Using beneficiary deeds can help avoid probate

Trying to keep personal assets and property from going through the costly and time consuming probate process should be the goal of every person. The most valuable asset most people own is real estate, in the form of their family home, farm property or investment property. Using the proper probate avoidance technique can help avoid having real estate tied up in probate court.

Most people are aware they can place a beneficiary on their bank accounts and car title through a transfer on death designation. Not as many people are aware that real property can be transferred upon death with a similar probate avoidance technique called a beneficiary deed.

A beneficiary deed allows the owners of real estate to transfer their interest in real property upon their death to whomever they list as beneficiaries. If the property is owned jointly by two or more persons, then the transfer takes place when the last surviving owner dies. Title to the real property automatically transfers at the time of death and therefore, the real estate does not have to go through probate.

The beneficiary deed does not become effective until it is signed by the owners and recorded in the recorder's office in the county where the property is located. No payment or consideration is necessary from the beneficiary to make this a valid deed.

Prior to the use of beneficiary deeds in the state of Missouri, in an attempt to keep their real property from going through probate, people would add their children's names to their property deed as joint tenants with the right of survivorship. When they died, their children would own the property as joint tenants and the real estate would not have to go through probate. There are several disadvantages to trying to avoid probate through such a transfer. There may be tax consequences in making a transfer to a joint tenant. In addition, giving the joint tenant a present ownership interest in the real estate allows them a certain amount of control over the property and subjecting that property to their creditors.

The advantage of a beneficiary deed is that during the landowner's lifetime, property continues to be owned and controlled solely by the owner.

The property can be used without any restrictions, since the beneficiaries only have a future interest in the property, not a present interest.

A beneficiary deed, however, cannot be used to transfer real estate in an attempt to avoid the landowner's creditors at the time of their death.

For a period of 12 months after the death of the landowner, a creditor of the landowner with a valid debt can open a probate estate and force the return of the real property or its value from the beneficiary to satisfy their debt. However, if at the time of the landowner's death they have no outstanding bills that cannot be covered by insurance, the transfer of real estate can be made through a beneficiary deed without involving probate.

There are certain restrictions on the ability to transfer property through a beneficiary deed in the state of Missouri. An experienced attorney in estate planning needs to discuss such a transfer with each individual client to make sure that a beneficiary deed will accomplish its purpose.

(Bryan T. Renfrow is a Springfield attorney with Daniel, Clampett, Powell & Cunningham, LLC.)