Use of Beneficiary Deeds to Avoid Probate
For owners of real property in Arizona, a Beneficiary Deed is a popular and simple way to transfer property at death without subjecting the transfer to probate.
Arizona has adopted a law that allows for probate-free
transfers of homes and other real estate at the owner’s death by way of a type
of deed known as a Beneficiary Deed. By signing and recording a
Beneficiary Deed in the county where the real property is located, an owner of
an interest in real property (or owners, if the property is jointly owned) may
cause his or her interest in the real property to be conveyed to persons or
entities at the owner’s death.
In the case of joint
ownership, for example, by a husband and wife, the conveyance occurs upon the
death of both spouses. The interest in the real property conveyed by a
Beneficiary Deed does not take effect until the owner’s death, at which time the
interest transfers automatically by law to the designated grantee(s) by
recording the death certificate of the owner with the County Recorder’s office
for the county in which the real property is located.
Benefits and Drawbacks
The benefits of a
It avoids the cost
and delay of probate because the real property is not part of the probate
It is a less
expensive and simpler way of avoiding probate than creating and administering a
If the owner has
created a trust as part of his or her estate plan, a Beneficiary Deed can name
the trust as beneficiary of the property.
Beneficiary Deed does not restrict the owner’s ability to sell, encumber or
otherwise deal with his or her property.
There is no gift
tax liability because it is not a present transfer of the property.
It can be revoked
or changed at any time during the property owner’s lifetime.
Beneficiary Deed does have its drawbacks:
For estate tax
purposes, the full value of the property remains in the deceased owner’s estate.
A Beneficiary Deed
is not able to deal with the possibility of a minor or disabled
beneficiaries are named as grantees, they will each own an undivided interest in
the property, which can make managing and selling the property more difficult.
If the property is
owned as joint tenants or community property with right of survivorship, the
last survivor can revoke or modify the Beneficiary Deed, which may frustrate the
intent of the owner who is deceased.
property is subject to a mortgage lien, the property is still subject to the
mortgage lien after the owner dies. If the beneficiary or beneficiaries want to
keep the property they must either assume the payments (with the lender’s
permission) or qualify for a new loan.
Not all states have transfer on death laws for real
property, but for owners of real property in Arizona, a Beneficiary Deed is a
popular and simple way to transfer property at death without the need for
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