A transfer on death (TOD) deed is a common method of transferring real estate. Upon death of the homeowner, the deed instantly transfers the property to the named beneficiary. A recent case brings to light a lurking danger of using TOD deeds, and serves as a cautionary tale.

New precedent

On February 5, 2021, the Eighth Circuit Court of Appeals decided the case of Strope-Robinson v. State Farm Fire and Casualty Company. Although based on Minnesota law, Strope-Robinson holds an important lesson for those who own homes in Ohio and other states that allow TOD deeds.

In this case, Dawn Strope-Robinson became the owner of her uncle’s home pursuant to a TOD deed. The uncle had insured the property. The new owner of the home, Ms. Strope-Robinson assumed insurance would cover in the event of property damage. A week after the uncle’s death/Ms. Strope-Robinson’s acquisition of the property, the uncle’s ex-spouse intentionally set the home on fire. Ms. Strope-Robinson filed a claim with State Farm for the loss of the house. State Farm denied this claim.

The District Court ruled in favor of State Farm. The Eighth Circuit Court of Appeals affirmed. The Appellate Court based its decision on the following: since the transfer from the uncle to Ms. Strope-Robinson occurred immediately upon the uncle’s death, the uncle’s estate did not have an insurable interest at the time of the fire. Moreover, Ms. Strope-Robinson was not covered because it was the uncle (not her) who was the named beneficiary on the insurance policy. Ultimately, Ms. Strope-Robinson was left in an unfortunate situation.

How an attorney can help

By incorporating certain language into Wills, thoroughly reviewing insurance policies, and providing sound advice throughout the process, counsel can help ensure this does not happen to you.