The beneficiary deed is a relatively new form of conveying property. It has only been on Arkansas law books since 2005. Arkansas is one of only a handful of states that allows for the transfer of property by beneficiary deed.
So, what is a beneficiary deed and how can it help you in your estate plan? It may be easiest to think of a beneficiary deed as a pay on death designation for land. A beneficiary deed enables the owner or owners of land to transfer the land upon the owner’s death to a person or persons that the owner designates in the deed. A beneficiary deed must be signed by the owner or owners and recorded in the real-estate records office prior to the owner’s death.
A beneficiary deed does not affect ownership of the land while the owner is alive. The owner still has a right to mortgage the land; liens can be placed against the land; and the landowner can sell or transfer the land at anytime during his or her life. A sale or transfer of the land prior to the owner’s death voids the beneficiary deed and the new land owner takes as if the beneficiary deed does not exist. The beneficiary deed can also be revoked or amended by the owner at anytime during his or her life by filing a revocation of the deed or a new deed with the real-estate records office.
The benefit of a beneficiary deed is the avoidance of probate, and the time and costs that go with it. Creating and filing a beneficiary deed is simple and cost effective, and the transfer of the property takes effect immediately upon the death of the landowner. The taker under the deed need only present a copy of the owner’s death certificate (and sometimes an affidavit, depending on the requirements of the clerk in a particular county’s real-estate office) and the land records will then show the taker under the deed as the new owner.
Now let’s consider transferring property via a last will and testament. A landowner can state in his will that he wants a friend or family member to have his land after his death. Upon his death, depending on the value of the landowner’s entire estate (all the property that he owned at death), the will will either have to go through probate or the takers under the will can file an Affidavit for Collection of Small Estate. Although the Affidavit for Collection of Small Estate process is generally shorter and less costly than probate, both avenues are more costly and time consuming than transfer of land via beneficiary deed. Also, both the probate of a will and an Affidavit for Collection of Small estate require notice to be published and several months to pass before a transfer deed can be issued.
One disadvantage of a beneficiary deed is that the taker under the beneficiary deed takes the land subject to claims for reimbursement of federal or state benefits by the Department of Human Services (DHS) from the estate of the landowner. If a landowner has to enter a nursing home prior to his death, and if his nursing home care is paid for by Medicaid, then DHS has a claim against the landowner’s estate, including the land conveyed in a beneficiary deed, for the amount of funds paid to the nursing home through Medicaid. It is up to DHS as to whether they will enforce the claim, and thus force the sale of the land.
If you would like assistance in creating a beneficiary deed, or would like further information about estate planning, you can contact me here to schedule a free consultation.