APRIL 30, 2001 VOLUME 8, NUMBER 44
Most lawyers agree that the probate process is neither as expensive nor as burdensome as most non-lawyers believe. Still, avoidance of probate is an important and legitimate goal in estate planning for most clients. The Arizona Legislature just made it easier to avoid probate for most Arizonans—or at least for those who do some simple planning.
House Bill 2280 passed both houses of the legislature and was signed by Governor Jane Hull on April 11, 2001. The new law creates an alternative way of transferring title to real estate—the “Beneficiary Deed.”
For decades smart planners have titled their bank accounts in their own names with a “POD” (Pay On Death) or “ITF” (In Trust For) designation. For the past decade it has been possible in Arizona to hold stocks, bonds and mutual funds in the similar “TOD” (Transfer On Death) form. Individuals who wanted to automatically transfer real estate did not have a similar option until passage of the new law this year.
Before the new law the owner of real property had three choices. Without any change in title, children or other beneficiaries would have to go through the probate process upon the owner’s death. A living trust could avoid the necessity of probate, but might seem expensive and cumbersome, especially in smaller estates. Many individuals chose to avoid both of those alternatives by simply placing children’s names on the title as joint owners, though that could complicate the owner’s life by exposing property to the children’s creditors, spouses and others—not to mention demands by the children themselves.
The Beneficiary Deed is a simple and elegant solution. The selection of beneficiary can be changed during the owner’s life, and the beneficiary acquires no interest in the property until the owner’s death. If no change is made, however, the beneficiary (or beneficiaries) can file a simple form and an original death certificate and property will be automatically transferred to the recipient.
In addition to avoiding the probate process, the Beneficiary Deed will permit widows and widowers to receive the full benefit of state property tax exemptions even while simplifying their estates. Children or other beneficiaries will benefit, but not acquire any interest in or control over the property during the owner’s life.
To be sure, the Beneficiary Deed will not be right for every property owner. In smaller estates, however, the availability of this simple tool will reduce the cost of estate planning and simplify administration of the estate.
Although the law is already on the books, the Beneficiary Deed is not yet an available option. It will probably become effective sometime in August. Like other new laws, this change will become effective ninety days after the end of the legislative session.
