Traditionally, real estate was passed through a signed, recorded Deed, transferring title to a new grantee. On death, the title is usually passed through a new Deed signed in the probate process by the personal representative to the new owners or beneficiaries.

In the past, clients have opted to sign a Quit Claim Deed passing title to their children prior to their death to avoid the probate process. There were significant drawbacks to that process. First, transferring title to children meant they owned the property rather than you. Second, if they had a judgment against them for some reason, it attaches to the real property, impacting your equity.  Third, a gift retains your tax basis (purchase price) for capital gains tax purposes, meaning they could have significant capital gains tax to pay when they sell (after your death), rather than if they inherit the property, they get stepped up basis (fair market value date of death), thus eliminating much or all the capital gains tax on your death .

The Washington Legislature adopted the Uniform Real Property Transfer on Death Act, RCW 64.80 effective in 2014. This allows for a “Transfer on Death Deed” (TODD) that transfers title to property “automatically” after your death, and they get the stepped up basis for capital gains tax purposes.

The transferor (owner), can record a completed Transfer on Death Deed, designating the beneficiaries, telling the county recorder’s office to transfer title to the beneficiaries on the transferor’s death, outside of probate and without having to pay Excise Tax.

A TODD does not affect your current mortgage, the ability to enter into a new mortgage or to sell or transfer the property prior to your death. If the transferor (owner) changes their mind, they can revoke the deed at any time.

If you are considering the possibility of a Transfer on Death Deed, please feel free to contact our office to discuss this option with one of our attorneys as part of your estate planning.