Establishing Arizona Beneficiary Deeds

The state of Arizona enacted Revised Statutes Section 35-405 on April 1, 2011, which established the legal option to hold real property in an Arizona beneficiary deed.  This allows the owner of a property (or owner of an interest in a property) to have that interest convey to people or an entity upon their death.   The ownership of that interest in a property does not transfer until the death of the owner and then it conveys automatically to the designated grantee(s) in the beneficiary deed.  Here are some of the main advantages and disadvantages to an Arizona beneficiary deed that you should understand before establishing one.

Advantages of an Arizona Beneficiary Deed

There are many advantages to holding real property in an Arizona beneficiary deed.  For starters, that property will avoid probate after the owner dies.  Since the deed transfers automatically, it will not be considered a part of the probate estate.  This should save at least a few thousand dollars in legal fees.

An Arizona beneficiary deed will be less expense than setting up a living trust.  Living trusts are much more common in Arizona, mainly because they have been used longer, but they are typically more expensive to setup.

The owner maintains control over the real estate with an Arizona beneficiary deed.  If a living trust is used, the trustee must administer the trust as the living trust has detailed.  This is a more complicated process than simply transferring ownership of the property upon the death of the owner.  There is also no gift tax liability when you hold real estate in an Arizona beneficiary deed because the property does not transfer until the death of owner.

The property owner has the flexibility to make changes to the beneficiary deed at any time, since they are still in full control of the interest in the property.  The owner can even revoke the beneficiary deed if desired.  A proper revocation will need to be recorded with the country recorder in this case.

Disadvantages of an Arizona Beneficiary Deed

There are some reasons to not use an Arizona beneficiary deed.  One of the main reasons to consider a different ownership structure for your property is the full value of the property will be assessed for estate tax purposes since it will not be transferred until the death of the owner.

Beneficiary deeds can also cause some difficulties with managing a property if there are multiple designated grantees.  They will have undivided ownership in the interest in the property and it might make future decision-making and management more complicated.

If the designated grantee is a minor, the owner of the property will need to consider that full ownership would transfer to the minor upon their death.  They may wish to place the interest in a trust or designate an adult to look over the property for the child until they are a certain age under the Arizona Uniform Transfers to Minor Act.

Find an Experienced Real Estate Attorney in Arizona

At MacQueen & Gottlieb, we have significant experience with Arizona beneficiary deeds and living trusts.  We can help you determine the best legal structures for your estate.  Contact us today  to schedule an initial consultation or make an appointment online.