What Is a Beneficiary Deed and How Does It Work?


When it comes to leaving property, the most renowned options include setting up a trust and listing your heirs in your will. However, you can also use a beneficiary to pass down property to your child or heir and ensure your belongings end up in the right hands.

In this blog post, we’ll explain what is a beneficiary deed and how to craft and file one, and discuss the perks and downsides of doing so.

What Is a Beneficiary Deed?

A beneficiary deed is a legal document that allows you to transfer property and assets to the person you name as the beneficiary. Beneficiary deeds are also known as Transfer-on-death deeds, as this type of deed doesn’t come into effect until after the issuer’s death. Although some states prefer using the former term while others prefer the latter, both refer to the same legal procedure.

If you’re wondering what is a prime reason for using a beneficiary in real estate, the answer is simple—their main purpose is to ensure your property goes to the right person, while their secondary function is to help avoid probate. The probate process itself can often take months or even up to a year, and it comes with some extra fees your heirs will be required to pay.

According to sources, probate can cost between 3% to 7% of the total estate value, so opting for a beneficiary deed can save your heirs both money and time spent in the courtroom.

Beneficiary Deed vs Will

Unlike a will, which requires the government’s approval and includes delays and extra costs, a beneficiary deed ensures the ownership is assigned to the designated beneficiary immediately after the owner passes away.

This itself makes beneficiary deeds a more attractive idea, although some states don’t allow their residents to use the beneficiary deeds. Another difference between the two is that wills are considered more comprehensive, since they allow issuers to express their last wishes. Before deciding on which one to use, it’s best to consult a lawyer.

How Does a Beneficiary Deed Work?

The reason why beneficiary deeds are so popular is that transferring property upon death allows owners to retain their rights during their lifetime. Chances are you’ll be notified of becoming a deed beneficiary only upon the death of your parent or relative, as beneficiary deeds are revocable and allow for flexibility in the future. A deed owner can change their mind and decide to sell the property or leave it to another person.

One thing to keep in mind is that beneficiary deeds can be more complex if you’re not the sole owner of the property you want to pass on. If there’s a co-owner of the property, the transfer will happen only after the passing of the last surviving owner.

Another benefit of this type of deed is that because the transfer of property technically doesn’t happen during the owner’s lifetime, there’s no associated real estate transfer tax or gift tax.

How Much Does a Beneficiary Deed Cost?

According to sources, attorneys typically charge anywhere between $250–$750 for the preparation of a beneficiary deed. Based on where the property is located, an additional nominal recording fee will apply. Overall, the actual cost of the beneficiary deed largely depends on the state you live in and the attorney you choose.

How to Create a Beneficiary Deed?

Although preparing a legal document to transfer your belongings to your heirs of choice may sound complicated, the process is surprisingly more straightforward than you’d expect.

Nevertheless, there are some things you should keep in mind when creating a house beneficiary deed of your own—for instance, some states have imposed laws on the exact language you need to use. If this is your case, look up your state’s respective law before you start and find the appropriate wordings you need to fill in the blanks.

When drafting your beneficiary deed from scratch, there are two things you need to get familiar with:

  • Formatting Requirements

Contact the county land records office to ask for assistance, as counties have their own unique formatting requirements. Although these vary from county to county, they also have things in common—for example, many require soon-to-be deed owners to leave an empty space at the top corner for a recording stamp.

  • Regulations on Co-owners of Property

As we mentioned previously, a house beneficiary deed gets a bit more complicated when there’s more than one owner involved. In such scenarios, it’s best to leave the work to a professional, reputable attorney.

How to File a Beneficiary Deed?

No matter how you choose to make your beneficiary deed, it’s important to take note of the following steps:

 1. Naming the Beneficiary

You decide who inherits your property, and you can name anyone as a beneficiary in your deed. It’s also crucial that you list a secondary, alternative beneficiary in case the primary beneficiary is unavailable or deceased. This is where learning the difference between a primary and contingent beneficiary can come in handy.

When naming beneficiaries, you should avoid using categories of relations such as “my daughter” or “my niece.” In some states, a beneficiary deed is by definition invalid if only categories of relations are listed, so it’s of critical value to include the person’s full legal name and surname.

 2. Including a Legal Description of Property

The legal description of your property can be found in your current deed. If it’s shorter, you can carefully copy the exact wording into your beneficiary deed. In case the legal description is longer, it’s best you insert a “See Exhibit A” text into this section and make a photocopy of the original description and attach it as a separate document.

