BENEFICIARY DEED

In 2001, Arizona became the second state to enact a statute (ARS §33-405) which permitted the use of a beneficiary deed to transfer real estate upon the death of the owner. In other areas of the country the deed is referred to as a transfer-on-death (TOD) deed. The beneficiary deed is similar in all respects with other deeds used to transfer real estate, except the one crucial difference being that the deed does not take effect until the death of the conveying party. The owner of real property is permitted to designate by deed, a beneficiary of the real property, and, on the death of the owner, the property passes to the beneficiary without the need for probate. In 2007 there were only 9 states that recognized the beneficiary/TOD deed. Currently there are 17 states which allow the use of beneficiary/TOD deeds.

The 17 states are: Arizona, Arkansas, Colorado, Hawaii, Illinois, Indiana, Kansas, Minnesota, Missouri, Montana, Nevada, New Mexico, North Dakota, Ohio, Oklahoma, Oregon, and Wisconsin. On January 1, 2013 Nebraska’s death deed act will go into effect.

                Each state has specific laws that govern the use of the deed in their state.

Aside from states that recognize transfer on death deeds by state statute, at least three states – Florida, Michigan and Texas – recognize an “enhanced life estate deed,” also called a “Lady Bird Deed,” under state common law. In these states, an enhanced life estate deed functions in a manner similar to a transfer on death deed.

                The beneficiary deed is a relatively easy and inexpensive way to transfer real property and aids in avoiding probate. Since this type of transfer is seen by many as an easy and inexpensive way to transfer real estate, many assume that the use of an attorney to prepare the document is unnecessary. However, as with any estate planning, a consultation with an attorney is probably best. Estate tax limits change constantly and consideration must be given to the tax implications which may arise upon the death. The taxes are just one consideration when contemplating the use of a beneficiary deed there are many others factors to consider. The attorney drafting the estate plan will review and discuss the clients entire estate. The attorney will also ensure that a durable power of attorney exists, with specific provision to permit the revocation of a beneficiary deed. A revocation may become necessary if the grantor becomes incapacitated. Such incapacitation without a durable power of attorney could further complicate matters especially for caregivers of the incapacitated party.

              Upon the death of the grantor to the beneficiary deed, further documentation is necessary to effect the end intended result of the deed. Such as, recordation of the death certification and an affidavit. A beneficiary deed which is executed but never recorded has no effect on the property as the statute in Arizona (§33-405) requires that the deed be recorded. This requirement prevents any transfer to occur on someone’s deathbed.

If you would like to read more about beneficiary deeds we have found the article written by Thompson Law Group to be most helpful. The article can be found here.

The preparation of documents by Title Security Agency and its Escrow staff can only take place when a transaction is opened for the purchase, sale, loan or refinance of a property. As such, preparation of beneficiary deeds are not part of the services offered by Title Security Agency.

If you have questions or comments regarding this blog post contact Brigitte Echave at Brigitte.Echave@TitleSecurity.com or 520-722-2578.

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