Are Beneficiary Deeds Worth It?

When planning your estate, there are several paths to take. First, the distribution of your wealth after your passing is important to get right. After all, it’s your family that needs these assets now. Some provisions can help if included in your will, or you might fund a trust. In this article, we’ll be discussing one form of property transfer, the beneficiary deed.

What is a Beneficiary Deed?

If you were to write a deed today, you would transfer property today. Beneficiary deeds, meanwhile, transfer property on your death. Until then, you are the property’s grantor. During your life, you can change your mind on the beneficiary deed. This is why they are also called ‘transfer on death’ deeds. No actual transfer occurs until your death. The deed must be valid before the time of your death. These have several considerations that must be made.

Some things make these deeds attractive for certain situations. The property included in a beneficiary deed is not subject to probate. It is also a very quick way to transfer property. The fees are lower, and in some cases, you can find the paperwork to file this deed yourself. You should also know that joint property can delay the execution of a beneficiary deed. In the case of a shared property, the deed is effective when the final owner dies.

However, there are also significant flaws with beneficiary deeds.

The Downside of Beneficiary Deeds

In other states, these deeds can apply to all sorts of property. Transfer-on-Death or Payable-on-Death deeds are used to move money and non-real estate assets. In the State of Florida, a Lady Bird deed is used instead. These are exclusively for real estate. Lady Bird deeds are easy enough to file that an attorney isn’t needed. However, this can make them a little harder to work with and leave you open to unexpected situations.

For example, if a beneficiary passes on before you do, it isn’t always clear what will happen to your property. If your beneficiary predeceases you, it’s important to change beneficiaries. Beneficiaries are also jointly responsible for the future of the property. If beneficiaries don’t cooperate, there can be problems down the road. Mortgage applications have also become trickier. Title insurance companies often don’t get involved with properties part of a Lady Bird deed.

Another serious concern (And there are many more!) is that your loved ones could be at risk of harassment by creditors. Lady Bird’s deeds often open the property up to attack. If a beneficiary is experiencing a divorce or other large judgment, creditors can take part in the property’s value.

The Solution

It may be that a Lady Bird deed or beneficiary deed suits your situation. It may. In many cases, however, reputable attorneys will recommend forming a trust instead. Trusts offer most of the same benefits as a beneficiary deed and more. They allow you more living flexibility with your plans and provide more protection. It can be very hard to say for sure without knowing your situation.

Your tax situation, the lives of your beneficiaries, and the amount of property make your case unique. Therefore, you need legal representation that will devote itself to your case. At Dowd Law, we will help you find which option is the very best for your needs.