Planning for your untimely death and purchasing life insurance is an uncomfortable but necessary part of life. You may also create a will outlining your final wishes and make decisions regarding your assets. If you decide to leave your real estate property to a family member or friend, there's the process of naming this person as beneficiary on your mortgage deed. This is a relatively simple process that transfers ownership to the person after you die.
If you're co-owner of a property, complete ownership of this property transfers to you after the other owner dies, and vice versa. But if there isn't another owner and you're the sole owner, naming a beneficiary on your mortgage deed keeps your property out of probate. Probate is a legal process in which a court distributes your assets and property to heirs. To name a beneficiary, you need a transfer-on-death deed. You can obtain a state-specific form from a lawyer and websites such as U.S. Legal Forms.
Adding a Beneficiary
Once you obtain a transfer-on-death deed, complete the form to name a beneficiary. The transfer deed will ask you to name the person(s) you wish to inherit your property. You can name multiple people as the beneficiary, as well as an organization. List the beneficiary's complete name and avoid titles. In other words, do not write "my granddaughter" or "my son" on the deed. This isn't specific, and this type of entry invalidates the deed.
In addition to naming a person(s) or an organization, you need to provide a legal description of your property. To simplify the process, simply copy the description from your current deed. If you don't have a copy of your deed, visit your city or county clerk's office and ask to see a copy of this form.
Record the Deed
After naming a beneficiary and providing a legal description of your property, sign the transfer-on-death deed before a notary public, if required by your state. The transfer isn't legal until you record the form with your local county recorder or land registry office. The deed needs only one signature if you're the sole owner. But if you live in a community property state or if there's a co-owner, your spouse or the other owner must sign the deed as well. There is a small recording fee.
Additional Mortgage Deed Considerations
Upon your death, the beneficiary of your mortgage deed inherits not only the property but also all debts associated with it. This includes a mortgage loan and any other loans taken against the property, such as a home equity loan. Your beneficiary can either make the home loan payments and keep the property, or sell the home and pay off the mortgage. If the beneficiary does not sell the property and fails to make the payment, the lender can foreclose.
To protect your beneficiary from any additional expense, you need adequate life insurance to pay off the balance upon your death. You can also buy mortgage protection insurance from an insurance company. In the event of your death, this insurance pays off your home loan.