Is a Beneficiary Deed Right for You?

February 19, 2016

A beneficiary deed is a simple tool that property owners may use to make a non-probate transfer of real property immediately upon death. 

A beneficiary deed is similar to a payable-on-death designation on your bank account. It allows for a quick and smooth transfer of property and is an inexpensive and easy alternative to transferring property through a will or creating, funding, and administering a living trust.

A beneficiary deed does not transfer property until death. The beneficiaries hold no interest in the property during the property owner’s lifetime. The owner of the property maintains complete control over the property and may revoke the deed at any time.

A revocation must be recorded in the office of the county recorder before the death. It is important to remember that a subsequent will does not amend, revoke or alter a beneficiary deed. Therefore, if you want to change or revoke the deed, simply changing your will is not going to do the trick.

If property is owned as a tenancy by the entirety or as a joint tenancy with the right of survivorship, the property does not pass until the last joint owner's death. The property passes subject to any encumbrances, liens and claims from federal and state governments for benefits provided, such as Medicaid.

A beneficiary deed must be recorded in the office of the county recorder in which the real property is located to be valid. An unrecorded deed sitting in a safety deposit box is not valid. 

A beneficiary deed avoids probate, which is desirable to many. A will must be probated for assets to be transferred to beneficiaries of the will. Probate can be costly and time consuming and involves a waiting period. Title to property is not transferred until the probate process is complete. When property transfers by way of a beneficiary deed the transfer bypasses probate.

A beneficiary deed also avoids the expense of creating and funding a living trust. A trust may also have ongoing expenses of administration. While a beneficiary deed does not provide as much flexibility as a trust, the property owner still has several design options. For example, a property owner may designate multiple grantees. The property owner may also designate how the beneficiaries will hold their ownership interest. It also allows the owner to name alternate beneficiaries.

For many people, a beneficiary deed is a great option for estate planning.

As with any estate planning, whether or not a beneficiary deed is right for you depends upon your unique circumstances. But it is a valuable tool to consider using. 

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