Some lawyers think these are the best way to handle real property transfers at death. Others, like me, completely disagree. I believe they are short-sighted and harmful when used as the sole method of estate planning. I do feel that they are appropriate to use when dealing with a financial institution that can’t seem to grasp the realities behind revocable living trusts and they are to transfer real property to the trust upon the death of the owner.
What are the drawbacks to using these as a way to transfer the bulk of an estate? There are so many. It really does depend on the client situation. I will only touch on a few.
Some of the trickiness comes up with the rest of the estate. Who is going to pay for the funeral? For the last illness? For the bills that may have piled up during the last illness? What about the mortgage that is attached to the real property? Are there any property taxes that need to be paid? What about estate taxes? What if there is a lawsuit because the deceased created havoc on their way out, whether intentionally or not?
What if the real estate is deeded by way of a beneficiary deed to multiple people, say, all the kids who are now adults and cannot stand each other? Or live in different states? Is that really a good idea? Oh, I know. A lot of people think that death brings the kids back together and they will get over their silly spats. Think again. Death brings out the worst in people.
What if there are three beneficiaries and one of them decides to move in permanently? Do the other two get to visit? Who pays for the upkeep or maintenance when there is a disparate use of the property?
What if the three beneficiaries actually like each other and agree to use the property as a vacation home and can actually agree with regard to the division of time. But, wait a minute. They cannot agree to whether the place needs to be maintained with fresh paint or new carpet. Or maybe they can agree to the maintenance. But they simply cannot agree to the color of the paint or what type of carpet it should be.
What if they actually can agree but one of them never has any money to pay for any of these maintenance items? Or the property taxes? Or the water bill? Seriously, why would you put people through this?
An estate plan should not consist solely of a beneficiary deed. It is short sighted and has the real potential to be messy. Trusts and wills clarify with specificity who will be the decision maker, who is in charge of paying expenses that are due, and who gets the benefit of the assets after liabilities are taken care of. Beneficiary deeds do none of these things. Do your loved ones a favor. Don’t be cheap. Get to a lawyer who knows what they are doing and get a complete estate plan in place. You have worked hard all of your life to accumulate your assets. Why would you want to short change your heirs when they are grieving?
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