Estate plans are not a one-size-fits-all game. You may need a simple Will for a simple estate. People with more complex estates need an estate plan that covers all the bases. Advanced estate plans may include lengthy Wills, trusts, strategies to reduce taxes and minimize probate. One tool that is commonly used for people who own real property is the beneficiary deed.
Beneficiary Deeds Defined
A deed is a legal instrument that conveys a property interest. Deeds must contain a thorough description of the property or interest being conveyed and must be signed. After agreed upon and signed, the deed is recorded with county recorder for the county where the property is located.
Also known as a transfer on death deed, the beneficiary deed differs from other deeds in that the property interest is not conveyed immediately to the new owner. Instead, the grantor (the owner) retains control of the property until his or her death. At that time, the property passes directly to one or more beneficiaries.
Benefits of Beneficiary Deeds
The first benefit is mentioned above: the property passes directly to the beneficiaries. In fact, real property transferred through a transfer on death deed does not become a probate asset. Avoiding probate in this way means that heirs are not subjected to a possibly lengthy probate proceeding or the associated fees.
Beneficiary deeds are often used to pass real property from parents to their children. The parents, as owners of the property, retain control and usually continue to live at the property. But this type of deed is not limited to family members. An owner could transfer interest to a life partner or close friend.
The owner may revoke the beneficiary deed at any time without the consent of the future owners.
Disadvantages of Using Beneficiary Deed
The transfer on death deed is probably not the best way to give property to a minor. If one of your beneficiaries is under age 18, talk to an attorney.
Transferring property to someone who receives government benefits can negatively impact their eligibility. Consult with an attorney who is experienced with elder law, special needs, or incapacity planning before conveying property to anyone who uses or may use government benefits.
Also, mortgages or liens on the property don’t go away. When the new owners take on the property, they also take on any claims against it.
Beneficiary Deeds Can Be a Great Tool, but . . .
Before rushing out to sign a beneficiary deed, make sure it’s the right strategy for you. Talk to a qualified Minnesota attorney about your estate plan, and learn whether a beneficiary deed would be beneficial. Call Virtus Law at 612.888.1000 or send us an email at email@example.com. Our main office is in Minneapolis, Minnesota. Other offices: Edina, Mendota Heights, and Red Wing.