Beneficiary deeds, also called a “transfer-on-death” deed, are a good way to avoid the cumbersome and expensive process of probate. Real estate is one of the assets that triggers a probate proceeding. The Beneficiary Deed can streamline what could otherwise be a slow and difficult process.
With a beneficiary deed, the real estate owner can retain ownership of the property, then upon the owner’s death, the beneficiary deed transfers the real estate to another party without the necessity of probate. The language must meet the Alaska law requirements and be recorded prior to the owner’s death.
When Does a Beneficiary Deed Become Legal?
A Beneficiary Deed becomes legal as soon as it is recorded, however it does not take effect until death. This means the owner can still sell the property, take out a mortgage, or do anything else that full ownership would allow. The beneficiary has no legal right to the property and no interest is actually conveyed, until the owner’s death.
What if I Change My Mind and Don’t Want a Beneficiary Deed?
As an Anchorage estate planning attorney, I have seen circumstances where a person goes through the time and expense of creating an estate, only to fail to update their financial or retirement accounts beneficiaries before their death. This may cause the unfortunate distribution of an asset to a now unintended beneficiary. As life changes so do our relationships. Beneficiary designations may need to be updated over time to reflect relationship changes.
What Happens If Your Beneficiary Dies Before You?
The majority of people we see in our Anchorage estate planning law firm name their adult children as beneficiaries of their estate plan. In most cases, this works well because children typically outlive their parents. But what happens when a child dies before the parent? Typically an alternate beneficiary is named in the deed, in case the primary beneficiary passes away first.
If you do not have a will or trust in place, the state of Alaska statutory distribution will determine what happens to your assets. This is another reason to regularly update your beneficiary information.
A Beneficiary Deed can be revoked or amended as many times as is necessary, as long as the owner has the capacity to do so. Just as the beneficiary deed must be recorded to become legal, so must any revocations or amendments.
How Does a Beneficiary Deed Work With the Rest of My Estate Plan?
Planning is key. Different kinds of ownership will sometimes require specific kinds of language. It’s important to get it just right, so that all documents are integrated.
What About Joint Ownership?
Sometimes people use joint ownership as a way to transfer property. While joint ownership can help avoid probate, it can also create complications. Naming a joint owner will transfer ownership of the real estate completely to the owner or owners, upon the death of one.
While you are living, under joint ownership, your home would be available to creditors, in the event of a judgement against either party. Your home could also become part of any bankruptcy or divorce proceedings involving your joint owner.
Beneficiary Deeds In Summation
Beneficiary Deeds can be a great way to keep things simple when structuring an estate plan. In some situations, a more sophisticated estate plan might be necessary, to accomplish all that is desired.
A will, for instance, is typically used to dispose of tangible personal property, small bank accounts and to name guardians for minor children.
A Beneficiary Deed may still be used as a tool to simplify the funding of your trusts, in the case of a more complex estate.
It’s also worth considering that if a Beneficiary Deed has multiple owners, it won’t transfer ownership until all the owners are deceased.
For that reason, it may be wiser to protect your property with a trust. Also, if your designated beneficiary is your direct descendant, and that person dies before you do, the property will then pass to that person’s direct descendants, but only if this distribution is included in the deed. If this is against your wishes, alternate designations must be made in the deed.
Ready to Start Planning?
As you can see, every family and therefore every estate is a little bit different. At the Law Office of Constance A. Aschenbrenner, we can educate you about the choices for your entire estate plan. We will walk you through a plan that will help you achieve peace of mind, knowing that if you face a crisis, your final decisions will have already been made.