 3. Singing the Beneficiary Deed

If there’s just one owner of the property, the process is simple, but laws vary when it comes to co-ownership of property. When filing a beneficiary deed, in some situations both owners are required to sign the deed, while in others making a beneficiary for just the portion of the property you own might be appropriate.

 4. Notarizing the Beneficiary Deed

At the bottom of the deed, you must include a notarization (acknowledgment) statement. In most cases, this means a notary needs to fill in and sign the deed, but in some states such as Illinois and California, you must have witnesses present who’ll also sign the deed.

 5. Filing the Beneficiary Deed

The beneficiary deed you’ve created won’t be valid until it’s recorded (filed) in the land records office in the state you own real estate in. Some states have deadlines for recording a deed, and all states charge a given fee. If you want to know how much does filing a beneficiary deed cost, you’ll have to check with your land records office. Usually, fees range between $25 and $45, but they might be higher in states like Washington and California.

Can You Use a Beneficiary Deed to Avoid Probate?

One of the biggest benefits of beneficiary deeds is that they’re not subject to probate. These deeds are popularly used to automatically transfer the interest in the property to a beneficiary, and this property doesn’t make part of your estate—and anything that isn’t part of your estate doesn’t go through probate. Living trusts are also widely used to avoid taxes and probate.

Beneficiary Deed vs Trust

Both these legal documents can help individuals avoid probate fees, but which one makes a better alternative? Trusts are usually a better option for individuals looking to leave an inheritance to minors.

A trust allows owners to create a sub-trust for children and name a custodian trustee who’ll be in charge of managing the property and assets for the child. Living trusts are also popularly used by individuals who anticipate or fear incapacity, as they allow them to name someone to manage their finances. Although a trust might hold greater power, beneficiary deeds are more easily revoked, easier to manage, and relatively inexpensive compared to living trusts.

When considering the beneficiary deed vs trust dilemma, keep in mind it’s easier for beneficiary owners to change their minds and revoke the deed—all they need to do is cancel the original deed and file a new one.

Still, in many situations, a trust might be preferable, and a beneficiary deed can work together with a trust to make for a comprehensive plan that protects all assets against probate.

Key Takeaways

A beneficiary deed is a legal document allowing you to transfer property and assets to whomever you choose.
These deeds are revocable and allow owners to retain the rights to their property during their lifetime.
Beneficiary deeds becomes valid once it’s recorded (filed) in the land records office where you own property.
This type of deeds can help avoid probate, real estate tax, and gift tax.

Advantages and Disadvantages of a Beneficiary Deed

Throughout the article, we’ve mentioned some of the advantages of filing a beneficiary deed.  To get a better idea of both its positive and negative aspects, we’ve outlined both its advantages and disadvantages below.

Advantages of a Beneficiary Deed

  • Helps avoid the delays and fees associated with probate.
  • An owner can change their mind at any time and revoke the deed.
  • Beneficiary deeds are overall less expensive than a will, living trust, or testament.
  • It helps avoid both the real estate transfer tax and the gift tax.

Disadvantages of a Beneficiary Deed

  • If beneficiary deeds are challenged, a long and costly proceeding may follow.
  • Ambiguities and inconsistencies found in a deed might cause an insurance company to refuse to issue title insurance.
  • Beneficiary deeds don’t offer any asset protection to the deed beneficiary.
DID YOU KNOW: Some life insurance beneficiary policy rules include an irrevocable beneficiary, meaning you need a beneficiary’s consent to remove them from the policy.


A beneficiary deed can be a good way to avoid probate. However, it’s important to understand the advantages and disadvantages before you create one. If you have any additional questions about beneficiary deeds, be sure to consult an attorney or another legal professional about the laws and procedures of the state you reside or own property in.


Where can I get a beneficiary deed form?

There are two possible solutions to finding beneficiary deed forms: deed owners can find templates and forms on their state government website or on online estate planning platforms. If you’re wondering how to get a beneficiary deed without having to do much research of your own, you can hire an attorney to create one for you.

Who is the beneficiary in a deed of trust?

In a deed or real estate transaction, the beneficiary is usually the lender or the person whose interest is being protected. The deed of trust serves as a guarantee to the lender you’ll pay off your loan.

How to add a beneficiary to a mortgage deed?

The process for adding a beneficiary to a mortgage deed is no different than the one we explained in our article on what is a beneficiary deed. The fact you have a mortgage on your house doesn’t prevent you from naming a beneficiary, but you should know the mortgage will be transferred to your beneficiary as well.


Researching various topics started out as a hobby, turned into a passion, and became a profession. Finance, investments, and gambling seemed particularly interesting topics of research, so they became my main focus. Now, I can deliver fresh, relevant content on these topics in my favourite language — English.

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