You have many options to consider when developing a great plan for how your property will be distributed after your death. Your attorney may suggest including certain provisions in your Will or creating and funding a trust. Another suggestion may be to use a deed to transfer property to your heirs. If you own real property, it’s important to know the pros and cons of using a beneficiary deed.
Deeds & Beneficiary Deeds
Most deeds transfer property right now. A beneficiary deed, or transfer-on-death deed, does just what its name implies – transfers the property to a beneficiary only upon your death. As grantor of the property, you retain ownership and control of the property during your lifetime and can revoke it anytime.
Sound like depressing way to transfer property? In some situations, there are very positive reasons to use a beneficiary deed.
Pros To Using Beneficiary Deed
- Avoids probate. Property transferred by a beneficiary deed does not need to go through probate.5
- Quickly transfer property. After the death of the grantor, it is relatively easy to transfer the property to the beneficiary or beneficiaries.
- Lower fees. Using a beneficiary deed may reduce or eliminate fees for probating the estate or managing a trust.
- Liens and loans. After a beneficiary deed is signed, grantors may still do what they want with the property, including selling it or mortgaging it. A beneficiary deed does not remove liens currently on the property when property is transferred to the heir.
If the property is owned as a joint tenancy with right of survivorship or community property with right of survivorship, the beneficiary deed becomes effective on date of the last owner’s death.
Cons To Using Beneficiary Deed
- Estate taxes. Property transferred may be taxed.
- No asset protection. The beneficiary receives the property without protection from creditors, divorces, and lawsuits.
- Medicaid eligibility. Your ability to get Medicaid may be affected.
- No automatic transfer. If your beneficiary dies before you, the property is not part of his or her estate.
- Incapacity not addressed. This type of transfer does not address or protect against your incapacity or disability. The property cannot be sold to pay for your care.
- Problems with beneficiaries. If your heirs are fiscally irresponsible, this type of deed allows them to sell or get a mortgage against the property immediately after your death.
Validity Of Beneficiary Deed
For a beneficiary deed to be considered valid and enforceable, it must:
- Comply with Arizona law.
- Be signed before notary public.
- Be recorded with the County Recorder before your death.
Get The Big Picture
A beneficiary deed might be the perfect way to transfer property to your heirs – or not. A thorough discussion with a qualified Arizona estate planning attorney will help you decide if this is the right path for you.
At Keystone Law, Francisco Sirvent assists people with their legal questions every day. To schedule an appointment, call us at (480) 418-8448. We offer services for clients throughout Arizona, including Chandler, Gilbert, Sun Lakes, Tempe, Phoenix, Mesa, Scottsdale, and Apache Junction.
