the remainder interest in the property at the time of the deed, but retain a lesser “life estate” interest for their lifetime. If the Grantor created a life estate, he or she has vested the rights of the children prior to his or her death, which would not be the case if the conveyance was only meant to transfer the property at death.

Another example of confusion arises with something sounding like joint tenancy language, “We, Mom and Dad grant, bargain sell and convey to Mom and Dad, and Daughter, it being our intention that if either Mom or Dad survive the other, then the property is the survivor’s until he or she dies, and then to Daughter at the death of the last of us.” This granting language leaves the reader wondering if the Mom and Dad intended to create a three person joint tenancy between the Mom, Dad and Daughter, or if they intended to create a two person joint tenancy, and transfer the property to the daughter after they die. Neither one can be accomplished by the language used, and so creates a cloud on title. In order to resolve issues like the above examples, probating the estate or filing an action to quiet title is required. These outcomes are exactly what the legislature was trying to avoid when they created the transfer on death deed statute. Part of the reason that these types of issues were common was because there was never any statutory authority to provide guidance to practitioners. Happily, this circumstance has recently changed.

The Non-Testamentary Transfer of Property Act

After the enactment of Oklahoma’s Transfer of Death Deed statutes, practitioners now have the benefit of The Non-Testamentary Transfer of Property Act, which provides an approved form for Transfer on Death Deeds. See 58 O.S. § 1253 (OK 2016). The pitfalls of ambiguous granting language can largely be avoided by limiting use of Transfer on Death Deeds only to those situations contemplated by the Act, and drafting the deed using the statutory form.

The Benefit of Using the Statutory Form

The statutory form is clear and minimizes the amount of potential ambiguity. Typically, interpretation of Transfer on Death Deeds only becomes an issue after the Grantor’s death, and when the Grantor is no longer available to clarify his or her intention. So, it is best to create the clearest record of the grantor’s intent at the time of execution. If the Grantor intends to transfer the property at death, then use of the statutory form creates a clear record of that intention.

Conclusion

Time will tell how the body of law surrounding these instruments will further develop. While the use of such an instrument is often inadvisable, at least for now practitioners have the benefit of The Non-Testamentary Transfer of Property Act and the statutory form. Using the transfer on death deed form language as well as executing the beneficiary affidavit according the statute make Transfer on Death Deeds an effective tool in certain limited instances.

 

Topics: Oil, Gas, + Energy, Probate, Oil + Gas Title Examination, Jennifer Fischer