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Missouri Beneficiary Deeds – What Happens with the Owner Dies?

We have written blogged several times about Missouri Beneficiary Deeds — the good, the bad, and the ugly.  We ran into a new situation recently.  A divorced dad died a few months ago and left his house to 19 year old Molly, his only child, through a beneficiary deed.  We offered to help her  with “getting organized” but she thought she could handle things herself.  A few weeks after dad died the house sustained significant damage due to fire.  The insurance company has stepped in to deal with things, and at first appeared as if things were fine.  The problem arose when we discovered that Molly never converted the insurance policy into her name.  Since the insurance contract was in Dad’s name, the Insurance Company can only pay money to or on behalf of Dad’s Probate Estate.

So — we now have to open a Probate Estate where one shouldn’t have been necessary.  Molly is going to have to deal with 6 to 8 months of headaches, and will be out several thousand dollars in Probate Fees.

When you inherit property via a Beneficiary Deed it is critical that you immediately assume all ownership functions.  This obviously includes taking care of insurance issues.  Other matters are utilities, maintenance, property taxes, and dealing with the property in the estate plan of the new owner.

This is another example of where using a Revocable Living Trust to manage the property for the 19 year old until she was more mature would likely have saved the day.

There are many morals to this story.  First – Beneficiary Deeds are great tools when used properly, but when not used properly can cause big problems.  Secondly, many, if not most young adults who are not experienced in dealing with money, property, assets, etc. should not be given their inheritance outright until they are more “seasoned”.  Finally, don’t be penny-wise and dollar foolish.  Don’t be afraid to pay a lawyer to help prevent problems.  It’s normally a lot cheaper than paying one to solve the problem.

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