Probate is the court process through which a Personal Representative is appointed to administer the estate and ultimately transfer the decedent’s assets to his or her devisees under the Will or heirs pursuant to intestate law if there is no Will. The quickest way to understand how to avoid probate, is to first know when it is required.

A common myth is that if you have a Will no probate is required and/or your nominated Personal Representative will have automatic authority to act. This is not true. The named Personal Representative has no authority to act unless the Court issues “Letters” via a probate proceeding. Additionally, whether a probate is required depends upon the value and nature of ownership of assets at time of the decedent’s death. In Arizona, if an individual dies with more than $100,000 in equity in real property or more than $75,000 combined in all other personal property (e.g., checking, savings, investment accounts, vehicles) in his or her name alone (not in trust, no joint owner with rights of survivorship, or no beneficiary designation), a probate proceeding will be required.

What if the estate assets are smaller? Both personal and real property can be transferred directly to the heirs or devisees of a decedent’s estate by Affidavit, but no sooner than thirty (30) days after date of death in the case of personal property or not for six (6) months after date of death in the case of real property, without the need for probate or the appointment of a Personal Representative. In many instances, collection by affidavit is not ideal given the time delays and cooperation required of all heirs or devisees in paying valid debts and expenses of the estate. For these reasons, we sometimes open probate even though it is not legally required. 

So, how can you avoid probate? There are three ways to avoid probate: 

  1. Establish and Properly Fund a Revocable Trust. This is the best option for most individuals. By using a revocable trust, you can maintain control and beneficial interest over your assets during lifetime and also transfer assets to the beneficiaries without court involvement after your death. Depending upon family dynamics and tax issues, this is often the ideal solution to avoid probate.
  2. Title property with Rights of Survivorship. There are two forms of ownership with rights of survivorship: 1) joint tenants with rights of survivorship; and (2) community property with rights of survivorship. Joint tenants are available to anyone, whereas community property is only available to spouses.  Each party owns an equal and undivided present right or interest in the property, whether it is real property or a bank account. Upon the death of one of the joint owners, the deceased owner’s share automatically passes to the surviving party and is not subject to transfer by probate. However, unless you intend to actually convey a present interest to a co-owner, we do not recommend use of rights of survivorship. By adding a co-owner the asset may be subjected to their creditors, among other potential risks. In addition, with regard to assets with a cost basis (such as real property or stocks) there can be extra and otherwise unnecessary capital gains tax incurred by the surviving owner. In general, it is not recommended that you add a child as a joint owner on a financial account or real estate with you for probate avoidance purposes. Rather, a Trust or use of method in 3 below is typically preferred.  
  3. Beneficiary Designations: Use Transfer on Death (TOD){brokerage accounts}, Payable on Death (POD){bank accounts}, Beneficiary Deed {real property} or Beneficiary Designation {vehicles, life insurance, annuities, retirement accounts}.  TOD or POD designations are allowed on various assets including but not limited to bank accounts and brokerage accounts; you will need to visit your bank or financial institution and complete their POD/TOD designation forms. For vehicles, Arizona Motor Vehicle Division has a beneficiary designation form which will transfer title of your vehicle to your designated beneficiary upon your death. For real estate, Arizona permits the recording of beneficiary deeds. To be valid, a beneficiary deed must be recorded during your lifetime. Life insurance policies, annuities, and retirement accounts all have both primary and contingent beneficiary designations; you will need to complete the financial institution’s forms to make the designations. Note, it is important that you have advice from an estate planning attorney, financial advisor, or tax professional before making any beneficiary designations to understand the tax implications of said designations and ensure consistency with your overall estate plan.    

For your complimentary estate plan consultation, call us at 480-922-1010 or email info@bivenslaw.com. Everyone’s situation is unique and requires specific legal advice to implement the best legal solutions to avoid probate and achieve your goals and objectives.