
Transfer on Death Deed or Trust in Virginia: Which Is Right for You?
At Commonwealth Life & Legacy Counsel, estate planning is about more than managing assets—it’s about providing peace of mind. In Virginia, two common tools for estate planning are Transfer on Death (TOD) deeds and trusts, both designed to help your assets avoid probate.
By sidestepping probate, you can save your beneficiaries time, money, and stress, ensuring a smoother transfer of your estate. Let’s look at these options to help you decide which is best for your needs.
What Is a Transfer on Death Deed in Virginia?
A Transfer on Death Deed is a straightforward way to ensure your real estate passes directly to your chosen beneficiary when you’re no longer here. Virginia adopted this option in 2013 under the Uniform Real Property Transfer on Death Act.
What’s the appeal? It skips probate entirely, transferring your property with minimal hassle and no need for court approval.
Advantages of Transfer on Death Deeds
Transfer on Death Deeds (TOD Deeds) offers several practical benefits that make them an attractive option for estate planning, such as:
Simple and Affordable
Creating a TOD deed is relatively quick and inexpensive compared to setting up a trust, making it a great option if your estate is primarily made up of real estate.
Revocable Flexibility
A TOD deed doesn’t lock you into your choice. As long as you’re alive, you can change or revoke your TOD deed without involving your beneficiaries.
Control During Your Lifetime
A TOD deed doesn’t affect your rights while you’re alive. You keep full ownership and control over your property, including the ability to sell or mortgage it.
Disadvantages of Transfer on Death Deeds
While Transfer on Death Deeds can be a convenient option for estate planning, they come with limitations that may not suit every situation.
Limited to Real Estate
A TOD deed only applies to real property, like your home or land. It doesn’t cover other assets such as bank accounts or personal possessions.
Subject to Creditors’ Claims
While probate is avoided, creditors can still make claims against your property after your death. This could impact what your beneficiaries ultimately receive.
Less Suitable for Complex Plans
If you need a detailed plan, such as distributing property in stages or placing conditions on inheritance, a TOD deed won’t provide that flexibility.
What Is a Trust in Virginia?
A trust is a legal entity that holds and manages assets on behalf of your beneficiaries. One of the most popular choices for estate planning is the revocable living trust, which allows you to maintain control over your assets during your lifetime and avoid probate after your passing.
Advantages of Trusts
Trusts offer a versatile and comprehensive approach to estate planning, providing benefits that go beyond simple asset transfers.
Covers a Variety of Assets
Unlike a TOD deed, a trust can include real estate, bank accounts, investments, and personal property.
Customizable Flexibility
Trusts allow you to tailor your estate plan to your needs. You can create staggered distributions, set conditions for inheritance, or establish special needs provisions.
Privacy Protection
Unlike a will, which becomes a public record, a trust remains private. This keeps details about your estate and beneficiaries out of public view.
Incapacity Planning
If you cannot manage your affairs due to illness or injury, a trust can ensure seamless management of your assets by a designated trustee.
Disadvantages of Trusts
While trusts offer many benefits, there are a few downsides to consider before deciding if they’re the right tool for your estate plan.
Higher Initial Cost
Establishing a trust typically costs more than creating a TOD deed due to the legal work involved.
Ongoing Management
A trust requires active maintenance, such as transferring assets into it and keeping it updated as your circumstances change.
Funding Is Key
For a trust to work as intended, you must ensure all appropriate assets are properly transferred into it. This step is often overlooked, which can lead to unintended outcomes.
Transfer on Death Deed or Trust in Virginia: Which Option Is Right for You?
When deciding between a TOD deed and a trust, consider your goals, family situation, and the type of assets you own.
Here’s a quick comparison to help:
Feature | Transfer on Death Deed | Trust |
Assets Covered | Real estate only | Real estate, accounts, investments, personal property |
Cost to Establish | Lower | Higher |
Flexibility | Limited | High |
Privacy | No | Yes |
Probate Avoidance | Yes | Yes |
Incapacity Planning | No | Yes |
When a TOD Deed Might Work
A TOD deed could be the simplest and most affordable option if you own a single property and want it to pass directly to your spouse or children.
When a Trust Might Be Better
A trust provides the flexibility and control you need if you have significant assets, blended family dynamics, or wish to create a detailed distribution plan.
Remember, TOD deeds and trusts aren’t mutually exclusive. You might use both—a TOD deed for your home and a trust for other assets—to craft a comprehensive plan.
Can’t Decide Between TOD Deed and Trust? Contact Commonwealth Life & Legacy Counsel
Estate planning can feel overwhelming, but you don’t have to tackle it alone. At Commonwealth Life & Legacy Counsel, we focus on understanding your unique circumstances and goals to recommend the best tools for your plan.
Whether you’re considering a TOD deed, a trust, or a combination of both, we’re here to guide you every step of the way.
Call us today in Central Virginia at (434) 589-2958 or in Powhatan at (804) 598-1348. Let’s work together to create an estate plan that gives you peace of mind and protects the people you love.