Wills, transfer-on-death deeds and inheriting a home

This guide is for families thinking about the future of their home and for people who just lost a loved one who owned one. It explains, based on what the law and official agencies say, how a home can pass to family: a will, a transfer-on-death (TOD) deed and inheritance without paperwork. It also covers your rights with the mortgage servicer if you inherit. It is not legal advice: the rules vary a lot from state to state, and for your situation free legal aid is one option.

In Florida, at a minimum, to sign a valid will

2 witnesses²

In Arizona and Washington, when a TOD deed must be recorded to be valid

Before death⁶

Homes where federal law protects a relative who inherits from a demand for immediate payment

Up to 4 units⁸

In Florida, for a co-heir to elect to buy out a cotenant who wants heirs' property sold

45 days²⁰

How a home can pass to family

When an owner dies, the home passes to other people in one of several ways. How the title is held can decide it: in a joint tenancy with right of survivorship, when one co-owner dies the other gets full ownership;¹⁴ our guide on how to hold title with family explains those forms. Otherwise, the home passes by will, by a transfer-on-death deed where the law allows one, or under the state’s inheritance rules.

If there is no will, state law decides who inherits. In Florida, for example, anything not left in a valid will passes to the heirs the code names, and the death is what gives them that right.¹ Every state has its own rules, so what you see here from Florida, Arizona and Washington are examples, not your state’s rule.

Wills: each state sets the rules

A will is the document in which a person says who gets their property when they die. Each state’s law says how it must be signed to be valid, and the differences matter.

In Florida, every will must be in writing. The person making it must sign at the end, in front of at least two witnesses, and the witnesses sign in front of that person and of each other. No special wording is needed if those formalities are followed.² In Arizona, a paper will is also in writing and is signed by at least two people who witnessed the signing.³ But Arizona also accepts a holographic will: even without witnesses, it is valid if the signature and the main provisions are in the handwriting of the person making it.⁴

	Florida	Arizona
In writing?	Yes	Yes
Witnesses	At least two, who sign in front of the testator and each other	At least two who witnessed the signing
Handwritten will with no witnesses	Not enough: it must follow the formalities	Valid if the signature and main provisions are handwritten

Florida has another rule that affects many families. Under its law and constitution, a homestead may not be left by will if the owner is survived by a spouse or minor children; it can be left to the spouse only when there are no minor children.⁵ So in Florida a will may not decide what happens to the home, even if it says so in writing.

The transfer-on-death (TOD) deed

Some states allow a deed that the owner signs and records during their life but that only passes the home to the person they chose when they die. It is called a transfer on death deed (TOD) or, in Arizona, a beneficiary deed. It is a deeddeedA deed is the legal document the seller uses to transfer ownership of the home to you. The seller signs it at closing, it lists the names of all the buyers and you receive a copy. Afterward, the settlement agent records it with the county records office; that recording puts the public on notice that you are now the owner. There are several types: a warranty deed gives the most promises about the title, and a quitclaim deed promises nothing. Do not confuse it with a deed of trust, which is the mortgage document.See the full definitionClose recorded with the county; in Washington, the law says it is not a will.⁷

In Arizona, a beneficiary deed passes the home to the beneficiary when the owner dies, along with any mortgages and lienslienA lien is a legal right a creditor holds in your property to make sure you repay a debt. It usually prevents the property from being sold until the debt is paid, and if you do not pay, the creditor may be able to take the property. Your mortgage is a lien on your home: when you pay it off, the lien is released and that shows up in your county's property records. There are other kinds, such as a federal tax lien, which is the government's legal claim against all your property when you do not pay a tax debt.See the full definitionClose on it. It is valid only if signed and recorded with the county before the owner’s death. The owner can revoke it at any time by recording a revocation, and if there are several, the last one recorded before death controls. The beneficiary does not have to sign, consent or even be told, and a will does not revoke it.⁶

Washington’s law says something similar: the deed is revocable, takes the same capacity as making a will and must be recorded with the county before death. While the owner is alive, it does not take away the right to sell or mortgage the home, and it gives the beneficiary no right to it. At death, the beneficiary takes the home with its mortgages and liens, and is liable for certain claims against the estate as state law provides.⁷

Will and TOD deed, side by side

For all your property

Will

• Each state sets how it is signed; in Florida, in front of at least two witnesses.²
• In Florida, it cannot always decide what happens to a homestead.⁵
• In Arizona, it does not revoke a recorded beneficiary deed.⁶

Only for the home

TOD or beneficiary deed

• Must be recorded with the county before the owner dies.⁶⁷
• Can be revoked, and gives the beneficiary no rights while the owner is alive.⁷
• The home passes with its mortgages and liens.⁶⁷

Both depend on your state's law; where TOD deeds exist, what counts is what was recorded in time.⁶

If you inherit a home with a mortgage

The mortgage does not disappear when the borrower dies. The CFPB talks about continuing to make payments or seeking a modification,¹³ and in Arizona and Washington the home passes to the beneficiary of a TOD deed with its mortgages and liens.⁶⁷ But federal law and CFPB rules give you important protections.

