A new form of real estate transfer, the beneficiary
deed, has, as I expected, become popular very
quickly as a way to transfer real estate to
a person's successors without a probate and
without the potential problems of using a joint
tenancy deed. Because the Arizona Legislature
recently clarified some details of the law,
I decided that now would be a good time to revisit
the subject and to discuss the use of a beneficiary
deed for property with multiple owners and multiple
beneficiaries.
The beneficiary deed does for real estate what
the "payable on death" or "POD"
designation does for a bank account. It allows
the owner to designate a beneficiary for that
asset and creates a method by which ownership
of the asset will transfer directly to the beneficiary
upon the owner's death. It is not affected by
the owner's will, meaning that the property
will pass to the designated beneficiary regardless
of any contrary provision in the owner‘s
will.
The difference between a beneficiary deed and
joint tenancy is that with joint tenancy, all
of the joint tenants (owners) have a present
ownership interest in the property. With a beneficiary
deed, the beneficiary has no ownership interest
in the property until the present owner dies.
This means that the owner retains complete control
of the property while he or she is living, and
the beneficiary has no control over the property
until the owner dies.
Transfer of title upon the owner's death is
essentially the same under a beneficiary deed
as under a joint tenancy deed. Recording the
death certificate together with an affidavit
reciting the contents and location of the deed
confirms title to the surviving beneficiary.
Also as with a joint tenancy deed, the transfer
to the beneficiary is subject to all recorded
liens.
A beneficiary deed can name one or multiple
beneficiaries, and can be given by one owner
or multiple owners. If there are multiple owners,
all of them must sign the beneficiary deed in
order to transfer the entire ownership of the
property. If there are multiple beneficiaries,
the title can pass to the beneficiaries in any
legal form of ownership. Use of multiple beneficiaries
is usually not optimum, however, for the simple
reason that ownership of property by multiple
individuals makes management and disposition
of the property cumbersome. Use of a business
entity or a trust is usually preferable if multiple
individuals are to be the owners.
A beneficiary deed may also be used to transfer
property to a trust. Ordinarily a person creating
a revocable living trust transfers their property
to the trust as soon as the trust is created,
but there may be circumstances where a person
would want to delay such a transfer until their
death. Using a beneficiary deed under those
circumstances would avoid the need for a probate
transfer of the property.
The law creating the beneficiary deed became
effective in August, 2001. A beneficiary deed
will not be the right method for everyone, but
it can be an effective way for property owners
to pass property to their successors without
the potential problems of joint tenancy or the
need for a probate proceeding.
