Avoiding the cost and hassle of Probate in Arizona is an important Estate Planning objective. Avoiding Probate saves your loved ones a great deal of expense, delay, and inconvenience.
Trust-based Estate Planning is the best way to avoid Probate (and a bargain in comparison). Nevertheless, some may not want an Estate Plan based on a Revocable Living Trust (“RLT”). The RLT is a great Estate Planning tool but is not always necessary. There are other strategies for avoiding Probate in Arizona:
1. Transfer Real Estate Upon Death Via Beneficiary Deed
An attorney can draft and record a Beneficiary Deed that gives your home to a beneficiary automatically upon your death. This deed does not transfer ownership until you die and can be revoked if you change your mind.
It is rarely advisable to add children or non-spouses to the deed of your home as joint owner. This can create an IRS-reportable gift, unwanted taxes, and expose your home to the legal and financial drama of your kids (bankruptcy, divorce, lawsuit).
2. Retirement Assets Avoid Probate with Proper Beneficiary Designations
Your IRA, 401K, Pension, and other retirement assets should have Primary and Secondary beneficiaries. Check and update your paperwork regularly. As long as your beneficiaries outlive you, retirement accounts will pass outside of Probate.
3. Bank & Investment Accounts Transfer to Loved Ones with POD/TOD Instructions
Your non-retirement savings, checking, and investment accounts can have “Pay on Death” (POD) or “Transfer on Death” (TOD) instructions. Complete paperwork at your financial institution choosing who will receive your accounts automatically upon your passing. POD/TOD paperwork can be done at no cost and avoids Probate as long as your “payees” outlive you.
4. Vehicles Pass to Loved Ones via Beneficiary Designation
The Arizona Department of Transportation provides paperwork placing beneficiaries on your vehicles upon your death. This transfers vehicles without Probate and requires that beneficiaries simply take the completed form, vehicle Title, and your death certificate to the DMV.
5. “Small Estates” Transfer to Loved Ones Without Probate
If personal property does not exceed $75K and real estate does not exceed $100K, your “Small Estate” can transfer to heirs without Probate.
Heirs claim Small Estates by presenting special affidavits, and other documentation, to your financial institutions. This process is faster and cheaper than Probate.
A home can be transferred by filing Small Estate paperwork with the court, provided six months have passed since death. Consult an attorney if you think Small Estate procedures apply as they can be impractical or ineffective in some scenarios.
You Still Need an Estate Plan!
If you use these strategies, you still need a Last Will & Testament, Financial & Medical Powers of Attorney, and Medical Directives. Your Will controls assets not covered by other transfer methods and you need to avoid conflict with family by stating clearly who gets what. If you have young children, your Will should designate guardians if both parents die.
It is essential that you choose others to make your health and financial decisions if you become incapacitated.
For Many, a Trust is a Better Solution.
If you have beneficiaries with special needs or live as a blended family you should have a Trust. If you own rental or vacation property, a business, tangible property worth over $75K, or want to control how your beneficiaries receive their inheritance (ie: not all at once!) then you should have a Trust.
Before you decide on a final strategy, seek the advice of an attorney so you can…
Leave a Legacy! Not a Burden.