How to Add a Beneficiary to a Mortgage Deed

By Cindy DeRuyter, J.D.

How to Add a Beneficiary to a Mortgage Deed

By Cindy DeRuyter, J.D.

Regardless of its value, real estate may be a significant part of your overall estate. As you consider who you want to inherit your home and other real property after you die, it's important to consider both the various methods of transferring ownership to someone else and the potential implications of those methods.

Man pushing forward document which says "mortgage deed" on it

Adding a beneficiary to a mortgage deed may not be possible in every state, although some states have enacted legislation allowing transfer-on-death deeds. With these, the property passes to your named beneficiaries, subject to any outstanding mortgage.

Other options include passing your real estate to one or more named beneficiaries through your will, adding beneficiaries as tenants in common, or adding them as joint tenants with rights of survivorship.

Transfer-on-Death Deeds

Depending on your state's laws, it might be possible to add one or more beneficiaries to your property deed by executing and recording a transfer-on-death deed—also known as a beneficiary deed—or other similar instrument. Where available, these tools allow property owners to pass title to their real estate to the named beneficiary or beneficiaries outside of probate court. If there is a mortgage on the property, title generally passes subject to the mortgage and any other liens or interests.

Filing a beneficiary deed involves drawing up a notarized document that describes the property, lists the full names of your beneficiaries, and bears your signature. After creating the new beneficiary deed, submit it to the county's recorder of deeds office. Note that while you can replace the beneficiary deed with a new version, making alternative arrangements in your will does not change or supersede what you publish in the beneficiary deed.

With a beneficiary deed, you—and any other current owners—retain full ownership rights over the property while you are living. Rights transfer only after death. In some states, you can designate whether jointly owned property should transfer when one joint owner dies or after both joint owners have died.

Passing Property Through Your Will

You can also pass ownership of your real estate to others by using a last will and testament that complies with your state's requirements. However, doing so usually requires the property to go through probate, the process of administering your will through the court system.

During probate, the court appoints an executor or personal representative charged with, among other things, ensuring assets are distributed according to either your will or state law, if your will does not address distribution. Probate can be time-consuming and might be costlier than some other methods of transferring ownership of real estate.

Adding Your Beneficiary as a Tenant in Common

When people own property as tenants in common, each owner holds a divided share. For example, if you own property in your name alone and add your spouse as a tenant in common, you each own one half of the property. This means that when either of you dies, your share will likely need to go through a probate proceeding to transfer to the other spouse.

Adding Your Beneficiary as a Joint Owner with Rights of Survivorship

If you own property in your name alone but want to pass it to your spouse outside of probate court when you die, you may wish to add your spouse to the title as a joint tenant with rights of survivorship.

In contrast to owning property as tenants in common, ownership structured as joint tenants with rights of survivorship means you each own an undivided interest in the property. When one joint tenant dies, ownership of the entire parcel passes to the remaining joint tenants.

Before you add adult children or others as joint owners, talk to a tax professional or an estate planning attorney to evaluate the potential pros and cons. There may be disadvantages that outweigh the potential benefit you hope to achieve.

Because of the complexities involved in real estate, you might be better off working with a licensed attorney in your jurisdiction who is knowledgeable about estate planning and real estate transactions, rather than trying to navigate the process yourself. Doing so may cost more, but it will provide you with peace of mind that your assets have been set up properly and as you wish.

This portion of the site is for informational purposes only. The content is not legal advice. The statements and opinions are the expression of author, not LegalZoom, and have not been evaluated by LegalZoom for accuracy, completeness, or changes in the law.