by Richard Keyt, Arizona real estate attorney

On April 11, 2001, the Governor of Arizona signed into law Arizona Revised Statutes Section 33-405, which created a new type of Arizona real property deed known as the Arizona beneficiary deed. By signing and recording an Arizona Beneficiary Deed, an owner of an interest in real property located in Arizona may cause the owner’s interest in the real property to be conveyed to people or entities on the owner’s death. The interest in real property conveyed by a Beneficiary Deed does not take effect until the death of the owner, at which time that interest transfers automatically by law to the designated grantee(s) named in the Beneficiary Deed.

Benefits of an Arizona Beneficiary Deed

The benefits of an Arizona Beneficiary Deed are:

  • Arizona real property transferred by an Arizona Beneficiary Deed avoids the cost and delay of probate because the property is not part of the probate estate of the deceased owner. Avoiding probate can save a family $1,500 to $3,000 or more in legal fees.
  • Transferring property by an Arizona Beneficiary Deed is a much cheaper method of avoiding probate than a living trust. The most common method to avoid probate is to create a trust and convey the real property to a trustee. Estate planning lawyers typically charge $1,500 – $2,500 or more to create a living trust.
  • An Arizona Beneficiary Deed is much simpler than creating and administering a trust. Property must be conveyed by deed to the trustee and the trustee must administer the property according to the terms and conditions of the trust agreement. With an Arizona Beneficiary Deed, the owner retains total control over the property.
  • After an Arizona Beneficiary Deed is signed and recorded, the owners may sell, encumber or otherwise deal with their property without any restrictions or limitations.
  • Signing and recording an Arizona Beneficiary Deed has no gift tax liability because it is not a present transfer of property.
  • The owner is free to change an Arizona Beneficiary Deed at any time.
  • The owner may revoke an Arizona Beneficiary Deed at any time by recording an appropriate revocation with the county recorder of the county in which the property is located.

Draw Backs to Using an Arizona Beneficiary Deed

Some of the negatives associated with an Arizona Beneficiary Deed are:

  • Because the property is not transferred until the death of the last owner, the full value of the property remains in the estate of the deceased for estate tax purposes.
  • If any beneficiary is a minor child, the child’s interest will be left outright to the child unless the deed provides that the interest is left to the child in a trust or to an adult for the child under the Arizona Uniform Gift to Minors Act.
  • In general, when there are multiple beneficiaries, they will own undivided interests in the property, which can make managing and dealing with the property more difficult and cumbersome than if it were held in a trust or by an entity like a limited liability company or a family limited partnership.
  • If property is owned as joint tenants with right of survivorship, the last survivor may revoke or modify the deed and frustrate the intent of the prior decedent(s). One way to avoid this problem is by using a trust that becomes irrevocable after the first death.

The above list is not all inclusive. We recommend that you consult with an experienced estate planning lawyer to discuss the pros and cons of using an Arizona Beneficiary Deed versus a comprehensive estate plan that includes a will and living trust. It may be that for you, a trust might be a better vehicle to accomplish your estate planning objectives.

Owner May Name Multiple & Successor Grantees

The owner of real property may name multiple grantees or a successor grantee(s), or both. Multiple grantees may take their interests as joint tenants with right of survivorship, tenants in common, community property, community property with right of survivorship, or any other tenancy that is otherwise valid under Arizona law. A grant to a successor grantee shall state the condition on which the interest of the successor grantee would vest.

Arizona Beneficiary Deed Example 1

If real property is owned as joint tenants with the right of survivorship or as community property with the right of survivorship, a deed that conveys an interest in the real property to a grantee designated by all the then surviving owners and that expressly states that the deed is not to take effect until the death of the last surviving owner transfers the interest to the designated grantee beneficiary effective on the death of the last surviving owner.

Example 1: John & Mary are married and own their home as community property with right of survivorship. They sign and record a Beneficiary Deed that names their children, Dick & Jane as their beneficiaries (grantees) as tenants in common only on the death of the last to survive of John & Mary. John dies two years later. At this time, Mary is the sole owner of the property. Mary dies ten years after John without selling or disposing of the property or revoking the Beneficiary Deed. Result: On the date of Mary’s death, Dick & Jane become the owners of the property as tenants in common.

Arizona Beneficiary Deed Example 2

If real property is owned as joint tenants with right of survivorship or community property with right of survivorship and if the Beneficiary Deed is signed by less than all of the owners of the real property, the Beneficiary Deed will be valid if the last surviving owner is one of the persons who signed the Beneficiary Deed. If the last surviving owner did not sign the Beneficiary Deed, the deed is invalid.

Example 2: John & Bob are unmarried brothers and they acquire real property as joint tenants with right of survivorship. John signs, delivers and records a Beneficiary Deed that conveys his interest in the property to Jane on his death. Bob does not sign a Beneficiary Deed.

Result 1: If John dies before Bob, Bob acquires sole ownership of the property by operation of law at the time of John’s death. John’s Beneficiary Deed is invalid.

Result 2: If Bob dies before John, John acquires sole ownership of the property by operation of law at the time of Bob’s death. If John does not sell or dispose of the property or revoke the Beneficiary Deed, then on his death, Jane will acquire sole ownership of the property.

Arizona Beneficiary Deed Example 3

A Beneficiary Deed will be valid only if the Beneficiary Deed is signed and recorded as provided by Arizona law in the office of the county recorder of the county in which the real property is located. A Beneficiary Deed must also be properly recorded before the death of the owner or the last surviving owner.

