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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.
Additional Articles
Upcoming changes to Arizona
guardianship/conservatorship laws
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this site have been prepared for informational
purposes only and do not constitute legal
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