How can I avoid probate?

Under Arizona law, real property titled solely in the name of a decedent valued more than $75,000 must go through probate. Oftentimes, married couples intend to avoid probate by holding assets as joint tenants with right of survivorship or in community property with right of survivorship. However, these forms of ownership don’t avoid probate after the second spouse dies.

To solve the problem for certain accounts, people wishing to avoid probate can title their bank and brokerage accounts in their names with a “POD” (Pay on Death) or “TOD” (Transfer on Death) designation. Upon death, these types of accounts pay immediately to the named beneficiaries without probate. Properly naming beneficiaries for life insurance policies, annuities and retirement plans such as individual retirement accounts and 401(k) plans also avoids probate. However, there was never a similar option for Arizona real estate — until now.

Before the new law, real property owners had three choices upon death: (1) probate of their estate; (2) create a living trust; or (3) placing children’s names on the title as joint owners. While trusts remain the most effective way to control property after death, many estates simply aren’t large enough to justify the creation of or administration of a trust. And, while the third option seems reasonable, it is irrevocable and exposes the real property owner to a child’s liabilities and creditors. In fact, there are numerous examples of unwary homeowners who have lost their homes as a result. In addition, such a transfer to a child may have both gift tax and capital gains tax consequences!

Under the new law, the Beneficiary Deed is a simple solution to the probate problem. The deed names a beneficiary or beneficiaries to receive the real property upon the death of the title holder (or the survivor of the title holder, if joint tenants). The beneficiary acquires no interest in the property until your death and you can change or revoke the selection of a beneficiary during your life with another deed. After you die, the beneficiary (or beneficiaries) files a simple form and an original death certificate with the County Recorder and the property automatically transfers to the recipient.