Example 3: John & Mary are married and own their home as community property with right of survivorship. They sign and record a Beneficiary Deed that names their children, Dick & Jane as their beneficiaries (grantees) as tenants in common only on the death of the last to survive of John & Mary. Assume any of the following events were to occur: (i) the legal description on the Beneficiary Deed does not describe the property owned by John & Mary, (ii) the Beneficiary Deed was recorded in a county other than the county in which the property is located, or (iii) the Beneficiary Deed is signed and properly acknowledged before a notary public, but it is not recorded in the proper county until after John and Mary die. Result: The Beneficiary Deed is not valid and does not convey any interest in the home to Dick & Jane.

Arizona Beneficiary Deed Example 4

An owner who signs and records a Beneficiary Deed may revoke the Beneficiary Deed at any time. If there is more than one owner, a Beneficiary Deed may be revoked by any of the owners who signed the Beneficiary Deed. If a Beneficiary Deed conveys interests of more than one owner and the revocation of the Beneficiary Deed is not signed by all the owners, the revocation will not be effective unless the last surviving owner is the party that properly revoked the Beneficiary Deed. Note: If all the owners of real property want to revoke their Beneficiary Deed, they should all sign the revocation to make sure the revocation becomes valid. To be effective, the revocation must be signed and recorded as provided by law in the office of the county recorder of the county in which the real property is located before the death of the owner who signs the revocation.

Example 4: John & Mary are married and own their home as community property with right of survivorship. They sign and record a Beneficiary Deed that names their children, Dick & Jane as their beneficiaries (grantees) as tenants in common only on the death of the last to survive of John & Mary. John later revokes his Beneficiary Deed by signing, properly notarizing and properly recording a revocation in the proper county. Mary does not revoke her Beneficiary Deed.

Result 1: If John dies before Mary, Mary acquires sole ownership of the property by operation of law at the time of John’s death. John’s revocation of his Beneficiary Deed is not effective. If Mary does not sell or dispose of the property or revoke the Beneficiary Deed, then on her death, Dick & Jane will acquire ownership of the property as tenants in common.

Result 2: If Mary dies before John, John acquires sole ownership of the property by operation of law at the time of Mary’s death. If John does not sell or dispose of the property, then on his death, the Beneficiary Deed would have been revoked and of no effect.

Arizona Beneficiary Deed Example 5

If an owner signs and records more than one Beneficiary Deed concerning the same real property, the last Beneficiary Deed recorded is the effective Beneficiary Deed.

Example 5: John is the sole owner of his home. He signs, properly acknowledges and records a Beneficiary Deed that conveys his interest in the home to his daughter Jane on his death. Two years later, John signs, properly acknowledges and records a Beneficiary Deed that conveys his interest in the home to his son Dick on his death. Result: By signing and properly recording the second Beneficiary Deed to Dick, the first Beneficiary Deed to Jane was revoked.

Form of Arizona Beneficiary Deed Approved by Statute

Arizona Revised Statutes Section 33-405.G provides that a Beneficiary Deed is sufficient if it complies with other applicable laws and if it is in substantially the following form:

Beneficiary Deed

I (we) hereby convey to ______________________ (Grantee) effective on my (our) death the following described real property:

(legal description)

If a grantee beneficiary predeceases the owner, the conveyance to that grantee beneficiary shall either (choose one):

[ ] Become null and void.

[ ] Become part of the estate of the grantee beneficiary.

___________________________

(signature of Grantor(s))

(acknowledgment).

Form of Revocation of Arizona Beneficiary Deed Approved by Statute

Arizona Revised Statutes Section 33-405.H provides that the instrument revoking a Beneficiary Deed shall be sufficient if it complies with other applicable laws and is in substantially the following form:

Revocation of Beneficiary Deed

The undersigned hereby revokes the Beneficiary Deed recorded on ___________ (date), in docket or book ______________ at page ______, or instrument number ___________, records of ________________ County, Arizona.

Dated: _______________________

____________________________

Signature

(acknowledgment).

Caution: To be recorded, all deeds and other documents must satisfy the conditions set forth in Arizona Revised Statutes Section 11-480.

The new Beneficiary Deed is an excellent way for owners of real property located in Arizona to convey interests in the property effective on death. This new type of Arizona deed can assist in estate planning and be used to avoid probate.

Property owners, however, should not prepare, sign and record Beneficiary Deeds without first obtaining counsel from an Arizona attorney who is familiar with Arizona real property conveyances and deeds and/or estate planning. Without proper legal advice or guidance, a property owner who prepares and records a deed without legal counsel takes a risk that the deed is defective or that it may not be sufficient to accomplish the property owner’s objectives. Deeds are legal documents and they should always be reviewed by a competent attorney before being signed or recorded.

KEYTLaw Arizona Beneficiary Deed Preparation Service

Arizona real estate attorney prepares Arizona Beneficiary Deeds and six other related documents for $195. See the list of services provided for this fee, which includes seven custom drafted documents:

  1. An Arizona Beneficiary Deed.
  2. A letter from you to the county recorder of the county in which the property is located. You send this letter to the country recorder with the Beneficiary Deed to record the Beneficiary Deed.
  3. A Revocation Deed (for later use if you change your mind and want to revoke your previously recorded Arizona Beneficiary Deed).
  4. A letter to the county recorder to record the Revocation Deed.
  5. A letter explaining the deed other documents.
  6. How to complete and record your Beneficiary Deed.
  7. How to complete and record your Revocation of Beneficiary Deed

To hire Arizona real estate attorney Richard Keyt to prepare an Arizona Beneficiary Deed for $195, complete the short Arizona Beneficiary Deed Preparation Service Agreement.

The Do It Yourself Arizona Beneficiary Deed Form

For people who would rather prepare their own Arizona Beneficiary Deed rather than pay an Arizona real estate and estate planning lawyer like me to prepare it, read about my Do-It-Yourself Arizona Beneficiary Deed form.