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What is a “Beneficiary Deed” and can it help me?
September 13 , 2004 by Monica DonaldsonIn my last article, I mentioned the “Beneficiary Deed” as an estate planning tool that could help avoid probate. This article defines and explains the use of the Beneficiary Deed in greater detail.
In April of 2001, Arizona Revised Statutes section 33-405 was enacted. Paragraph A of this statute defined a Beneficiary Deed as
A deed that conveys an interest in real property, including any debt secured by a lien on real property, to a grantee beneficiary designated by the owner and that expressly states that the deed is effective on the death of the owner transfers the interest to the designated grantee beneficiary effective on the death of the owner subject to all conveyances, assignments, contracts, mortgages, deeds of trust, liens, security pledges and other encumbrances made by the owner or to which the owner was subject during the owner's lifetime.
In other words, if you own real property, you can sign a deed granting the property to a designated beneficiary, and upon your death, your designated beneficiary becomes the owner of the property.
A Beneficiary Deed follows the same reasoning as a Living Trust – the asset avoids probate because it is not considered part of the deceased owner’s estate. However, if your situation does not otherwise warrant the use of a Living Trust, a Beneficiary Deed can achieve probate avoidance without the cost or complication of a Living Trust. The following lists illustrate the contrasts and comparisons between a Beneficiary Deed and a Living Trust.
Beneficiary Deed
Avoids probate?
Yes, if done in compliance with statutes
Cost to set up
Usually $100-200, plus a small recording fee
Control
Remains with owner until death
Revocable?
Yes
Living Trust
Avoids probate?
Yes, if properly funded
Cost to set up
Usually $1200 - $2500
Control
Remains with Trustee
Revocable?
Yes
As with any estate planning matter, it is a good idea to consult with an experienced attorney before executing a Beneficiary Deed, particularly if you have any of the following potential complications: (1) multiple owners; (2) multiple beneficiaries; and (3) minor children as beneficiaries.
To discuss Beneficiary Deeds or any other estate planning questions, please feel free to contact me at mdonaldson@evliving.com or (480) 792-9770.
