Transfer on Death Deed vs. Trust: Which One Prevails for Your House?

In estate planning, it's common to wonder about conflicting instructions for your assets, especially real estate like your home. What if you initially set up a house as payable on death to one person, but later decide to place the same house into a trust for someone else? This scenario raises important questions about which designation rules. Let's break it down step by step based on how deeds work.

Understanding Transfer on Death Deeds

A transfer on death deed (often called a TOD deed) is a way to designate a beneficiary for your property without going through probate. In some places, like Florida, this might be referred to as a Lady Bird deed, which is a specific form of a transfer on death deed. When you create one, you're essentially saying, "When I pass away, this house goes to this person."

These deeds should be recorded to make your intentions clear and to notify others of the property's status. Recording establishes the most recent activity regarding the home.

What Happens When You Change Your Mind?

As the owner of the home, you always have the right to change your mind. If you first create and record a transfer on death deed naming one beneficiary, but later decide you'd rather put the house into your trust (which might benefit a different person), you can do that.

Here's how it works: You sign a new deed transferring the property into the trust and record it. This new deed will prevail over the previous one. The most recent deed is the one that rules. It doesn't matter if the change happens a year later, a day later, or even five minutes later—the newest recorded deed trumps the older one.

You can also update a transfer on death deed itself by recording a new one with a different beneficiary or multiple beneficiaries. Again, the most recently recorded deed is the one that takes precedence.

The Dangers of Unrecorded "Pocket Deeds"

This topic gets interesting—and potentially problematic—when people prepare deeds without recording them. These are sometimes called "pocket deeds" because they're signed but kept unrecorded, perhaps tucked away.

Imagine preparing a transfer on death deed or Lady Bird deed leaving the home to one beneficiary, and also preparing another deed putting the home into a trust for someone else, but not recording either. Reasons for this might vary—maybe waiting to see what happens, avoiding upsetting someone, or even wanting both parties to believe the house is going to them. Whatever the reason, it's a very bad idea.

Having multiple unrecorded deeds floating around can lead to serious issues, including litigation. After the owner's passing, arguments can arise about which deed was created later, whether one was signed under duress, what the true intent was, and more. This setup stinks of potential legal battles and complications.

Best Practices: Record Your Deeds Properly

If you change your mind about how your house should be handled, do it the right way. Prepare a new deed and record it immediately. This ensures the new deed replaces the older one clearly and legally.

If you or someone you know has unrecorded deeds or multiple conflicting deeds, it's crucial to consult an attorney. They can help clarify intentions and ensure everything is handled properly to avoid future disputes.

Final Thoughts

In summary, if a house is first designated via a transfer on death deed but later placed into a trust with a new recorded deed, the trust will prevail—it's that simple. Always prioritize recording deeds to reflect your current wishes and prevent complications.

If you have questions about transfer on death deeds, estate planning in general, probate, or Medicaid (and you're in Florida), don't hesitate to reach out. We're atCause Law Office, the non-stuffy attorneys.

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