Texas estate planning requires knowledge of smooth real estate transfer methods, and property owners must decide between using Transfer on Death Deeds (TODDs) and Lady Bird Deeds as their non-probate instruments.

The two deeds enable Texas property owners to maintain complete control of their assets until death while selecting beneficiaries who will inherit property ownership after their passing without needing probate proceedings.

The distinction between these two legal instruments is significant because the TODD receives statutory support, whereas the Lady Bird Deed relies on common law origins, which affects the speed of property transfer, creditor protection, and owner asset management during incapacitation.

What are Transfer on Death Deed (TODD) and Lady Bird Deeds?

Texas residents can use Transfer on Death Deeds (TODDs) and Lady Bird Deeds to transfer real estate ownership to beneficiaries after death, avoiding the need for probate procedures. The two deeds enable property owners to maintain complete control over their property, allowing them to sell, mortgage, and change beneficiaries until their death.

The Core Similarity: Avoiding Probate

The primary purpose of these two deeds is to facilitate real estate transfers without requiring Probate. The title transfer to the designated beneficiary becomes possible through the submission of a simple affidavit to the county records after the owner passes away. The property benefits from a step-up in basis for capital gains tax purposes under both types of deeds.

The primary distinction between TODD (Statutory) and Lady Bird (Common Law) deeds exists in their fundamental characteristics.

TODD: The Statutory Option

The Texas Estates Code provides explicit authorization for the Transfer on Death Deed (TODD), which operates under statutory guidelines. The statutory framework of this deed offers ease of use while also restricting its application in specific ways.

A TODD requires the property owner to sign it personally because agents under a Power of Attorney are not authorized to execute this document.

The TODD system allows creditors to pursue property claims against the estates of deceased owners for two years after death when the estate lacks sufficient assets to pay debts.

The TODD statute explicitly states that the property transfer includes no warranty of title, which might create problems for beneficiaries who encounter title issues in the future.

The TODD allows property owners to designate substitute beneficiaries who will receive the property if the first beneficiary dies before the owner.

Lady Bird Deed: The Enhanced Life Estate

The Lady Bird Deed operates as a non-statutory instrument under common law to establish an enhanced life estate, which grants the owner complete authority to manage the property during their lifetime. The structure provides users with additional flexibility options.

The execution of a Lady Bird Deed does not specifically prohibit an execution made under a properly drafted Power of Attorney because it allows agents to sign on behalf of the owner when they lose the capacity to do so.

Lady Bird Deeds offer better protection for beneficiaries, as they do not face the same two-year creditor "clawback" restrictions that apply to TODDs, resulting in faster title transfers.

The warranty deed included in a Lady Bird Deed can be either general or special, which provides the beneficiary with enhanced protection from title defects.

The Lady Bird Deed serves as a reliable tool for avoiding the Medicaid Estate Recovery Program (MERP) due to its established common law foundation, which makes it effective for Medicaid planning purposes.

You need to decide between these two deeds based on specific factors that will determine your choice.

Factors to Consider

1. Concern for Incapacity

The Lady Bird Deed stands as the more flexible option because it allows agent representation through a Power of Attorney when the owner loses mental capacity to manage or modify their deed.

2. Speed of Post-Death Transfer

The Lady Bird Deed offers faster post-death property transfer capabilities because it avoids the two-year creditor waiting period found in TODDs, which results in title company delays.

3. Statutory Certainty

The Transfer on Death Deed (TODD) offers a convenient legal solution for users seeking straightforward Texas law-based rules, despite its limited features.

4. Naming Alternate Beneficiaries

The TODD provides a better framework for specifying multiple backup beneficiaries through its statutory framework when you want to include them directly in the deed (e.g., "to my children, but if any child dies before me, then to their children").

The information in this article provides general guidance, but it should not be considered a substitute for legal advice. The selection between a TODD and a Lady Bird Deed for your estate planning needs depends on your specific financial situation and planning requirements. You should consult a qualified Texas estate planning attorney for guidance before executing any deed.

The following examples show when Texas property owners would select one deed type over the other based on their specific circumstances.

Example 1: Prioritizing Future Incapacity and a Smooth Sale

(Lady Bird Deed is the Better Choice)

The 78-year-old widow, Maria, wants her home to pass directly to her two children without going through probate proceedings. Maria's current health status has caused her to establish a detailed estate plan, which designates Carla as her Agent through a Durable Power of Attorney (POA). The home sale process will be triggered by Carla according to Maria's instructions when she requires long-term care funding.

A TODD presents a problem because Texas law requires the property owner to sign the document personally, so Carla, as the POA agent, cannot execute or cancel the deed when Maria becomes incapacitated. The two-year statutory creditor "clawback" period after Maria's death could create delays for her children to sell the property because debts would need to be settled first.

The attorney suggests Maria should use a Lady Bird Deed as her preferred solution.

The POA allows Carla to execute the sale of the home for care expenses or to cancel the deed because Lady Bird Deeds function under common law principles, which does not prohibit valid POA execution.

The Lady Bird Deed provides Carla and her brother with a quick title transfer process because the property avoids the two-year creditor claim period that applies to TODDs.

Example 2: Prioritizing Statutory Certainty and Contingency Planning

(Transfer on Death Deed (TODD) is the Better Choice)

The 50-year-old property owner, David, plans to leave his vacant investment property to his two adult sons, Mark and John, after his death. The current situation makes him concerned about what will happen if one of his sons dies before him. David does not face any urgent concerns about Medicaid eligibility or potential loss of mental capacity.

The Lady Bird Deed presents a problem because it lacks built-in provisions for designating substitute beneficiaries, which results in inflexibility. The distribution of Mark's share after his death, before David, becomes uncertain because it depends on the specific wording of the deed, which might lead to Probate or pass through Mark's estate.

The attorney advises David to use a Transfer on Death Deed (TODD) for his property transfer needs.

The Texas Estates Code supports the TODD through statutory backing, which provides David with both form-based simplicity and legal certainty.

The TODD enables David to specify his sons as primary beneficiaries while establishing a clear succession plan for contingent beneficiaries (Mark's children will receive his share if he dies first). The TODD provides David with complete peace of mind because it includes specific statutory provisions for detailed contingency planning.

Bringing It All Together

The decision between a Transfer on Death Deed (TODD) and a Lady Bird Deed in Texas depends on individual estate planning needs and risk assessment. Real estate owners can utilize these tools to avoid probate while maintaining control; however, the different legal frameworks between them create essential distinctions.

The TODD provides straightforward execution with clear statutory guidelines; however, it prohibits Power of Attorney signatures for incapacity planning, and it imposes a two-year creditor protection period that restricts beneficiaries from selling the property. The Lady Bird Deed operates under common law principles, which makes it more suitable for elderly individuals who need long-term care protection, as it allows financial agents to sign and manage the deed through a Power of Attorney. The selection of the right deed depends on individual circumstances, so it is crucial to consult a Texas estate planning attorney who specializes in these matters.

Ready to get started with your TODD or Lady Bird Deed? Call us today 855-936-8375 or schedule a free consultation here.