The Fort Worth Court of Appeals has recently set aside a Transfer on Death Deed (an instrument that usually avoids court action for real estate to pass to a beneficiary) since a jury determined the deed was signed as a result of fraud and undue influence.

Transfer on Death Deeds were permitted by law in 2015 to make it easier for real estate to directly pass to beneficiaries. Studies had shown that many Texans failed to have even a simple Will resulting in countless title nightmares. Normally if one signs a Transfer on Death Deed (which is a deed, signed in writing by the owner of the  property, which gives the legal description of the property and is recorded in the county where the property is located and which names a beneficiary) the property is transferred on the owner’s death to the beneficiary (unless the owner cancelled the deed or sold the property before his or her death) by simply providing a death certificate (and without any court action unlike Wills which often require approval by the court thus resulting in no delay and no additional costs).

In the recent case in which the Transfer on Death Deed was voided, the beneficiary/grantee of the deed argued that the probate court had no authority to act since the Transfer on Death Deed transfers the property immediately on death of the owner. However, the Court of Appeals ruled that the probate court did have jurisdiction because it involved a claim arising from estate administration that directly related to the settlement, partition and distribution of the estate.

Lessons learned from this case:

  1. Whether you have a Transfer on Death Deed, Deed with Reservation of Life Estate or Enhanced Life Estate Deed (commonly known as a Ladybird Deed) which are different types of deeds which avoid probate, one should consider having a Will so that the court and title companies will know your intention. However, the state often has a right to make a claim against the property if it passes by Will if the deceased property owner was on long-term care Medicaid which helps pay for long-term care costs such as nursing home and drug costs (which is why Transfer on Death Deeds and Ladybird Deeds are often used since those type of deeds avoid a successful claim from Medicaid for reimbursements of expenses advanced); and
  2. Whether you have a Transfer on Death Deed, Deed with Reservation of Life Estate or a Ladybird Deed, such deed could be voided by a court if the property owner lacks sufficient mental capacity at the time the deed was signed or if the deed was procured by fraud, undue influence or duress. As a result, one should seek counsel to minimize risks.

If interested in learning more, consider attending our next free “Estate Planning Essentials” workshop by calling us at (214) 720-0102 or sign up by clicking here.

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