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If you own title to real property and are beginning to look at your estate plan for the first time or if you are looking to revise your estate plan. You may want to consider a beneficiary deed. With a beneficiary deed you can transfer the property to the person, persons, or entities you designate and title does not change until your death.
A beneficiary deed is a way to transfer title to a property, subject to any liens, to a designated person or beneficiary upon death. A beneficiary deed can be used to transfer property to a person or a trust and can do so even if the trust is revocable.
Basically, it is just like any other deed to property but it is not effective until the death of the owner(s) granting the interest. Any loans, liens, encumbrances, deeds of trust, conveyances, security pledges, and the like that the owner was subject to on the property, remain with the property when the beneficiary takes ownership.
In other words, the owner's interest in the property is passed to the beneficiary including all of the encumbrances on the property. You can't get out of a mortgage by giving your property in a beneficiary deed. You can't nullify a community facilities district lien by a beneficiary deed, and you can't extinguish the rights of other owners in the property unless they agree and comply with the deed as well.
A beneficiary deed is only valid if the deed is executed and recorded with the county recorder in the Arizona county in which the property is located. This type of deed can be revoked at any time by the owner prior to death. If there is more than one owner, any one of the owners who executed the deed can revoke the deed even after one or more of the other owners have passed.
In fact, Beneficiary deeds can get tricky if there is more than one owner because any one of them can potentially upend your estate planning by either revoking the beneficiary deed or filing another beneficiary deed naming a different designee.
Beneficiary deeds can provide options and flexibility for your estate plan when implemented correctly and given the right circumstances. They can even help you avoid passing title to the real property in probate as an alternative to a trust in the right circumstances.
However, there are some limitations because of their revocability and you may be dependent on another owner to continue the plan once you have passed, among other considerations. Further, if your intent is to pass the property to another free and clear of any current liens, mortgages, etc., there may be better options.
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