Can a Transfer on Death Account Be Contested? Legal Insights

Dealing with the loss of a loved one is never easy, especially when questions about their estate arise. If your loved one in Texas had a transfer on death account, you may find yourself asking, “Can a transfer on death account be contested?” It’s a common concern, particularly in situations where a will exists, or family dynamics are complicated. While transfer on death accounts are generally straightforward, there are instances where a beneficiary designation can be challenged.

In Texas, you won’t find traditional transfer on death (TOD) accounts for bank accounts. But Texas does allow for a similar mechanism known as a Transfer on Death Deed, sometimes called a Beneficiary Deed. Let’s take a look at these types of accounts, explore when and why they can be contested, and discuss ways to help protect your loved ones during those tough times.

What is a Transfer on Death Deed in Texas?

A Transfer on Death Deed in Texas lets real estate owners (the grantor) designate a beneficiary to receive their property directly after their death. This method sidesteps probate, making the transfer of a deed smoother and often quicker for the beneficiary.

To formally transfer the property outside of probate court, an Affidavit of Death is typically required upon the owner’s death. You have two options for using the Affidavit of Death: either download the PDF form or use the user-friendly guided online form offered by the state of Texas. This process offers convenience and streamlines the property transfer upon the original owner’s death.

Can a Transfer on Death Account Be Contested in Texas?

While both options help people avoid probate court and are usually simple to execute, there are situations where a beneficiary designation can become more complicated. For example, situations where a will exists.

Although Texas does not allow TOD accounts for bank accounts, individuals can establish Transfer on Death Deeds. A Transfer on Death Deed, also known as a Beneficiary Deed in Texas, allows real estate owners (grantor) to designate a beneficiary who receives the property upon the original owner’s death, bypassing probate. You can complete an Affidavit of Death form when an owner passes to transfer ownership of the property outside of probate court.

Reasons a Transfer on Death Account or Deed Could be Challenged

Contesting a TOD Deed often hinges on demonstrating that the original owner’s intent was not reflected in the document or that something fundamentally flawed the designation. Here are several key scenarios:

Lack of Capacity

If there’s evidence to suggest the original account holder lacked mental capacity when naming the beneficiary, the TOD Deed could be contested. For instance, if someone was coerced into naming a beneficiary while in a weakened mental state due to illness or medication, that could potentially invalidate the TOD deed.

Undue Influence

This arises when an individual, often in a position of power over the grantor, manipulates them into naming a specific beneficiary. A case illustrating this point comes from Florida, where courts often uphold strong protections against the exploitation of fiduciary relationships.

The Keul v. Hodges Blvd. Presbyterian Church case centered on a payable-on-death (POD) designation being successfully challenged in court. Evidence indicated undue influence exerted by a caretaker who held a position of trust. The court ultimately deemed the beneficiary designation invalid.

Fraud

Imagine this: a person forms a relationship with someone much older, only to change that person’s will and TOD designations shortly before the older person passes away. This type of situation raises red flags regarding a TOD account and might suggest fraud.

Because this accusation is serious, substantial evidence is required to prove the intent to deceive and unlawfully benefit from the transfer.

Improper Execution

Overlooking or disregarding a single detail in the legal requirements, like missed signatures or failing to have those signatures properly notarized, can put the entire TOD Deed at risk. It is crucial to meticulously follow all procedural requirements to avoid any potential issues.

Forgery

Forgery, involving a falsified signature on a TOD deed, while uncommon, can lead to legal action if discovered. While financial institutions usually take extra steps to verify identification and prevent forgery, it is crucial to be aware of this possibility.

Should a question of forgery arise concerning a TOD deed, legal expertise becomes essential, given the complexity involved in validating signatures.

Explore key reasons why a Transfer on Death Deed can be contested in Texas and how to safeguard your estate planning from potential disputes.

Protecting Your Interests with Effective Estate Planning

Think of TOD accounts, POD accounts, and TOD Deeds as individual tools in your overall estate plan. While they can be helpful in avoiding lengthy probate processes, they are not a complete substitute for a thorough estate strategy.

Texas law, like community property laws in other jurisdictions, often follows a 50/50 split of assets obtained during a marriage. Therefore, it is crucial to consider such factors to avoid potential complications with TOD designations, especially with blended families or situations involving stepchildren. To make sure your wishes are honored, seeking advice from an attorney specializing in estate planning is highly encouraged. They can provide guidance tailored to your circumstances.

