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What Is A Beneficiary Deed?

What is a beneficiary deed?

Beneficiary deeds are used when someone wants to transfer ownership of a real property to another individual after they die. They’re also useful for transferring assets between spouses, children, and other family members. To learn more about what is a beneficiary deed, keep reading.

Who Needs A Beneficiary Deed And Why?

It is for real estate.

If you own real estate, you need to make sure it will go to the person or persons you intend when you pass away. A beneficiary deed will ensure that your intended recipients receive the full value of your home at the end of your life. It goes to them directly, rather than going through an expensive and time-consuming probate.

Other accounts can also have beneficiaries.

Also consider how much money you have saved in retirement accounts and other investments. You should name beneficiaries who will inherit these funds as well. The same goes for life insurance. If you don’t name a beneficiary of your life insurance, it will go to probate when you die. (You don’t use a beneficiary deed for these account. Rather, the specific financial institution will provide its own form to use.)

What Are Some Of The Benefits Of Having A Beneficiary Deed In Place?

There are several benefits. First, it ensures that your named beneficiary or beneficiaries get the full value of your real property when you die. However, if there is more than one beneficiary, you put them in a position of owning real property together. If they do not agree on how to manage or use the property, they could end up in court in a partition action.

Second, it helps protect your loved ones by ensuring that your assets are distributed according to your wishes. This assumes that you want the named beneficiary or beneficiaries to receive the property. Don’t assume the beneficiary will later sell and distribute the money according to a conversation you had with them. That rarely happens. (If you want to make sure property goes to certain people, it’s best to use a revocable living trust.) This also assumes that our named beneficiary doesn’t owe money to creditors or for taxes. If they do have creditor problems, the house could end up going to the creditors.

Third, it allows you to leave gifts to others without worrying about taxes. (However, the beneficiaries may need to pay an estate tax, depending on your net worth.)

What Should You Include In A Beneficiary Deed Form?

Arizona has specific requirements. A.R.S. Section 33-405 even contains model language. Other states have their own requirements. For instance, California calls these Transfer on Death Deeds and list the requirements in their statute.

When Do You Need To Record A Beneficiary Deed For It To Become Valid?

You need to record the deed before you die. If you die without having recorded the beneficiary deed, the deed is not effective.

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Founding attorney Paul Deloughery has been an attorney since 1998, became a Certified Family Wealth Advisor. He is also the founder of Sudden Wealth Protection Law.