Beneficiary Deeds: What are they? When are they used?
Selling the family home at 8895 Morton Road in Niwot, Colorado was unexpectedly delayed due to a deed issue that surfaced after a parent passed away. Despite receiving multiple offers early on, we couldn’t move forward because of unresolved ownership barriers. As a result, the home sat on the market for nearly a year. The good news? Once resolved, the home went under contract immediately and recently closed.
This experience is a reminder of how important it is to properly deed your parents' home and check the title before listing. Taking care of these legal details in advance can save a lot of time, money, and heartache!
We connected with our friend and client, Julia Winters and others from her team, who helped to bring a happy ending to this family's story of selling the home they grew up in.
You may be wondering...What is the beneficiary deed process? and ...When should they be used? Read on...
1. Short explanation of Beneficiary Deed process:
- If advised by an estate planning attorney that a Beneficiary Deed is appropriate (they are not always appropriate depending on details of the client's situation), an attorney prepares the Beneficiary Deed, the property owner(s) execute(s), and the attorney should record the Beneficiary Deed ASAP. (It MUST be recorded in the county where the property is located before the death of the property owner(s)).
- The Beneficiary Deed has NO EFFECT until the last of the owners/Grantors dies (if more than one), so if the owner(s) want to sell before that event, the sale just voids the Beneficiary Deed.
- After the death of the last owner/Grantor, the Beneficiary Deed is effectuated by the recording of a Supplemental Affidavit and death certificate(s) of the owners.
- There is NO new deed issued to the beneficiaries that inherited the property; instead, a title company usually searches the chain of title records to see when the owner(s) originally purchased the property, when the Beneficiary Deed was recorded, and when the Supplemental Affidavit and death cert(s) were recorded.
- Also, probate is NOT required. No Personal Representative needs to be appointed by the probate court/ NO "Letters Testamentary/of Administration" are required to transfer the property after the owner(s)/Grantor(s) death.
2. When Beneficiary Deeds are used:
- Clients are often advised to use Beneficiary Deeds when they want to avoid probate via beneficiary designations on all their assets (if they don't cover all their assets, their estate may end up in probate court) as an alternative to utilizing a trust. (It's less expensive and easier to use beneficiary designations but not always appropriate).
- Generally, we advise Beneficiary Deeds if there are only one or a few beneficiaries who will cooperate after the death of the Grantor(s); and if there are more than one beneficiaries who may have a difficult time cooperating or if there are many beneficiaries, we do not advise the use of this tool (again, this is a generalization and each client's unique situation needs to be discussed and analyzed).
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