Beneficiary Deeds in Montana

What are Beneficiary Deeds and How Do You Effectively Use Them?

What is a Beneficiary Deed?

A Beneficiary Deed is a type of ownership interest where an individual holds title to real property but conveys his or her interest in the property to another individual to become effective upon the owner’s death. The individual to receive title to the original owner’s property upon death is known as a “grantee beneficiary.” A grantee beneficiary might be a child or other family member but it could also be a friend or charity. The grantee beneficiary’s interest in the real property is not effective until the death of the original owner. This means that an owner can revoke a Beneficiary Deed or change the beneficiaries at any time.

A Beneficiary Deed is a separate type of deed which requires all the formalities of a deed to be effective. This means that the deed must contain a full, accurate legal description of the property, contain the addresses for both the grantor and the grantee beneficiary, and it be signed, notarized, and recorded with the Clerk and Recorder in the county in which the real property is located. It also requires the filing of a Montana Realty Transfer Certificate with the Montana Department of Revenue.

Essentially a Beneficiary Deed is a way to transfer interest in real estate to heirs and beneficiaries upon death without the need for a probate.  While a Beneficiary Deed is not suitable in all situations, it can be an effective tool in transferring interest in real property upon death if executed for the appropriate reasons.

Beneficiary Deeds are most effective for estates that are relatively simple where real estate may be the only asset without an existing beneficiary designation and where the family members or other beneficiaries generally get along with one another. If your estate consists of your home and financial accounts, a Beneficiary Deed can be a simple and effective way to transfer your estate upon your death.

When a Beneficiary Deed May Not Be As Effective

If you have a complex estate, especially one with any type of trust in place or with potential estate tax planning issues or property in multiple states, then a Beneficiary Deed may not be the best option.

  • If your estate is complex. Complex estates, especially estates that are likely to exceed the federal estate tax exemption amount, require additional planning and consideration. For 2016 the federal estate tax exemption amount is $5,450,000.00 per individual.  While a Beneficiary Deed may be a simple way to transfer real estate upon death, it could have other estate tax implications or unintended consequences. If your estate is above or near the current federal exemption limit it may be beneficial for you to consider other estate planning options for avoiding probate such as a revocable living trust. If your estate falls into the more complex category discuss your overall estate plan with your attorney to determine how a Beneficiary Deed would impact your plan.
  • If you own property in multiple states. Every state has a different system for addressing real property and not all states recognize Beneficiary Deeds. Accordingly, if you own property in multiple states, the use of Beneficiary Deeds may not be as effective in accomplishing your estate planning goals. Instead, you may consider other options such as a revocable living trust to pass your real estate to your beneficiaries without the need for a separate, or “ancillary,” probate proceeding in each state where you own property. With a properly funded trust, the trust holds title to your property so no probate is required regardless of the location of your real property.
  • If family members or other beneficiaries do not always get along. Similarly, if you want to leave your estate to multiple individuals that may not always get along, a Beneficiary Deed may create more problems. If your heirs are likely to disagree, it does not make sense for them to hold title to real property together. Instead you may decide to create a separate trust or direct your personal representative or trustee to liquate your real property and split the proceeds between your heirs to avoid potential conflict.

Naming Multiple Beneficiaries

An owner of real property can list more than one grantee beneficiary on a Beneficiary Deed. However, they are most effective when only one or a few beneficiaries are listed (and those beneficiaries get along). If you decide to list more than one beneficiary on a Beneficiary Deed, it is important to make sure you specify how the beneficiaries will hold title together upon your death. Specifically, state whether they will own the property as tenants in common or as joint tenants with rights of survivorship. If you plan to list more than one beneficiary, make sure you discuss your options with a real estate or estate planning attorney to ensure that you understand the implications of different title designations.

How is Title to Property Updated Upon Death?

If you list an individual as a beneficiary of a financial asset, that individual becomes the legal owner immediately upon your death without the need for probate. The same concept is involved with a Beneficiary Deed. The beneficiary you name on the deed becomes the owner upon death, instead of having to wait to transfer property through a probate proceeding. To update the title, the beneficiary owner must record an affidavit certifying that the original owner has died and naming the grantee beneficiary or beneficiaries entitled to receive the property. This affidavit must be signed by the grantee beneficiaries in the presence of a notary public and recorded with the office of the Clerk and Recorder in the county where the real property is located. If these steps are followed, the beneficiaries will take title without the need for a probate proceeding.

Seek Legal Advice

Beneficiary Deeds can be simple and effective estate planning tools. However, before you proceed to execute a Beneficiary Deed discuss it with your real estate or estate planning attorney. It is important that a Beneficiary Deed is properly executed and meets all the formal requirements for a deed. It is also important for you to consider your assets, family situation, and personal preferences carefully before recording a Beneficiary Deed and to ensure that it fits in with your overall estate plan.

If you have questions or need legal assistance regarding Beneficiary Deeds, estate planning or other real estate matters, contact Kelly O’Brien at Measure, Sampsel, Sullivan & O’Brien, P.C. at (406) 752-6373/ www.measurelaw.com