Recently I took questions from two different clients concerning end-of-life planning, and specifically how it relates to the transfer of Real Estate.

In the first case, a taxpayer’s parent was on their deathbed, and they were contemplating preparing a quit-claim deed to transfer property into the name of the taxpayer in contemplation of death in order to avoid probate.

In the second case, the taxpayer’s parent had a proper trust which was being used to divide the parent’s property amongst children from different families.  The parent, however, wanted their home to go directly, and in an undivided fashion, to the taxpayer.

There are many was to achieve the goals of the taxpayer.  Though I am not an attorney, I do regularly consult on estate planning matters.  I recommended that they discuss the concept of a ‘Beneficiary Deed‘ with an attorney.

A beneficiary deed provides for the direct and immediate transfer of title to the individual named on the beneficiary deed.  The transfer does not take place until the death of the property owner, therefore avoiding the gift tax reporting and shared liability issues that a quit claim or multi-owner deed can bring about.

From a tax standpoint, the beneficiary owner is also able to maintain an incredibly important tax attribute – that of “stepped up basis.”  If a property is gifted prior to death, the recipient must use the donor’s tax basis in determining gain or loss on the sale of property.  Using a beneficiary deed, the property’s basis is revalued as of the date of death, perhaps saving tens of thousands of dollars in capital gains tax which would result from the sale of the property.

For more information on estate planning services please contact our office.  If you would like to contemplate a beneficiary deed, please contact your attorney.


*** Update ***

Apparently I’m not the only one getting these questions.  Attorney Christopher Combs with the Combs Law Group answers a similar question in this Arizona Republic Article on Saturday, July 27, 2013.