Benefits of an Arizona Beneficiary Deed

by Richard Keyt, Arizona real estate & estate planning attorney

To hire me to prepare an Arizona Beneficiary Deed complete and submit my online Arizona Beneficiary Deed Preparation Agreement.

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.

The benefits of an Arizona Beneficiary Deed are:

1. 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.

2. 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.

3. 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.

4. 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.

5. Signing and recording an Arizona Beneficiary Deed has no gift tax liability because it is not a present transfer of property.

6. The owner is free to change an Arizona Beneficiary Deed at any time.

7. 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.

Drawbacks to Using an Arizona Beneficiary Deed

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

1. 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.

2. 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.

3. 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.

4. 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 p