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Beneficiary Deeds Free Real Property from 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. by Ann F. Schrooten, Attorney
There are many benefits of a Beneficiary Deed:
ore than a decade ago, Arizona adopted a law that created a type of deed that allows for probate-free transfers of homes and other real estate at the owner’s death. This deed is 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.
• 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.
At the same time, a Beneficiary Deed is not without 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 adequately 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
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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 they want to keep the property, the beneficiary or beneficiaries 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 subjecting the transfer to probate. For more than 20 years, Fitzgibbons Law Offices attorney Ann Schrooten has served clients throughout Arizona in the areas of estate planning, probate and real estate law. She can be reached at 520-426-3824 or firstname.lastname@example.org.
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