The problems all come from the same place: the deed names one outcome and coordinates with nothing, so a beneficiary who dies first, a beneficiary who is a minor, several beneficiaries who cannot agree, unpaid creditors, Medicaid recovery, and a later will that says something different are all situations it handles badly or not at all.
None of this makes the instrument a bad one. It is cheap, it is one page, and for the right estate it does exactly what a much more expensive plan would have done. The problems are worth knowing because they are almost all avoidable, and because they surface after the person who could have fixed them has died.
The specifics vary by state, since every transfer on death deed is a creature of one state's statute. What follows is the pattern that shows up across them.
The beneficiary who is not there to take it
If the named beneficiary dies before the owner, most statutes simply void the gift as to that person. There is no automatic substitution of their children unless the deed named a contingent beneficiary or the statute supplies an anti-lapse rule, and many do not. The property then falls back into the estate and goes through the probate the deed was written to avoid.
The fix is naming an alternate in the deed itself, which the statutory forms in some states do not obviously invite you to do. A deed drafted in ten minutes off a template usually names one person and stops.
Minors and incapacity
A minor cannot hold or convey real property in their own name. Naming a grandchild means that at the death the title vests in a child, and selling or mortgaging it requires a court-appointed guardian of the estate, with a bond, an accounting, and a judge's approval of the sale. That is a probate-style proceeding arriving through the door the deed was supposed to close.
The same problem shows up if the beneficiary is an adult who has lost capacity, or if the owner loses capacity before recording, since capacity to make or revoke one of these deeds is usually measured by the standard for making a will. A trust handles both cases and a deed cannot, because a deed has no mechanism for holding property on somebody's behalf.
Several beneficiaries and one indivisible house
Naming three children usually leaves them as tenants in common, each with an undivided fractional interest. Any one of them can block a sale by refusing to sign, and any one of them can force one by filing a partition action, which is a lawsuit that ends in a court-ordered sale with fees taken off the top.
That is fine when everyone agrees. It goes badly when one sibling lives in the house, one wants the cash and one wants to keep it as a rental, and there is no executor here with authority to sell and divide the proceeds, only co-owners. Each co-owner's own creditors and divorces now attach to a fractional interest as well, so three beneficiaries means three sets of risks pointed at one parcel.
Creditors, Medicaid, and the waiting period
The property does not arrive clean. It arrives subject to every lien recorded against it, and in many states it also stays reachable by the deceased owner's creditors when the probate estate is too small to pay allowed claims and family allowances. Some statutes put that in the beneficiary's hands: publish a notice to creditors, mail it to the personal representative and the state Medicaid agency, and wait out a claim period, commonly measured in months, before distributing or selling.
Medicaid estate recovery is the version that costs the most. States that expanded recovery beyond the probate estate can reach property that passed this way, and several transfer on death deed statutes say directly that nothing in them limits recovery of Medicaid benefits. A deed does not shelter a house from a long-term care claim.
Lenders and title companies add their own delay. The beneficiary owns a house with somebody else's loan on it, is not the borrower, and has to be recognized by the servicer as a successor in interest before they can even be told the balance, while the payments stay due throughout. Title underwriters then vary in how long after a death they want to wait and what affidavits they want recorded, so a beneficiary who needs to sell quickly can lose months to a rule nobody mentioned when the deed was signed.
The deed that outranks the will, and the fight about how it got signed
A transfer on death deed usually beats a later will as to that parcel. Someone who signs a deed in 2020 leaving the house to one child, then writes a will in 2024 leaving everything equally to three, has probably left the house to the one child, because the will never revoked the deed and in most states cannot. Whether that was intended is exactly the sort of thing families litigate.
So is capacity and undue influence. A one-page deed signed at a kitchen table, notarized by a mobile notary, with no lawyer and no witnesses, is easier to attack than a will executed with the usual formalities. The claim is usually that the person who drove the owner to the notary chose the beneficiary.
Recording mistakes round out the list: the wrong legal description, a deed recorded in the wrong county, a deed never recorded at all because it sat in a drawer, and a second deed recorded later that quietly revoked the first.
When it is still the right tool
One house, one competent adult beneficiary, no Medicaid history, a modest estate, and a family that is not going to argue. That is a large number of people, and for them the deed does the job of a trust at a fraction of the cost. It gets worse as the facts get more complicated: minor or multiple beneficiaries, several properties, a blended family, likely long-term care, or a house with more owed against it than it is worth.
Questions people ask
Can a will override a transfer on death deed?
In most states it cannot, because the deed passes the property outside the estate and the will only speaks to what is in the estate. A few statutes allow a will to revoke one if it meets specific requirements, so the state's own statute is the thing to read.
What happens if the beneficiary dies before the owner?
Unless the deed named an alternate, or the state supplies a substitute by statute, the gift lapses and the property stays in the estate to be distributed by will or by intestacy. That normally means the probate case the deed was intended to avoid.
Does the beneficiary inherit the mortgage too?
They inherit the house with the mortgage still attached to it, which is not quite the same as becoming personally liable on the note. The loan has to be kept current or refinanced or the house sold, because the lender's lien survives the transfer untouched.