January 9, 2023 Stephen Bell 0 Comments

A recorded beneficiary deed automatically transfers ownership of real estate upon the owner’s death to a designated beneficiary or beneficiaries without the necessity of probate administration.  The use of beneficiary deeds is authorized by the Missouri Non-probate Transfers Law, the same law that authorizes “T.O.D.” (Transfer On Death) bank accounts and other means of probate avoidance.

While probate avoidance is the biggest benefit, beneficiary deeds also allow the owner the very important advantage of retaining complete lifetime control of the real estate.  And they are revocable – meaning they can be cancelled by the owner at any time.  Moreover, they are inexpensive to prepare and quite easy to implement after the owner’s death.  No wonder they are an extremely popular choice of estate planners.

So, every real estate owner should have one, right?

No, not always.  What seems like love at first sight sometimes deserves a second look.

If an owner leaves real estate to more than one beneficiary, then upon the owner’s death, all of the beneficiaries must agree on its sale.  That can be a lot to ask.  Recently five siblings in the St. Louis area inherited their father’s house via beneficiary deed.  Because they could not agree on how to sell the property, a partition lawsuit was filed, resulting in substantial legal fees and a court order forcing the sale.

Think twice before making your beneficiaries partners in real estate ownership.  Are they currently partners in any business ventures, which should make them more agreeable in such a matter?  Would they work well in a partnership forced upon them by you?  If the answer is no, then maybe you should consider an alternative to a beneficiary deed, such as a revocable living trust where one person is appointed to handle the sale of the real estate.

If you intend to leave your real estate to two or more people via beneficiary deed, then you must also answer this important question:  Who will receive the share of a named beneficiary should that beneficiary die before the owner?  Will that share pass to the other beneficiary or beneficiaries, or to the heirs of the deceased beneficiary?   Often this contingency is not anticipated and therefore is not considered, leading to unintended and often costly consequences.  This tricky issue must be addressed if you are considering a beneficiary deed.

Remember, too, that unlike other real estate deeds, to be effective a beneficiary deed must be recorded with the county recorder of deeds before the death of the owner.  So, record it without delay.

A beneficiary deed is a wonderful estate planning tool.  Just think it through.

Stephen G. Bell