When people talk about estate planning, a issue that comes up most of the time is avoiding probate. Probate is the process by which title assets are passed from a deceased person to his or her beneficiaries. The probate process takes place in Superior Court and takes no less than 6 months but can potentially take much longer. Not all titled assets must be probated. For example, assets held in a trust and accounts with beneficiary designations do not need to be probated.
Often, real estate is a person’s most valuable asset to pass to his or her beneficiaries. If the equity in the real estate is more than $100,000 and the real estate is titled to the deceased person alone, then probate will be necessary to transfer title to the real estate or to allow for the property to be sold and the proceeds to be distributed to the deceased person’s heirs/beneficiaries. Arizona provides an alternative for real property to bypass the probate process without transferring the real estate to a trust or titling it jointly with another person – the beneficiary deed.
A beneficiary deed is a new deed that is recorded with the county that reflects the current ownership of the property but also names beneficiaries to the piece of real estate. The beneficiaries do not have any authority over or right to the property until after the owner dies.
The benefit of a beneficiary deed is that it will avoid probate as to a specific piece of real property. However, there are circumstances in which a beneficiary deed may cause more trouble than good. For example, mom owns her home and has three children. She would like to avoid probate and wants for her three adult children to inherit her home. She signs and records a beneficiary deed. After mom dies, title transfers to her three children. Now the three individuals own the home together. They must all agree whether to either keep the home or sell the home. If they keep it, they will need to work out how to split the costs for upkeep, taxes, etc. on an ongoing basis and will need to make sure each is pulling his own weight with regard to the same. Alternatively, if they agree to sell the home, they must all agree on the realtor, list price, final sale price, etc. Even in families where everyone gets along, there is a lot of opportunity here for disagreement. If there are any disagreements, the only way to solve them is through the probate court.
A beneficiary deed can be a very helpful and cost effective estate planning tool. However, whether it is right for you and your family requires considering a number of factors and is something that should be discussed with an experienced estate planning attorney.