Does Maryland Allow Beneficiary Deeds?
As you look forward and begin planning your estate in Maryland, you might have come across the term beneficiary deed. So, what are these types of deeds, and are they recognized in Maryland?
Beneficiary deeds are not allowed for real estate in Maryland. This means that if you want to immediately transfer property to your home to your child upon your death, you will have to do so using different estate planning tactics. For example, a life estate deed might enable you or a parent to remain living in their home as a life tenant with the grantee also owning interest in the property. Upon the grantor’s death, ownership of the remaining interest will transfer to the grantee. Alternatively, grantors could set up living trusts that transfer assets to beneficiaries upon their deaths. Either option could allow beneficiaries to avoid probate following a grantor’s death in Maryland.
Call Rice, Murtha & Psoras today at (410) 694-7291 to set up a free case assessment from our Maryland wills and estate planning lawyers.
Are Beneficiary Deeds Allowed in Maryland?
A beneficiary deed, also known as a transfer-on-death (TOD) deed, allows people to pass on property to beneficiaries after their deaths without the property having to go through probate. Unfortunately, these types of deeds are not recognized for real estate in Maryland.
The purpose of beneficiary deeds is to avoid probate, plain and simple. With a beneficiary deed, the transfer of property, like real estate or bank accounts, goes to the beneficiary upon the grantor’s death. This is the physical document that gives the beneficiary ownership of the property. Of the various benefits of beneficiary deeds, such as being able to avoid probate, a primary one is that grantors do not have to get the consent of beneficiaries to alter TOD deeds. This means grantors can alter beneficiary deeds at any point before their deaths.
Because transfer-on-death deeds are designed so that beneficiaries can get ownership of assets without going through probate, such deeds are not permitted for real estate in Maryland. That said, you might be able to execute a beneficiary deed for other property, such as stocks, bonds, and other securities. While, there is pending legislation to allow Maryland to allow transfer of real estate through beneficiary deeds, there is no guarantee it will prevail.
Beneficiary Deeds vs. Life Estate Deeds in Maryland
Although beneficiary deeds are not recognized in Maryland, life estate deeds are. Life estate deeds deal with real estate allow the transfer of a home or property upon the grantor’s death.
According to Md. Code, Real Prop. Art., § 4-108(a), interest in property can be held by grantors and grantees. For example, suppose your parent still lives in your childhood home. If they would like, they could execute a deed authorizing the transfer of property upon their death to you, their child. In doing so, they would create a life estate, meaning they can continue to live in the house for the rest of their life until their death when the property would be transferred to you.
This differs from a beneficiary deed in that the grantee owns an interest in the property and becomes what is known as the “remainderperson.” The grantor becomes the life estate tenant. With beneficiary deeds, the grantee does not own any interest in the property until the grantor’s death.
By executing a life estate deed, you or your parent could remain living in the home in question while ensuring it will be transferred to the designed grantee upon the grantor’s death in Maryland. Your parent could also remain eligible for Medicaid.
With life estate deeds, grantees can still avoid probate, making this option very appealing to those with aging parents who wish to stay living in their homes.
Because grantees own interest in properties when life estate deeds are created, it is important to consider one’s relationship to a grantee before making a life estate deed in Maryland. Life estate deeds can be terminated if all parties, including the life tenant and remainderperson, agree to terminate them.
Due to the similarities between beneficiary deeds and life estate deeds, exploring the latter might be prudent since the former is not allowed in Maryland.
Alternatives to Beneficiary Deeds in Maryland
If your goal is to have beneficiaries inherit assets without dealing with probate, you can do so by creating a trust. For some, this may be the best alternative to making a beneficiary deed, which is not allowed in Maryland.
By placing property in a living trust and designating beneficiaries of that trust, you can ensure beneficiaries do not have to deal with probating certain property. Trusts can act somewhat similarly as beneficiary deeds in that property can be transferred to beneficiaries upon a grantor’s death. In order to create a trust in Maryland, you will have to execute a declaration of trust document and retitle property accordingly. You will need to make and file a new deed confirming the transfer of property to the trust at this time. Our Germantown, MD wills and estate planning lawyers can help you set up a trust and place certain property into that trust. If you wish to avoid probate by making a trust, it may be wise to place probate property into the trust. This will include any property that you own alone.
When making a trust in place of a beneficiary deed, make sure you create a revocable trust, not an irrevocable one. You can stipulate as much in the declaration of trust document. If you create an irrevocable trust, you might not be able to make changes to it during your lifetime unless the court sees that all beneficiaries agree to those changes and the changes do not violate the material purpose of the trust, according to Md. Code, Ests. & Trs. Art., § 14.5-410(a)(2).
You can set up a trust in such a way that assets are transferred to beneficiaries upon your death, similar to a beneficiary deed.
Call Our Maryland Lawyers Today
Call (410) 694-7291 to speak with our Baltimore wills and estate planning lawyers and get a free case assessment from Rice, Murtha & Psoras.