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What is a Beneficiary Deed and Could it Work for Me?
For many of us, our home is our primary asset—not just in monetary value, but in sentimental value too. So we may worry about what will become of our home when we die. Do I have to mention it in my will? Could my spouse continue to live there for his or her life, then could I leave it to my child from a prior marriage? What if my children are under the age of eighteen?

The law provides an array of options for a homeowner to plan for the disposition of his or her home upon death. One option available in Arizona (and a handful of other states) is for the homeowner to execute and record a Beneficiary Deed. Depending on the homeowner’s estate planning needs, a Beneficiary Deed can be an easy and efficient way to control the passing of the home after death.

The main advantage of a Beneficiary Deed is that it can help avoid the hassle and cost of probating your estate after your death because it removes the home from your probate estate. If your remaining probate assets are under the statutory amount (currently $50,000), your estate can generally be administered without the need for court probate proceedings. Transfer by Beneficiary Deed can be cheaper than establishing a living trust to avoid probate, and unlike a trust, which would require that the home be conveyed to a trustee, with a Beneficiary Deed the homeowner retains full control over the home. A Beneficiary Deed may be freely changed or revoked at any time by the homeowner(s). And unlike certain transfers in trust, a Beneficiary Deed does not incur gift tax liability because it is not a present transfer of the interest in the property.

On the flip side, a Beneficiary Deed is not appropriate in certain situations. If the home is owned in joint tenancy with right of survivorship, when the first homeowner dies, the home will pass to the joint tenant. Even if the deceased spouse and surviving spouse executed a Beneficiary Deed prior to the deceased spouse’s death, the surviving spouse is free to change or revoke it, bypassing the deceased spouse’s plan for the home. A trust that becomes irrevocable at the first spouse’s death may be a better option when this situation is a concern. There are also complications if the beneficiary under the deed is a minor child (although these can be overcome with proper planning). Additionally, although a Beneficiary Deed can designate the home to multiple beneficiaries, it is best used when leaving the home to a single individual or couple due to potential complications in administering the interests of multiple beneficiaries.

One last caviat: Beneficiary Deeds must contain specific language and must be executed and recorded in the manner required by law in order to be effective. Homeowners should seek the advice of an Arizona attorney who practices in real property/estate planning before attempting to execute a Beneficiary Deed. Any defects in the procedure could frustrate the homeowner’s plan for the home.

But with proper guidance, you may find that a Beneficiary Deed is the perfect tool to provide you peace of mind as a homeowner and the knowledge that the place you made your memories will pass into loving hands.
 

 

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