Transfer on Death Deeds

Until recently, Mississippi law did not recognize transfer-on-death deeds. However, with the passage of SB 2851, the Mississippi legislature created statutory guidelines for “Transfer on Death Deeds” in Mississippi. SB 2851 was signed into law on June 29, 2020, by Governor Reeves and became effective July 1, 2020. The “Mississippi Real Property Transfer on Death Act” provides the requirements for using a transfer on death deed (“TODD”) in Mississippi.

What is a TODD?

A TODD is a legal document that transfers an individual’s interest in real property to one or more designated beneficiaries effective at the transferor’s death. The TODD requires the property owner (the “transferor”) to name a person (the “beneficiary”) to whom the property will automatically transfer at the death of the transferor. The creation and filing of a TODD does not impact the rights of the transferor while living. In other words, the transferor retains all rights and control over the property, including the right to sell, transfer, encumber, and use the property. A TODD does not change ownership of or rights to the property until the death of the transferor.

Who can execute a TODD? 

In order to execute a valid TODD, the transferor must have the capacity to make a contract. A TODD cannot be created through the use of a power of attorney, unless the power of attorney expressly authorizes it.

What can be transferred by a TODD?

Any real property in Mississippi may be transferred by a TODD.

What must be included in a TODD? 

A TODD must contain the essential elements of a recordable deed and must also state the transfer of real property to a designated beneficiary (or beneficiaries) is to take place at the death of the transferor. Unlike other deeds, there is no requirement that a deed be delivered to or accepted by the beneficiary. A TODD is effective if executed by the grantor and filed, without any action by or even knowledge of a beneficiary.

What must be done with a TODD?

In order to be effective, a TODD must be executed and recorded before the transferor’s death in the land records in the official records of the chancery clerk of the county where the property is located.  If the TODD is not recorded prior to death, it is not effective. 

Can a TODD be revoked? 

Unlike other deeds, a TODD is revocable. In order for a transferor to revoke a TODD, the transferor must file an instrument of revocation expressly revoking the TODD, or may execute and file a subsequent TODD that revokes all or part of the prior TODD either by expressly revoking or by inconsistency between the two TODDs. Any subsequent revocation must be recorded prior to the transferor’s death in order to be effective. A will does not revoke or supersede a transfer-on-death deed. If a transferor and a designated beneficiary were married when a TODD was created and subsequently divorce, the TODD is revoked only if the final judgment of divorce is recorded in the land records where the TODD is recorded prior to the death of the transferor.  The mere fact that a divorce occurred would not revoke the TODD.

What other rights are affected by a TODD? 

Certain property transfers can impact rights of a transferor.  Here is how a TODD may or may not impact the most common of these rights:

  • A TODD does not affect the transferor’s right to claim the property as their homestead.
  • A TODD does not affect any property tax exemptions afforded to the transferor (i.e. over 65 years old exemption).
  • A TODD does not affect the rights of creditors of the transferor.
  • A TODD does not trigger a “due on sale” or similar clause in a mortgage or other type of loan document.
  • A TODD does not subject the property to claims of a creditor of the beneficiary.

Because a TODD does not transfer ownership of the property until the death of the transferor, the property receives a step-up in basis adjustment at the transferor’s death.

Since the TODD is not a completed gift until the death of the transferor, it is not considered a taxable event for the purposes of gift taxes.

What action must the beneficiary take at the transferor’s death?

At the death of the transferor, a beneficiary must record an affidavit of death in the deed records in order to become the legal owner of the property. 

What are the pros of a TODD? 

A TODD can be attractive as a means to transfer ownership of real property quickly and affordably without going through the probate process. A TODD allows the transferor to keep control over the property during his or her lifetime and allows the transferor to revoke the TODD at any time.

What are the cons of a TODD?

Because TODDs are so new, there is simply not very much law related to these instruments, which may lead to uncertainty for lawyers and clients alike. One potential downside of a TODD is the recording requirement for both the TODD itself and any revocation of the TODD. If a transferor fails to properly record the document prior to his or her death, it is ineffective and that could lead to unintended consequences at the transferor’s death. Another potential downside is that people may not understand the concept that a TODD trumps a will if both address the same property, which again could lead to unintended consequences is a TODD was executed in addition to a will. Finally, and probably most importantly, is that a TODD is subject to claims of creditors and estate taxes. Thus, before the designated beneficiary may rely on the deed, they must either probate the transferor’s estate or wait, in the case of claims of unsecured creditors, 3 years and 90 days, or in the case of federal estate taxes, 10 years.