How does a TOD deed work?

The process. You must sign the deed and get your signature notarized, and then record (file) the deed with the county recorder's office before your death. Otherwise, it won't be valid.

The beneficiary's rights. The person you name in the TOD deed to inherit the property has no legal right to it until your death. The beneficiary doesn't have to sign or acknowledge the deed. Of course, it's a good idea to let the beneficiary know that you've recorded a TOD deed. Otherwise he or she might not know about it, even after your death.

Earlier wills. If you have previously made a will, or a TOD deed, that leaves the property to someone, your new TOD deed will override the earlier document.

Your rights. You keep complete ownership of and control over the property while you're alive. You pay the taxes on it, and it's not protected from your creditors. You can sell it, give it away, or mortgage it. Because you're not giving it away now, there's no federal gift tax.

Revoking the deed. Later, if you change your mind about whom you want to inherit the property, you are not locked in. You can give or sell the property to someone else, record a revocation, or record another TOD deed, leaving the property to someone else. You cannot use your will to revoke a TOD deed. If joint owners sign the TOD deed, a revocation signed by one owner does not affect the other owner's transfer on death. If spouses or domestic partners sign a deed transfering community property, the deed is considered revoked only if it is revoked by both spouses or domestic partners. If one of the spouses or domestic partners dies, however, the survivor may revoke the deed.

How ownership is transferred. At your death, ownership passes automatically to the beneficiary you named in the deed. Any mortgage or debt attached to the land goes along with it. To retitle the real estate in the new owner's name, the new owner should record a sworn statement (affidavit) and a copy of the death certificate. The process is simpler and quicker than probate.

Liability for debts after your death. If, after your death, there isn't enough money in your estate to pay your debts, creditors can file a court claim, seeking payment from any real estate transferred by a TOD deed. Creditors will have between four months and two years to file the claim, depending on whether your estate's executor publishes a notice about probate proceedings. (See Wash. Rev. Code §§ 11.18.200 and 11.40.051.)

Are there special rules for co-owned property?

This form may be signed by one person or by two people who own property together. If you own the property with someone else, how to proceed depends on how you and the other co-owners hold title to the property. If you don't know how you hold title, start by looking at the deed that transferred the property to you. It might say, for example, "to Joanne Hayden and Edward M. Hayden, as tenants in common." If you're not sure how you co-own the property, consult a lawyer.

There are several common ways to co-own property in Washington:

Community property. Washington real estate acquired by a married person is generally the couple's community property, even if the deed doesn't say so. (Only married couples can hold title as community property.) Both spouses should sign the TOD deed, which will take effect when the second spouse dies.

Caution: If you want to sign a TOD deed by yourself, to leave your half-interest in community property real estate to someone other than your spouse, talk to an attorney first.

Joint tenancy. If you own real estate as joint tenants, and together you sign a TOD deed, then the property will go to the TOD beneficiary when the last joint tenant dies.

If you're the only joint tenant who signs and records a TOD deed, the deed will be effective only if you are the last surviving owner of the property. If you die first, the surviving co-owner(s) will own the property, and the TOD deed won't have any effect.

If you want to transfer only your share of the property, you can first change the joint tenancy into a tenancy in common, by preparing and recording a deed to that effect. (You'll need a quitclaim or grant deed, not a TOD deed.) Then you could use a TOD deed to leave just your interest in the property.

Tenancy in common. If your deed doesn't state how you own the property, you and your co-owners are presumed to own it as tenants in common, unless the co-owner is your spouse or you've agreed otherwise in writing. As a tenant in common, you can leave your interest to someone by using a TOD deed that's signed by you alone. Only your interest in the property will be transferred to the beneficiary when you die. For example, if you own a house with your brother as tenants in common, you can sign a TOD deed that leaves your half-interest to your daughter. At your death, your daughter will become a tenant in common with your brother.

If you're not sure how you co-own the property or whether or not your spouse has any rights to it, consult a lawyer.

Trust property. If you hold real estate in a trust, you probably won't need to use a TOD deed, because trust property doesn't need to go through probate anyway. If for some reason you want to use a TOD deed instead, you'll probably need to transfer the property out of the trust first. Talk to a lawyer about your estate plan.

What do I need to know about naming beneficiaries?

You can name anyone you please to inherit your real estate -- a person, more than one person, or an organization such as a favorite charity.

More than one beneficiary. If you name more than one person, think carefully about how they will feel about owning the property together. Co-ownership is cumbersome and often causes tension. For example, one co-owner could force a sale of the property even if the other co-owners didn't want to sell.

If a beneficiary dies before you do. If you name more than one primary beneficiary, and one of them doesn't survive you, the surviving primary beneficiary(ies) will inherit the property. Alternate beneficiaries will inherit only if all of the primary beneficiaries die before you do. To avoid any confusion, the best thing to do is make a new deed specifiying what you want to have happen to the property.

Children under age 18. Think twice about naming a child under age 18 as a beneficiary. A child can take title to the property, but an adult will need to manage it. You may have several options for naming an adult to manage the property, including:

• using your will to name a property guardian who will take care of any property you leave to your own young children, including property transferred by this deed
• setting up a trust for a child and naming the trust as the TOD beneficiary, or
• naming an adult under the Washington Uniform Transfers to Minors Act, which lets you name a "custodian" to manage the property until the child reaches the age of 21 or 25, at which time the beneficiary would own the real estate outright.

For more information, see Nolo's article Leaving an Inheritance for Children. If you need help setting up a property management method for a young beneficiary, consult a qualified estate planning lawyer.