‘Transfer-on-death’ deed passes real estate without probate

“The first thing we do, let's kill all the lawyers.”

-- Dick the Butcher, Henry the Sixth, Part 2, Act 4, Scene 2

Contrary to what you might have heard, that oft-quoted line by Will Shakespeare is NOT part of the statement of legislative intent preceding the text of Washington’s "Transfer On Death Deed” act – but the thought may have crossed the lawmakers’ minds. At least, the non-lawyer lawmakers.

The purpose of the law (Chapter 64.80 of the Revised Code of Washington) was to uncomplicate the settlement of estates where real estate – basically, the family homestead – is the only asset of value. Executing a “transfer on death” deed allows a person to pass real property automatically, without a probate – the court-administered settling of an estate. Bye, bye, lawyers.

Actually, those of us who practice in the area of probate and estates aren’t taking it personally. We often work with clients trying to figure out a “workaround” alternative to doing a full probate of an estate where there is real property with equity, but little or no “working capital” to pay for attorney’s fees and other costs. Attorneys often take on probate cases with the understanding that their fees and upfront costs, such as filing fees, will be paid when the property is sold. But that can take time, especially in a down market.

Enter the Transfer on Death Deed, which operates essentially like the beneficiary designations you may have filled out for your IRA or 401-K accounts, or for life insurance proceeds. Many brokerage and other financial accounts are also set up with “transfer-on-death” provisions that take them out of the probate process. The named beneficiary produces proof of the asset holder’s death, and his or her proof of ID. The asset is transferred without resorting to the courts.

The Transfer On Death Deed, in form, is like any other deed transferring an interest in real property, with the same formalities required (the most important being acknowledgement -- or signature – by the grantor and recording with the county auditor). Upon the grantor’s death, the interest in the property vests immediately in the named beneficiary. The transfer of equitable title to the property is automatic, unlike bank accounts or life insurance proceeds, where the physical transfer of the funds is not accomplished until the procedural requirements are met. Unlike a quitclaim deed executed during the property owner’s lifetime (often with a life estate reserved), the Transfer on Death Deed can be undone unilaterally at any time during the grantor’s lifetime (assuming he or she still has to mental capacity to do so).

Helping your heirs avoid having to probate your estate, and knowing you can change the named beneficiaries – or revoke the deed altogether – are the two main selling points for Transfer on Death Deeds as a “will substitute.”

But there are some potential downsides. For one thing, if you carry this whole “I-don’t-want-anything-to-do-with-shyster-lawyers” bit to an extreme, you could end up executing and recording a document with legal errors that could nullify the whole exercise. Failing to provide for what happens if a named beneficiary predeceases you could be one sin of omission that consulting with an estate planning attorney would have helped you avoid. Just sayin’ …

There is also the issue of novelty. This is a brand new statute, at least in Washington; it became law on June 12, 2014. There is no case law yet to deal with ambiguities or omissions in the statutory language.

We often fear what we don’t know. Third parties – in the form of buyers, lenders and title companies – with no familiarity with the new statute may balk at purchasing, lending or insuring title on the property in the absence of the tried-and-true probate proceeding and the court’s official stamp of approval on the transfer. The sky has not fallen in the 20 other states – plus the District of Columbia – that previously enacted Transfer on Death Deed statutes. But there’s always that bit of trepidation that comes with being out front on anything. What do they say about pioneers? Those are the guys with the arrows in their backs.

But on the whole, the introduction of the Transfer on Death Deed should help streamline the process of passing real estate to heirs in cases where there is no other reason to open up a probate. It should save families money and speed up the settlement of the decedent’s affairs – all good things,

And don’t feel sorry for us probate lawyers.

There are always other practice areas we can move into if business slows down too much.

Say, is that a siren I hear?