What Is a Beneficiary Deed?

By Beverly Bird
A beneficiary deed, effect, your death

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A beneficiary deed is another name for a transfer-on-death deed. If you own real estate that you want to pass on to a certain person when you die, you can create this type of deed to transfer it -- and the property won’t have to go through probate. However, not all states recognize these deeds. Check with an attorney if you have questions.

Ownership Rights

If you create and sign a beneficiary deed to transfer ownership of your home to someone else, this doesn’t give her an immediate interest in it. As long as you’re alive, the property is yours. The deed doesn’t become effective until your date of death. You can also change your mind and revoke it at any time. Your property isn’t vulnerable to your beneficiary’s creditors, at least during your lifetime and until she takes ownership.

Tax Issues

Transferring property by beneficiary deed doesn’t incur a gift tax because it isn’t legally changing hands during your lifetime. However, the property still contributes to your taxable estate, which is the value of everything you own -- less liens, debts and the expenses of probate -- at the time of your death. At the federal level, you don’t have to pay estate taxes unless the value of your taxable estate exceeds $5.34 million as of 2014. Even then, only the balance over that amount is taxed. Keep in mind that some states impose estate taxes with significantly lower thresholds. If your state does, your transferred property would contribute to the total value of your estate for tax purposes.

About the Author

Beverly Bird has been writing professionally for over 30 years. She specializes in personal finance, divorce and family law, bankruptcy, and estate law, and she writes as the tax expert for The Balance. She is the author of more than 30 novels.

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