Avoiding Probate in Texas with Transfer on Death Deeds and Lady Bird Deeds

Probate in Texas can be costly, time-consuming, and public. Fortunately, Texas law offers powerful alternatives—Transfer on Death Deeds (TODDs) and Lady Bird Deeds—to transfer real estate outside of probate. Paired with beneficiary designations on other assets, they can form the backbone of a non-probate estate plan.

Benefits of Avoiding Probate

Traditional probate involves court oversight, delays, and public filings. Avoiding probate provides critical advantages:

• 🕒 Faster access to assets
• 💰 Lower legal fees and avoidance of court costs
• Full family privacy
• Reduced risk of disputes or contests
• ✨ Simpler administration for heirs
• Keeps your affairs out of the public record

How TODDs and Lady Bird Deeds Work

Both allow you to name someone on the deed to inherit your property automatically at death, bypassing probate entirely.

Transfer on Death Deed (TODD)

• Statutory: Recognized under Texas Estates Code § 114
• Ownership: You retain full control during your lifetime
• Recording: Must be recorded before death to take effect
• Power of Attorney: Cannot be signed by an agent under POA
• Probate: Avoids the need for probate process and court involvement

Lady Bird Deed

• Common law tool (not codified by statute)
• Ownership: You retain full control as life tenant and can revoke, sell, or mortgage
• Power of Attorney: Can be signed under POA
• Recording: Not legally required but strongly recommended
• Probate: Also bypasses probate

Will These Deeds Trigger a Due-on-Sale Clause?

No. Under the Garn–St. Germain Act, neither TODDs nor Lady Bird Deeds trigger due-on-sale stipulations in mortgage agreements. Transfers at death are exempt, so lenders cannot demand repayment upon recording these deeds.

Strength in Numbers: Pairing Deeds with Beneficiary Designations

For comprehensive probate avoidance, complement TODDs or Lady Bird Deeds with:

• Payable-on-death (POD) designations for bank accounts
• Transfer-on-death (TOD) designations for investment accounts
• Life insurance and annuities with named beneficiaries
• Retirement accounts (IRA, 401(k), pensions), using primary and contingent designations

Used together, this creates a system-wide strategy to pass property, bank accounts, and financial investments outside of probate.

Finalizing the Transfer: Filing an Affidavit of Death

Once the property owner dies, the beneficiary must file the final step:

1. Prepare an Affidavit of Death referencing the original TODD or Lady Bird Deed.
2. File it with the county clerk’s deed records.

This confirms ownership transfer and ensures clear title.

Do not file the death certificate publicly—title companies may request a copy privately, but it must not become part of public deed records.

Medicaid Estate Recovery (MERP): Another Avoided Snag

MERP allows Texas to recover Medicaid-paid long-term care costs from estates. The good news:

Only assets passing through probate are subject to MERP.

Since TODDs and Lady Bird Deeds carry property outside of probate, they shield the family home from MERP claims, offering valuable protection if long-term care is needed.

⏳ Waiting Period for Creditors & the Two-Year Clawback Rule

Even though Transfer on Death Deeds and Lady Bird Deeds allow real estate to transfer outside of probate, creditor rights don’t automatically vanish at death—and this can impact what happens after the deed becomes effective.

🧾 The Two-Year Creditor Clawback Window

Under Texas law, creditors have up to two years after death to file claims against the deceased person’s estate—even if the estate was never probated. If a property is transferred outside of probate using a TODD or Lady Bird Deed, that transfer may still be subject to a clawback if a valid debt is owed and there are insufficient assets in the probate estate to pay it.

This means that even though the property automatically passes to the beneficiary, it may not be fully insulated from claims until that two-year period has expired.

🏡 How This Affects Title Insurance

If a beneficiary tries to sell the property shortly after inheriting it through a TODD or Lady Bird Deed, title companies may flag the two-year creditor period as a risk. This can lead to:

• Delays in issuing title insurance
• Exceptions in the title policy for potential creditor claims
• Requirements for additional documentation or indemnity agreements

In some cases, certain title companies may require the heirs to wait until the two-year statute of limitations for estate creditors has passed or ask for a probate proceeding to formally cut off creditor claims.  

A Caveat on Multiple Beneficiaries

Naming multiple beneficiaries results in co-ownership after death, which may bring challenges:

• Disputes over sale or usage
• Unequal responsibilities (e.g., who pays taxes or insurance)
• No automatic mechanism to ensure equitable expense sharing
• Potential for a partition lawsuit if disagreements escalate

In cases where you want more structured control—for example, limiting or guiding usage of the property—a revocable living trust may serve better.

Why These Deeds Matter for Estate Planning

By using TODDs or Lady Bird Deeds—often in combination with beneficiary designations—you can:

• Bypass probate and court delays
• Keep estate matters private
• Avoid probate-related costs
• Transfer property seamlessly at death
• Protect the home from Medicaid claims

In Conclusion

Transfer on Death Deeds and Lady Bird Deeds are highly effective tools for Texans seeking probate-free transfer of real estate. They enhance control, privacy, and estate continuity at minimal cost. If you’d like help deciding which deed fits your situation—or want a complete non-probate estate plan—an experienced estate planning attorney can guide you through each option.  Contact Law Office of Laura Vale, PLLC for more information.