PROBATE Flashcards
FOUR WAYS TO AVOID PROBATE IN ARIZONA
- Create a Trust
- Designating Beneficiaries
- Titling Property to avoid probate
- Utilizing small estate court proceedings
- ESTABLISH A TRUST
The American Bar Association (ABA) recommends that people use revocable or living trusts in order to avoid probate and reap potential tax benefits. Trusts provide people with a flexible way to initiate the transfer of property and assets prior to death. The creator of a Trust still maintains full ownership of their assets during their lifetime, but establishes a path for their assets to be distributed without Court involvement upon their passing.
To establish a trust, you must name an order for trustee succession and the plan for distribution of the assets upon your death. We recommend that in addition to naming the initial trustee, which is typically the creator of the trust, you also name at least two (2) successors to continue to manage the trust in the event you become unable to do so.
Following the creation of a trust, you will need to fund your assets to the trust. While there are a few key exceptions to this rule, including qualified retirement plans, a trust will not avoid probate unless it is fully funded.
- TITLE PROPERTY WITH RIGHTS OF SURVIVORSHIP
You can also avoid probate by using a form of ownership with rights of survivorship when you title or acquire property. There are two (2) forms of ownership with rights of survivorship: 1) Joint Tenants with Right of Survivorship; and 2) Community Property with Rights of Survivorship. Joint Tenants is available to all individuals, whether or not they are related to one another, and can include more than two (2) people. Community Property is limited to married couples.
When property is held with rights of survivorship, each party owns an equal and undivided present right or interest in the property, whether that property is a home or a bank account. Upon the death of one of the joint owners, his or her share will automatically pass to the surviving party and the property should not be subject to probate.
- MAKE ACCOUNTS PAYABLE ON DEATH OR TRANSFER OF DEATH
A further option is adding a “Payable on Death” (POD) or Transfer on Death (TOD) designation on various assets including but not limited to bank accounts, brokerage accounts, real property, and vehicles. Adding a POD or TOD designation is sometimes referred to as a beneficiary designation. In order to add a beneficiary designation to a financial account held at a bank or brokerage house you need to visit your financial institution and complete a POD/TOD designation form. Each financial institution will have its own separate form.
On the POD/TOD designation form, you designate your beneficiary or beneficiaries and what share, or percentage, you want each beneficiary to receive. In most cases you will be able to name secondary beneficiaries in the event your primary beneficiary predeceases you. You can name an individual, multiple individuals, your trust, a company, or a charitable organization as your beneficiary. The named beneficiary will be legally entitled to access the asset within the account upon your death and the asset should not be subject to a probate.
With regard to vehicles, the Arizona Motor Vehicle Division has a Beneficiary Designation Form. In order to effectuate a beneficiary designation for your vehicle, you simply complete and staple the form to your original Vehicle Title. If completed properly, the Beneficiary Designation Form will transfer title to your designated beneficiary upon your death.
Finally, Arizona permits the recording of Beneficiary Deeds which allows for the transfers of title to real property upon the death of the owner. Due to complications that can arise out of the preparation and recording of a Deed, it is recommended that you speak with a qualified estate planning attorney to determine if a Beneficiary Deed is the best course of action for you and your family.
- PROVISIONS FOR SMALL ESTATES
Even if you cannot completely avoid probate, you can make the process less costly and more efficient by taking advantage of Arizona’s small estate procedures. Specifically, Arizona allows for various procedures in the event the total value of your estate is less than certain statutorily set values. Such values include: equity in real property less than $100,000.00; total value of personal property (including bank accounts and vehicles) less than $75,000.00; and a total value of all assets, after all reasonable funeral expenses, final medical expenses and the costs of a probate administration, is less than $37,000.00.
Even with the small estate procedures, it is important to make your final wishes regarding the distribution of your assets are set forth in a Last Will and Testament. Without a valid Last Will and Testament, the distribution of assets under the small estate procedures will be determined by the Arizona intestate statutes.
HOW MUCH DOES AN ESTATE HAVE TO BE WORTH TO GO TO PROBATE IN ARIZONA?
In Arizona, if a decedents estate is small enough, the law allows you to skip probate altogether and use a simplified process. This usually is reserved for smaller estates if the value is under $100,000 (for real estate) or under $75,000 (personal property)
WHEN IS PROBATE NOT REQUIRED?
Probate is required by Arizona law unless all of a decedent’s assets are placed in trust or the decedent has listed beneficiaries for all their assets. However, Arizona has a more straightforward, streamlined probate process for smaller estates.
WHAT HAPPENS IF YOU DO NOT FILE PROBATE IN ARIZONA?
Assuming probate is necessary, there can be a number of consequences for not petitioning to open probate: Individually-titled assets will remain frozen in the decedent’s name. The estate’s assets are subject to losses. Another interested party may petition to open probate.
HOW MUCH IS PROBATE IN AZ?
The average cost of probate in Arizona can vary depending on a number of circumstances, but legal fees alone can range, on average, anywhere from $2,000 to about $5,000.
WHAT HAPPENS IF PROBATE ISNT APPLIED FOR?
If you don’t apply for probate when it’s needed, the deceased’s assets can’t be accessed or transferred to any of the beneficiaries. Probate gives a named person the legal authority to deal with the assets. Without this authority, they can’t do anything with the assets.
HOW LONG DO YOU HAVE TO FILE PROBATE AFTER DEATH IN ARIZONA?
Under Arizona law, you have two years from the date of the decedent’s passing to probate a Will.
“POUR OVER” WILL
A “Pour Over” Will is a Last Will and Testament that names the Trust as beneficiary to your Will. When you and your spouse (if you are married) die, then anything that you have acquired during your lifetime that you have forgotten to put into your Trust will be “poured over” or placed into the Trust.
A pour-over will is a will used alongside a living trust. You can use it to transfer assets not already held in your trust before you die into your trust after your death.
Having a pour-over will makes sure that all of your assets will pass to intended beneficiaries. This avoids probate by easily passing assets on to heirs.
