With an Arizona Beneficiary Deed, the owner of real property located in Arizona may convey his or her interest in the property to other people or entities following his or her death. That is, the ownership of the property does not change hands until the Beneficiary Deed takes effect after the original owner passes away. The benefits of a Beneficiary Deed include:

realestateProbate avoidance. Arizona real property transferred by an Arizona Beneficiary Deed avoids the cost (anywhere from $2,500 to $5,000) and delay of an uncontested probate. This is because the property is not part of the deceased person’s probate estate. Avoiding probate in this way is also more economical than doing so through a trust, which typically costs several thousand dollars when drafted by a qualified attorney.

Simplicity. An Arizona Beneficiary Deed is much simpler than creating and administering a trust. In addition, the owner retains complete control over the property with an Arizona Beneficiary Deed.

No gift tax liability. Since an Arizona Beneficiary Deed does not transfer property as a “gift,” it is not subject to gift taxes.

Flexibility. The owner is free to change an Arizona Beneficiary Deed at any time. He or she may sell, encumber or otherwise deal with their property without any restrictions or limitations. In addition, the owner may revoke an Arizona Beneficiary Deed at any time.

Be Careful With IRA Beneficiary Forms

Despite what some people believe, retirement accounts are not included in wills.

An article in the New York Times notes that who gets the money invested in a retirement account such as an IRA depends on who is named on the account’s beneficiary form.

Lots of people make mistakes when it comes to retirement accounts.

They may fail to name a beneficiary, or the form may not be on file with the custodian (financial institution) of the account.

Either mistake can cause problems when it comes to distributing the money. For example, the money could go to the person’s estate and be subject to creditors or to someone you don’t want to see get the money.

If you name your estate as the beneficiary, other problems may ensue. For example, the distributions also may not be stretched out over time.

Here are some IRA rules to live by:

  • Name a beneficiary
  • Name an alternate
  • Don’t name your estate
  • Review the forms on a regular basis
  • Make sure your financial institution has the form and any updated forms.

Take Caution When Designating Beneficiaries

man-and-woman-going-over-a-beneficiary-deedPeople can name the person they would like to be beneficiary on a variety of accounts and financial devices. This is advantageous because the assets that have a named beneficiary transfer outside of probate, saving heirs time and money. However, many people forget that a beneficiary designation on many documents will override their will.

recent article urges people to use caution when designating beneficiaries for various accounts. People may name individuals, charities, trusts, their estate, or private organizations as the beneficiary to their account. People may also choose not to name a beneficiary, in which case their will determines the distribution of the account.

It is also important to review beneficiary designations every five years, as well as after certain trigger events. According to elder law attorney Andrew Hook, “Key times to review your beneficiaries include after a marriage or divorce and after the birth or death of a close family member. Rollovers and conversions of retirement accounts are also important events because beneficiary designations generally won’t carry over from your old account to your new one.”

The article also warns against naming minors as a beneficiary to accounts. When minors are named beneficiaries, a court will typically appoint a custodian to manage and distribute the funds until the minor reaches the age of majority. This arrangement can be expensive, depending on the age of the minor.

Updating Your Listed Beneficiaries

Once you have a comprehensive estate plan in place, it is important to keep it up to date. This is particularly important for the beneficiaries you listed for things like retirement plans, IRAs, life insurance policies, bank accounts, and investment accounts. A recent article outlined the following six reasons for why you should update beneficiaries on these and similar accounts:

  1. You got  divorced  or  remarried: Make sure you don’t accidentally exclude a new spouse from an estate plan or accidentally include an ex-spouse.
  2. You changed jobs and  rolled over your retirement plan: In this instance the old beneficiary commonly does not follow to the new account, so you will have to rename him or her.
  3. Your primary beneficiary died: If you had second beneficiary named, that person would automatically become the first beneficiary in line.
  4. Your financial institution changed ownership:This can result in the loss of your beneficiary forms, or the new institution requiring a new form be filed.
  5. You had a child or grandchild: You might want to make sure to include new family members as beneficiaries on your assets. If your spouse is listed is your primary beneficiary, considered naming your new child as a secondary beneficiary. You could also name a trust as a beneficiary if the child would be too young to manage the asset.
  6. Your beneficiary became disabled: You might want to name a special needs trust as a beneficiary so that it can manage the asset for the disable individual. If you leave money directly to a special needs individual, you he or she might lose eligibility for Medicaid or Supplemental Security Income (SSI) benefits.

FAQs Concerning Arizona Beneficiary Deeds

An estate plan will ensure your assets are distributed to your beneficiaries with the least amount of legal fuss. The beneficiary deed was passed into Arizona state law on Aug. 9, 2001, and is designed to make it easier to transfer your real property to a beneficiary when you die. With some basic estate planning, you can include a beneficiary deed and make life easier for your loved ones. Get in touch with an experienced real estate attorney in Arizona to learn more.

What is a Beneficiary Deed?

A Beneficiary Deed is sometimes called a transfer-on-death (TOD) deed and is allowed in 23 states, including Arizona. It can be used to transfer an owner’s Arizona property interest to another person upon the property owner’s death. Once you create a beneficiary deed, it needs to be recorded with the county recorder in the area where the property is located. Upon death, the death certificate of the deceased also has to be recorded with the same county recorder, and the transfer can then be completed.

Why Use a Beneficiary Deed?

It is an easy and inexpensive method of estate planning and can be used by anyone who owns property in the state of Arizona. Without a beneficiary deed in place, there can be a lot of problems when it comes to deciding who is entitled to the property. If you die without creating a beneficiary deed, your property will be passed on pursuant to your trust, will, or state laws of intestate succession. This deed eliminates the need for the expensive probate.

Who Can Receive Property Via a Beneficiary Deed?

The person to receive the land is called a grantee. You can name a person who is 18 years of age or older, trust, or entity as a grantee. You can decide upon several grantees that share title as joint tenants with right of survivorship, tenants in common, or any other tenancy form that is legal in the state of Arizona.

When Will a Beneficiary Deed be Ineffective?

There are potential problems if two (or more) people own the property with rights of survivorship. If only one owner creates a beneficiary deed, it might be ineffective. It depends on whether that owner was the first to die. If the owner who created the deed dies first, his interest goes to the other owner instead of the grantee(s) listed on the beneficiary deed. Additionally, the surviving owner can execute a new deed and name someone else as grantee(s).

What Do I Need to Do to Ensure the Beneficiary Deed Is Valid?

A Beneficiary Deed has to be signed by the property owner and notarized, recorded in the county where the property is located during the owner’s lifetime, and must accurately state the property’s legal description.

While an Arizona Beneficiary Deed has many advantages, it is not for everyone. Certain property owners will be better served by other estate planning tools. Contact us today for more information about Arizona Beneficiary Deeds and to learn whether they are a good option for your specific situation, needs and goals.