What’s the difference between a TOD and a POD Account?

This is a common question and highlights an important distinction for sound estate planning. In essence, both aim to distribute assets directly to beneficiaries upon the account holder’s death. The difference lies mainly in the type of asset:

• Payable on Death (POD) Accounts, also known as Totten trusts, are often used for financial accounts. These can include savings, checking, or money market accounts. They work well for ensuring funds are readily available to a named beneficiary without a drawn-out legal process.
• Transfer on Death (TOD) Accounts are more common for securities. They come into play when you want assets like stocks, bonds, or brokerage accounts to pass to a named beneficiary, usually avoiding probate.

Understanding Potential Downsides of TOD Accounts and Alternative Planning Tools

While TOD Accounts have their benefits, understanding the disadvantages can be eye-opening for those exploring estate planning. It’s like buying a car – knowing potential drawbacks, as well as its perks, is key.

One consideration: what if you have multiple beneficiaries, and one passes away before you? Since they lacked the original owner’s legal rights, they cannot name a beneficiary for that TOD account. This is something that many overlook, potentially disrupting intended inheritance plans.

Alternatives to a simple TOD designation:

• Revocable Living Trusts: Offer a great alternative to a TOD Account, providing flexibility to modify or dissolve the trust. Also, these revocable trusts can generally encompass a wider range of asset types.
• Life Insurance Policies: Often less complicated for beneficiaries to navigate, life insurance policies let you designate who receives a death benefit upon passing. The death benefit isn’t considered part of the estate, usually not subject to probate in the same manner as assets within a TOD account.

FAQs About Can a Transfer on Death Account Be Contested?

What Makes a TOD Invalid?

Factors that could invalidate a TOD designation include:

• Lack of mental capacity when the designation was made.
• Evidence suggesting fraud or forgery.
• Failing to follow proper execution procedures.

Can You Fight a Transfer on Death Deed?

While less common than challenging traditional wills, TOD Deeds can be contested in Texas. Because each scenario is different, working with a seasoned estate planning attorney can help determine the best course of action for you.

What are the Disadvantages of Transfer on Death?

In cases where one of multiple named beneficiaries on a Payable on Death account passes away before the original owner, complexities can arise. Since they didn’t hold the same legal standing as the original owner, that deceased beneficiary generally can’t designate their own heir for their portion. It’s a nuance often overlooked, potentially resulting in the funds going through probate, despite the initial intent to avoid it.

Does Transfer on Death Override a Will?

Yes, generally, beneficiary designations on financial products like TOD and POD accounts supersede instructions outlined in a will. Remember that a will typically dictates only the distribution of assets a person directly controls when they die, not those that transfer via a TOD designation.

Do I Need a Will If I Have a TOD Account in Texas?

While a TOD account can transfer specific assets, it’s not a substitute for a comprehensive estate plan. Having a properly executed will alongside your TOD account helps manage your remaining assets. It can also address unforeseen situations.

Many times you won’t need a will. Talking with an estate planning attorney can help you understand this. Consulting an experienced professional can be likened to navigating a new city with the assistance of a knowledgeable local. It ensures a smoother journey.

Conclusion

So, can a transfer on death account be contested? The short answer, as we’ve seen, is yes, it is possible. Though TOD and POD accounts are intended to simplify the transfer of assets, they are not immune to legal challenges. From lack of capacity and undue influence to improper execution of a death deed, several grounds exist for potential contests.

This underscores the importance of approaching estate planning proactively. Open communication with beneficiaries, clear understanding of state laws, and guidance from experienced estate planning attorneys are very important. These measures collectively form the bedrock for building a robust and legally sound estate plan.

At Warren & Migliaccio, estate planning issues can quickly spin out of control – especially when disputing a Transfer on Death Deed gets thrown into the mix. With our experienced attorneys, you can rest assured your family’s wishes will be carried out just as you intend. We’ll handle all the details thoroughly. For families overwhelmed by estate planning decisions, we offer empathetic, expert advice. Take the first step towards clarity and confidence – contact us for trusted legal guidance. Get ready to take the first step towards a solution – book your consultation now at (888) 584-9614.