Buying a house is probably the biggest and most expensive purchase you will ever make, so it’s important that you ensure that house will be handed down as intended upon your death. There are various methods to transfer your home and avoid probate, such as co-ownership, life estates, and various types of deeds. Two common options for doing this are (1) filing a Beneficiary Deed, which will transfer the property to the designated beneficiary after your death, or (2) transferring your property to your existing revocable trust with a General Warranty Deed.
A Beneficiary deed allows for an owner’s property interest to be transferred on death, to their chosen recipient, without the property getting involved in the time consuming and expensive process of probate. The deed must be filled out, signed in front of a notary, and filed with the recorder of deeds in the county where the property is located. Then, when the time comes, the recipient will have to do is show a copy of the owner’s death certificate to take possession of the home. If you have a trust, your Beneficiary Deed should grant the property to your trust instead of to a specific person and doing so typically provides greater flexibility for disposition of your home among your beneficiaries.
The new owner of the home will have to refinance if there is an existing mortgage and continue paying for the property. Although the Beneficiary Deed allows for the house to avoid probate, it remains an asset of the estate for estate tax purposes.
Beneficiary Deeds are most suitable for homeowners who are paying on a mortgage, those who own their home outright should consider other options. A General Warranty Deed is most appropriate for homeowners who own their property outright, who do not anticipate taking out another mortgage, and who have a Revocable Trust set up. The process for filing a General Warranty Deed is like that of a Beneficiary Deed but instead of waiting until your death, the home will become an asset of your Revocable Trust at the time of filing. At your death, no additional paperwork will need to be filed with the Recorder of Deeds.
It is important to consider your options, figure out what makes the most sense for your situation, and put that plan into action to make sure that your house is taken care of when the time comes.