How Does a Beneficiary Deed Work to Avoid Probate?

Also known as a Transfer on Death deed, a beneficiary deed is a particular type of deed that can be used to transfer ownership of real estate outside the reach of a probate court. Typically used in transactions like reverse mortgages, the beneficiary deed grants an interest in real property to a beneficiary at the time of the grantor’s death. As a revocable instrument, the grantor can make changes to the beneficiary deed throughout their lifetime. Beneficiary deeds are tools that our team of Springfield probate lawyers frequently use with estate planning clients looking to maximize their estate’s wealth. 

Beneficiary deeds allow property within them to avoid probate and can be used to remove a particular property from a probate estate. When used with a reverse mortgage – a transaction that allows a homeowner to borrow cash from the equity in their home – the beneficiary can immediately access the property and begin working with the lender or servicer to deal with matters like the sale or transfer of the property.

How Do Beneficiary Deeds Work?

When an individual owns real estate and does not have a co-owner deeded to the property, they are generally required to pass the property onto a beneficiary through probate court. While assets in a living trust also avoid probate court, it’s often simpler and more cost-effective to create a beneficiary deed.

Beneficiary deeds are created upon signing, meaning that it only takes drafting a document that lists another beneficiary as your property owner. This transfer of title won’t occur until you pass on, meaning that you will be entitled to the full rights and use of the property for the remainder of your life. What’s more, because these deeds are revocable, you can update or change the beneficiary at any point in time, so you have plenty of flexibility if you change your mind. 

To get this done, your Springfield probate lawyers will record the beneficiary deed with the country records office in which the property is located. If you were to change your mind, the paperwork would simply be revoked and corrected to reflect the new changes. 

Because you’re not actually giving the property away during your lifetime, the property listed in the beneficiary deed won’t incur a gift tax. Still, it would be included as part of the total value of your estate for tax purposes. Determining whether saving on the gift tax or having the property be included on the tax of your entire estate will be a question for your attorneys, who can advise on some of the more common approaches to minimize tax obligations on your estate.

Hire our Springfield Probate Lawyers to Get Started

Preparing for the transfer of your estate includes considering the fastest and most cost-effective solutions for getting it done. You want to ensure that your heirs enjoy the benefits of their inheritance without the burden of unnecessary tax obligations. Our Springfield probate lawyers frequently counsel clients toward solutions that work for their families. Contact our offices today to get started.