Imagine that a listing agent meets with a property owner about potentially listing the owner’s property for sale. During the meeting, the owner reveals that he recently signed and recorded a deed transferring the property to his daughter. Can the agent take that listing from the owner? Before July 1, 2013, the answer to that question would be an emphatic “no.” After July 1, 2013, the answer is “maybe,” if the deed to the daughter was a transfer on death deed.
On July 1, 2013, the Uniform Real Property Transfer on Death Act became effective in Virginia. That act, specifically Section 64.2-624 of the Virginia Code, permits an individual to transfer property to one or more beneficiaries effective at the transferor’s death by a transfer on death deed. A transfer on death deed must be in writing, and meet all of the other formalities for proper recordation of deeds. It must state that the transfer to the designated beneficiary occurs at the transferor’s death, and it must be recorded before the transferor’s death in the land records of the clerk’s office of the circuit court in the jurisdiction where the property is located. If the property is owned by joint owners, the transfer on death deed must be signed by all of the joint owners in order to be effective. Transfer on death deeds are exempt from recordation taxes.
Upon the death of the transferor, title to the property described in the transfer on death deed shifts to and vests in the designated beneficiary, but only if the designated beneficiary survives the transferor. A transfer on death deed is effective even if the beneficiary has paid nothing for the property, and whether or not the deed has been delivered to or accepted by the designated beneficiary during the transferor’s life. If the designated beneficiary does not survive the transferor, the transfer lapses. If the transferor is divorced or his marriage is annulled after recording a transfer on death deed to his spouse, the divorce or annulment revokes the transfer to the former spouse unless the transfer on death deed expressly provides otherwise. Once the deed becomes effective, the beneficiary takes the property subject to all conveyances, encumbrances, assignments, contracts, mortgages, liens and other interests to which the property is subject at the time of the transferor’s death. In other words, the death and the transfer have no cleansing effect on the title received by the beneficiary.
The agent who wishes to take a listing on property on which a transfer on death deed already has been recorded should be safe in doing so based on two sections of the Transfer on Death Act. First, Section 64.2-630 provides that a transfer on death deed may be revoked at any time before the transferor’s death by (a) a new transfer on death deed that expressly revokes the prior transfer on death deed, (b) a new transfer on death deed that names a designated beneficiary that is inconsistent with the designated beneficiary in the prior transfer on death deed, (c) an instrument of revocation that expressly revokes the transfer on death deed, or (d) a deed made during the transferor’s lifetime that expressly revokes the transfer on death deed. Any deed or other instrument revoking a prior transfer on death deed must be recorded before the transferor’s death in the land records of the clerk’s office of the circuit court where the transfer on death deed is recorded. A revocation must be by a separate recorded document and cannot be marked on or added to the original or a copy of the prior transfer on death deed.
Second, Section 64.2-631 states that during the transferor’s life, a transfer on death deed does not (a) affect any interest or right of the transferor or any other owner, including the right to transfer or encumber the property, (b) affect any interest or right of a transferee, even if the transferee has actual notice of the transfer on death deed, (c) affect the right of any secured or unsecured creditor or future creditor of the transferor, even if the creditor has actual knowledge of the transfer on death deed, (d) affect the transferor’s or the designated beneficiary’s eligibility for any form of public assistance, (e) create a legal or equitable interest in favor of the designated beneficiary, or (f) subject the property to claims of a creditor of the designated beneficiary.
The provisions of the Transfer on Death Act strive to make the transfer on death deed precisely what its name implies, an instrument that has absolutely no effect until the transferor dies. If the act works as designed, an individual who records a transfer on death deed should maintain the full range of rights and remedies with respect to his property during his lifetime, and a third party, such as a listing agent, should be able to deal with the owner during his lifetime as if no transfer on death deed had been recorded. As with most statutes, litigants may eventually discover cracks in the Transfer on Death Act that call transfer on death deeds or subsequent revoking deeds or instruments into question. Unless and until that happens, REALTORS should not be deterred from listing or selling property simply because a transfer on death deed has been recorded with respect to that property.