When it comes to estate planning, most of us want the same thing: make things easy for the people we leave behind.
That’s one reason Transfer-on-Death (TOD) deeds can be appealing. In Oregon, a TOD deed allows you to name someone to receive your home when you die, generally without the property going through probate.
Sounds simple, right?
Sometimes it is. But there’s an important Oregon rule that homeowners should understand before deciding a TOD deed is the best solution.
The 18-Month Rule
Under Oregon law, property transferred through a TOD deed can still be subject to certain claims against the estate if the probate estate doesn't have enough assets to pay its debts.
And here's the important part: legal action to enforce those claims can generally be brought for up to 18 months after death.
That’s significantly longer than the typical four-month creditor claim period in probate after proper notice is given.
So while a TOD deed may avoid probate, it doesn't necessarily eliminate creditor risk or uncertainty.
Why Could That Matter?
Imagine you inherit your parent's home through a TOD deed. You become the owner when they die and decide you'd like to sell it.
You might assume the process will be quick and straightforward.
But because creditors may still have claims against the property, a title company may be unwilling to insure a sale or refinance during the 18-month period without additional steps.
And without title insurance, a buyer or lender may not be willing to proceed.
In some situations, probate may ultimately be needed anyway—particularly if there are debts to resolve or the beneficiary wants to sell the property quickly.
What About the Beneficiary?
A TOD beneficiary doesn't necessarily receive the property completely free and clear of the deceased person's obligations.
Depending on the circumstances, creditors, taxes, or Medicaid estate recovery could potentially create claims against the property.
That means the beneficiary may inherit not only a house, but also some uncertainty about what happens next.
When Might a TOD Deed Make Sense?
A TOD deed can still be a perfectly reasonable planning tool, particularly when:
- The estate is simple and has few or no debts.
- The beneficiary plans to keep the home long-term.
- There is little concern about creditor or Medicaid recovery claims.
- Avoiding probate is a priority.
When Might a Trust Be Better?
For some families, a revocable living trust may provide a smoother path—especially when the home is a significant asset or the beneficiary is likely to sell it soon after death.
A properly structured trust can give a successor trustee authority to manage and sell the property, while potentially avoiding some of the title and creditor complications that can arise with a TOD deed.
The Bottom Line
A TOD deed can be a useful estate-planning tool, but it isn't always the simplest solution for the person inheriting the home.
Before choosing one, consider the bigger picture:
Will the beneficiary want to sell the home? Are there potential creditors or estate recovery concerns? Is the home your primary or most valuable asset? Would a trust make more sense?
These are good questions to discuss with your estate attorney and financial planner.
Because ultimately, good estate planning isn't just about making things easy for you—it’s about making things easier for the people you leave behind.
Disclaimer
This article is provided for general educational and informational purposes only and is not intended to provide legal, tax, or individualized financial advice. Estate planning laws and individual circumstances can vary, and Oregon law may change over time. A Transfer-on-Death deed, revocable living trust, or other estate-planning strategy may or may not be appropriate for your situation.
Before making changes to your estate plan or property ownership, we recommend consulting with your qualified estate-planning attorney and tax professional. Your financial advisor can also help you understand how estate-planning decisions fit into your overall financial plan.
The information provided is not a substitute for professional legal or tax advice, and no attorney-client relationship is created by reading or relying on this article.