Fitzgibbons Law Offices - Pinal County Lawyers

520-426-3824

 
 
 

Ann Schrooten, Casa Grande Estate Planning and Probate Attorney

 

Fitzgibbons Law Offices
1115 E. Cottonwood Lane
Suite 150
Casa Grande, AZ 85122

Golden Corridor Living

This article appeared in the Winter 2016 issue of Golden Corridor Living Magazine

Estate Planning

November 2015

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 Beneficiary Deed:

•  It avoids the cost and delay of probate because the real property is not part of the probate estate.

•  It is a less expensive and simpler way of avoiding probate than creating and administering a trust.

•  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.

•  A recorded 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.

A 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 beneficiary.

•  If multiple 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.

•  If the 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 probate.

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