Transfer-on-Death Deeds in Kentucky: How to Avoid Probate on Real Estate
For many Kentucky families, the home is the most valuable asset in the estate — and one of the most cumbersome to transfer through probate. A transfer-on-death deed (TOD deed) offers a way to pass real property directly to a named beneficiary at death, bypassing probate entirely. Kentucky is one of a growing number of states that authorize this planning tool, and when used correctly, it can simplify estate administration significantly.
How a TOD Deed Works
A transfer-on-death deed is a deed that you sign and record during your lifetime, but the transfer does not take effect until your death. You remain the full owner of the property while you are alive. You can sell it, mortgage it, rent it, or change your mind and revoke the TOD deed at any time. The named beneficiary has no ownership interest in the property until you die — at which point the property transfers automatically, without the need for probate.
Kentucky authorizes TOD deeds under the Uniform Real Property Transfer on Death Act, codified at KRS 394B.010 through KRS 394B.170. The statute took effect in 2020, making it a relatively new tool in the Kentucky estate planning toolkit.
Requirements for a Valid TOD Deed
To be effective, a TOD deed must contain specific language indicating that the transfer is effective at the owner’s death. The deed must be signed by the owner (or the owner’s authorized agent), acknowledged before a notary, and recorded in the county clerk’s office of the county where the property is located — all while the owner is still alive. A TOD deed that is not recorded before the owner’s death is ineffective. The statute does not require the beneficiary’s signature or consent, and you are not required to notify the beneficiary that the deed exists.
Revocation and Changes
One of the key advantages of a TOD deed is that it is revocable. You can revoke it at any time by recording a revocation instrument in the same county clerk’s office. You can also execute a new TOD deed naming a different beneficiary — the most recently recorded TOD deed controls. Importantly, a subsequent will or trust does not automatically revoke a TOD deed. If you want to change how your real property passes at death, you must record a new TOD deed or a revocation; simply changing your will is not sufficient.
TOD Deeds vs. Other Probate Avoidance Tools
A TOD deed is not the only way to avoid probate on real property. Joint tenancy with right of survivorship achieves a similar result, but it gives the joint tenant a present ownership interest — meaning they could encumber or sell the property, or expose it to their creditors. A revocable trust can also hold real property and transfer it outside of probate, but it requires creating and funding the trust, which involves more complexity and cost. A TOD deed offers the simplicity of a deed with the flexibility of revocability, without giving the beneficiary any present interest.
Potential Pitfalls
TOD deeds are not appropriate for every situation. If the property is owned jointly with a spouse, both owners must sign the TOD deed. If you name multiple beneficiaries, they will take the property as tenants in common (unless you specify otherwise), which can lead to the same disputes you were trying to avoid. If the named beneficiary predeceases you and no alternate beneficiary is designated, the TOD deed is ineffective and the property will pass through probate or under your will.
TOD deeds also do not protect against the claims of creditors. If you owe debts at death, creditors may still be able to reach the property even though it passed by TOD deed. And the transfer may have Medicaid recovery implications if you received Medicaid benefits during your lifetime.
Tax Considerations
Property that passes by TOD deed receives a stepped-up tax basis at the owner’s death, just as property that passes through probate does. This means the beneficiary’s capital gains tax basis is the fair market value of the property at the date of death — not the original purchase price. This can result in significant tax savings if the property has appreciated substantially. Kentucky inheritance tax may still apply depending on the beneficiary’s relationship to the decedent, under KRS 140.010 through KRS 140.990.
If you are interested in using a transfer-on-death deed as part of your Kentucky estate plan, contact Buckles Law Office at (859) 225-9540 to discuss whether it is the right tool for your situation.
