Every week, clients approach our firm in hopes of saving their heirs the need to probate their estate…after all, you worked your entire life to acquire assets and likely want them to pass to your loved ones without delay and expense. Here is one way to reduce the list of assets that require court involvement and better yet….the cost is so remarkably reasonable you will kick yourself for not having one on file already.
Chapter 461.025 of the Missouri Revised Statutes provides for the creation of a beneficiary deed. A beneficiary deed transfers ownership in a residence to a grantee or multiple grantees when the last owner dies. Similar to the Payable on Death procedure for bank accounts or the Transfer on Death procedure for titled personal property, the use of a beneficiary deed is an effective way to avoid probate of your home, which for most Missouri residents is, and will be, the largest asset they own.
Loans and liens must be satisfied: Now the use of a beneficiary deed will not allow your heirs to receive your premises free and clear of mortgages and liens. Beneficiary deeds are not bankruptcy tools. Instead, grantees take ownership of the premises subject to all loans and liens and must satisfy or pay those obligations in order to enjoy free and marketable title to the premises. In plain terms, if the grantees want to keep the premises after your death, they continue to pay the existing obligations you incurred while you owned the premises or they can refinance the loans if the lender so requires. If they merely want to cash out, they sell the premises, pay off any mortgages and liens at closing, and then enjoy their net cash benefit from your estate.
Beneficiaries/Grantees are anyone of your choosing: Beneficiaries or grantees within the deed can be anyone of your choosing; they are not required to be relatives. If you and your spouse want your two grown children to inherit your home upon the second of you to die, a beneficiary deed is the perfect way to do so. If you want to leave everything to your children but for your home, you file a beneficiary deed and the home would not be included in your probate estate inventory or subject to court order.
When do beneficiary deeds transfer the property: Your named beneficiaries take ownership of the home instantaneously upon the death of a sole owner, or the death of the last surviving of multiple owners. For example, you own a home with your spouse and you create and file a beneficiary deed while she is alive. She then predeceases you but the home remains yours until you die. Upon your passing, if the beneficiary deed remains unchanged and on file, the home instantaneously transfers to your grantees when you die. While alive, any owner can revoke or amend a beneficiary deed. Moreover, the interest given to a beneficiary deed is not vested until the last owner dies so grantees are not free to market their share in the premises to others or lien their interest by taking out a loan. Although not required by law it is a good idea that each grantee create, sign, and record an Affidavit As To Death of Grantor with the same County Recorder of Deeds where the beneficiary deed was recorded. By recording this affidavit, it normally causes the recorder of deeds to note transfer and allow them to update the local tax roll. The need for the affidavit arises more often when the grantee seeks to sell the premises.
What are the costs of a beneficiary deed: No money must be exchanged between grantor and grantee. A beneficiary deed is not evidence of a purchase. Most reputable law firms charge less than $300 for such a deed and the cost to record the deed is normally $30 or less thereafter.
What are the risks of using beneficiary deeds: The risks in creating a beneficiary are very few. Each deed must be recorded prior to the death of the grantor(s) or they are void. Beneficiary deeds must be drafted properly so professional advice and counseling is strongly suggested. When you convey a property to multiple parties, sometimes those multiple grantees disagree about how to dispose of or use the premises going forward. In rare instances, those contested parties must file a quiet title action in order to separate their business interests. Finally, if the premises are given to a married grantee, his or her spouse will likely be involved in any subsequent sale of the property. Those unfortunate recipient grantees with nasty spouses may be better served to receive your property through use of a revocable trust with protective provisions removing the spouse from enjoying any interest in the property whatsoever.
Todd Miller is the Senior Partner with the Law Office of Todd Miller, LLC in Jefferson City, Missouri. Mr. Miller earned his juris doctorate degree from the University of Missouri School of Law in 1999. He was recognized as Golf Tax Consultant of the Year by Boardroom Magazine three times and candidate for the “10 Best” attorneys for the State of Missouri by the American Institute of Family Law Attorneys and “10 Best” attorneys for the State of Missouri by the American Institute of Criminal Law Attorneys. He formerly hosted a radio talk show entitled the “Mid-Missouri Legal Advocate” on KRMS News Talk 1150AM and 97.5FM. You may also find him on Facebook, Google+, LinkedIn, and Twitter and striving to pick winning NFL teams in the weekly News Tribune 2015 Pro Football Contest.