Probate is the court process after the death of an individual where a Personal Representative administers the estate to the devisees or heirs. Probate is required if the individual dies with more than $100,000 in equity in Arizona real property or more than $75,000 combined in all other personal property (e.g., checking, savings, investment accounts, insurance proceeds paid to the estate, vehicles, and so on.) To avoid probate, you may use the following non-probate transfer strategies:
Establish and Fund a Revocable Trust. This is the best option for most individuals. This type of trust can offer you control over your assets during your lifetime without court involvement after you pass. The key is that your assets must either be owned by the trust during your lifetime, or payable to your trust by beneficiary designation. This process is commonly referred to as “trust funding”; without a properly funded trust your estate could still end up in probate!
Title Property with Rights of Survivorship. There are two forms of ownership with rights of survivorship where each party owns an equal and undivided present right or interest in the property (whether real property or a bank account) that passes on the death of the other and is not subject to probate.
- Community property with right of survivorship — only available to spouses. The spouse gets a step up in basis at first spouse’s death.
- Joint tenants with right of survivorship — available to anyone. Caveat: by this ownership, each party has 100% access to bank accounts. This type of ownership is subject to creditors of either party. With regard to brokerage accounts and real property, there is no step up in basis, and there may be unnecessary capital gains tax to the survivor owner. We have heard so many clients say they put an adult child’s name on the account or deed to “avoid probate”, but they did not understand the risks and consequences- there are better planning options to avoid probate.
Designate accounts as Transfer on Death (TOD) or Payable on Death (POD). Financial institutions have forms to complete to transfer property in this regard. Various transferable assets include bank accounts, brokerage accounts. Beneficiary deeds also are used to transfer title of real property upon the death of the owner. Beneficiary designations on life insurance policies, annuities, and retirement accounts will pass the death benefit or account assets to the beneficiary designated by the policy or account owner. Note, you should always have advice of financial advisor or experienced estate planning attorney before designating beneficiaries to retirement accounts in light of the SECURE ACT of 2020.
Estate planning is not a DIY-job. Please contact one of our experienced estate planning attorneys at Bivens & Associates, PLLC, to discuss your unique situation to understand and implement the best legal solutions to achieve your goals and objectives. Call 480-922-1010 or email email@example.com to schedule your consultation.