The first is the Garn-St Germain Act. Many loans have a due-on-sale clause, which lets the lender demand the whole debt if the home is transferred without its consent. For a home with fewer than five units, the law does not let the lender use that clause because of a transfer to a relative resulting from the borrower’s death, when the borrower’s spouse or children become owners, a transfer by will, inheritance or operation of law on the death of a joint tenant, or a move into a living trust in which the borrower remains a beneficiary.⁸

The second is Regulation X. Someone who receives the home through those transfers is a successor in interest.⁹ The loan servicerloan servicerThe loan servicer is the company that sends you your mortgage statements and handles the day-to-day tasks of the loan: it processes your payments, answers your questions, keeps track of principal and interest paid and manages your escrow account, if you have one. It can also offer options if you fall behind and, in certain cases, start a foreclosure. It may be the same company that lent you the money or a different one, and it is common for another company to take over the loan after closing.See the full definitionClose must have procedures so that, when it learns the borrower has died, it promptly makes it easy to communicate with potential successors.¹² If you write to it saying you may be a successor, with the borrower’s name and information to find the account, it must answer in writing with the documents it needs and a phone number.¹¹ Once confirmed, you are treated as a borrower under the escrow and loan servicing rules.¹⁰

If you inherit a home with a mortgage, step by step

1. 1. Tell the loan servicer

   As soon as you can

   It is the company that sends the monthly statement. It may ask for proof of your right to the home.¹³

2. 2. Ask in writing which documents it needs

   With the borrower's name and the account number

   The servicer must answer in writing with the list of documents and a contact phone number.¹¹

3. 3. Gather the proof it asks for

   Depending on your state

   It may be a copy of the executed will and the death certificate, or a letter from the executor.¹³

4. 4. Wait for the servicer's decision

   Promptly, after you send the documents

   Its procedures must let it decide promptly and tell you whether you are confirmed, need to send more documents and which ones, or are not a successor.¹²

5. 5. Once confirmed, ask about your options

   After confirmation

   Ask how to keep making payments or how to seek a loan modification.¹³

If you want to take over the loan, the CFPB explains that if you already have title to the home, for example through inheritance, its rules do not require the lender or servicer to evaluate your ability to repay before letting you take over the mortgage.¹⁴ The CFPB also says the proof you are asked for may vary from state to state, and that you can ask how to keep paying or seek a loan modificationloan modificationA loan modification is a change in the terms of your mortgage that you agree on with your loan servicer when you have trouble paying. It is a type of loss mitigation, meaning one of the options to avoid foreclosure. It can extend the time you have to repay, lower the interest rate, or defer or reduce part of the principal balance, which can lower your monthly payment. Often you start with a trial modification for a few months; if you make those payments on time, the change becomes permanent.See the full definitionClose.¹³ If the payments are hard to make, our can’t pay my mortgage guide explains the options, and if your relative had a reverse mortgagereverse mortgageA reverse mortgage is a loan secured by your home for older homeowners. In the most common kind, HUD's Home Equity Conversion Mortgage (HECM), the youngest borrower must be 62 or older at closing. Instead of making monthly payments, you receive money; interest and fees are added to the balance each month, so the debt grows and your equity shrinks. The home stays in your name, but you must live in it, pay property taxes and insurance and keep it in good condition. It is repaid when you no longer live there, usually by selling the home. To get a HECM you must receive counseling from a HUD-approved agency.See the full definitionClose, our reverse mortgage guide covers that case.

The inherited home’s basis and taxes

For taxes, a home’s basis matters when you sell it: the IRS says it is the starting point for figuring a gain or loss.¹⁶ And the basis of an inherited home is figured differently from that of a home received as a gift.

Example with real numbers

Inheriting the home or receiving it as a gift during life

How the IRS figures basis in each case, in words. Your situation may have special rules.

You inherit the home when the owner dies

Generally, its fair market value on the date of death

The home is given to you during the owner's life

It depends on the giver's basis, the value on that day and any gift tax paid

What basis is for

Figuring your gain or loss if you ever sell

According to IRS Publication 551, there are exceptions, such as the alternate valuation date the estate's personal representative may choose.¹⁵ Basis is the starting point for figuring a gain or loss when you sell.¹⁶

The CFPB mentions that some families transfer the home from parents to children before the parent dies.¹⁴ If your family is thinking about that, know that the IRS figures the basis of a gift from the giver’s basis, not from the value on the date of death.¹⁵ If you have questions about your tax return, our free legal aid guide explains where to look for free tax help. And if you inherit the home and will live in it, our homestead exemption guide explains that property tax break.

Heirs’ property: when no one put the home in their name

Many families live for years in a home still in the name of a grandparent who has died. The USDA calls this heirs’ property: family land owned by the descendants of a person who died whose estate never went through probate. The heirs can use the property but do not have a clear or marketable titletitleTitle is your legal right to own and possess a property. The deed is the document showing that the seller transferred that right to you, and legal title is the title that can be documented in public records. As part of the purchase, a title search is done to see whether anyone else has a claim against the home; common claims come from a previous owner's unpaid taxes or from contractors who say they were not paid for work on the home. Title insurance protects you if such a claim shows up later.See the full definitionClose. The land passes down without a will or deed to prove who owns it, and each generation usually adds more heirs. Without proof of ownership, it can be hard to get federal benefits, and it could end in forced partition sales requested by third parties.¹⁷

Some states have special laws for these cases. In Florida it is called the Uniform Partition of Heirs Property Act.¹⁸ Under it, heirs property is property held by several co-owners in common, with no recorded agreement on how to divide it, where at least one got their share from a relative and, for example, 20% or more of the property is held by co-owners who are relatives.¹⁹ If someone asks the court to divide it, the court sets its fair market value, generally with an appraisalhome appraisalAn appraisal is a written document that gives a professional appraiser's opinion of how much a property is worth. The lender orders it before approving the mortgage, because the home is the loan's collateral and the lender does not want to lend more than it is worth. If the appraisal comes in below the price you agreed, the bank bases the loan on the lower value and you will have to cover the difference, renegotiate the price or walk away if your contract allows it. An appraisal is not an inspection: it measures value, not the home's condition.See the full definitionClose.²¹ And if a co-owner asked for a sale, the others can tell the court, no later than 45 days after the notice, that they want to buy that share at the price that comes from that value.²⁰

A home without clear title also attracts scammers who forge deeds; our deed theft guide explains how to protect yourself.

Where to get free help

To deal with the loan servicer or go over your payments, a HUD-approved housing counselorHUD-approved housing counselorA HUD-approved housing counselor works at an agency HUD has approved to provide housing counseling: independent, expert advice customized to your situation about buying a home, renting, a missed mortgage payment, a foreclosure or credit problems. The agencies usually charge little or nothing; many serve in Spanish and offer the homebuyer education course several assistance programs require. They are not lenders or real estate agents and sell you nothing. Your county page lists the official agencies with phone numbers.See the full definitionClose gives independent advice, often at little or no cost.²² The CFPB also mentions the HOPE Hotline, open 24 hours a day, at (888) 995-4673.¹³

For questions about a will, a deed or probate, free legal aidlegal aidLegal aid is the free civil legal help that nonprofit organizations and their lawyers provide to low-income people in civil, not criminal, matters. In housing, that includes representing families facing eviction or foreclosure, alongside matters such as custody, child support, protection from domestic violence and access to benefits. In the United States, the Legal Services Corporation, created by Congress, funds a nationwide network of these organizations; its finder points you to the one in your area. Each sets its own income limits.See the full definitionClose is an option, never a requirement. The Legal Services Corporation funds civil legal aid offices for low-income people; on its site you find the nearest one by entering your address or city, and LawHelp.org has free legal information and forms.²³

If this is you

You own your home and are thinking about your children

Arizona and Washington have a deed that passes the home at death, if it is recorded during life.⁶⁷ In Florida, check the homestead rule if you have a spouse or minor children.⁵

Your father or mother died and the home has a mortgage

Tell the servicer and ask in writing for the list of documents to confirm you as a successor.¹¹

Your spouse died and the home has a mortgage

For a home with up to 4 units, federal law does not let the lender use the due-on-sale clause because you became an owner.⁸ Ask the servicer how to keep paying.¹³

The home is still in your grandfather's name

That is heirs' property: without clear title, help is harder to get.¹⁷ LSC-funded legal aid offices serve low-income people.²³

Mistakes that can cost your family the home

• Mistake: Signing a TOD deed and not recording it with the county.

  Instead: In Arizona and Washington it is valid only if recorded before the owner dies.⁶⁷

• Mistake: Thinking a new will cancels a beneficiary deed.

  Instead: In Arizona, a will does not revoke it: it is revoked with a recorded document.⁶

• Mistake: Waiting until you have every paper before talking to the servicer.

  Instead: Tell it early and ask in writing which documents it needs.¹³¹¹

• Mistake: Believing the bank can demand the whole debt because you inherited.

  Instead: Federal law bars that for a transfer to a relative resulting from the borrower's death.⁸

• Mistake: Leaving the home in the name of someone who died for years.

  Instead: Without clear title, help is harder to get and it can end in a forced sale.¹⁷

• Mistake: Transferring the home during life without knowing how it changes the tax basis.

  Instead: The IRS figures basis differently for a gifted home and an inherited one.¹⁵

What to do this week

1. Find the deed to your home and see how it says the owners hold title; our guide on how to hold title with family explains each form.
2. If you are considering a transfer-on-death deed, check whether your state’s law allows it and how it is recorded; in Arizona and Washington, it must be recorded during life.⁶⁷
3. If you inherited a home with a mortgage, write to the servicer with the borrower’s name and the account number, and keep a copy.¹¹
4. Gather the death certificate, the will if there is one, and any letter from the executor.¹³
5. Ask the servicer how to keep making payments while everything is sorted out, or what options exist if you cannot; a HUD-approved housing counselor can guide you, often for free.¹³²²
6. If the home is still in the name of a relative who died, look for a free legal aid office near you; it is an option, never a requirement.²³