Most people what to avoid probate court in Arizona, but why? Among the worst issues are that probate court can delay transferring your assets to your heirs, can cause privacy issue because probate cases are a matter of public record, can be costly if your estate has to hire a lawyer, and can open your estate up to conflict from a probate challenge. Fortunately, with estate planning, you can reduce and mostly avoid probate court for essential assets. Here’s some effective estate planning tools that will help you bypass probate, helping your estate to be hassle-free for your heirs.
You Probably can’t Completely avoid the Probate Process, but you can Minimize it
Probate is a court process for validating a will and administering the estate of a deceased person. Court oversight clearly can cause delay and expense. Almost everybody is going to have some property that might have to go through the probate process – a car or an account the estate neglected. The good thing is that there is an easy, low-level probate used to transfer ownership of smaller items. This process is usually known as “probate by affidavit” or a “small transfer affidavit” in Arizona. This process is relatively quick and simple. The trick is to stay below the amounts which can be transferred by affidavit, which in 2023 are $100,000 in real estate equity, and $75,000 in personal property. These days, you can even transfer a vehicle with a “non probate affidavit” filed with the Motor Vehicle Department.
Create a Revocable Living Trust for Larger Assets
Due to the recent real estate market, almost every homeowner has over $100,000 in real estate equity. Most homeowners use a revocable living trust to avoid probate on their real estate. By transferring legal ownership of your assets to a trust that you control, you can avoid the need for probate. A living trust allows for the immediate transfer of assets to your heirs, called “beneficiaries” in a trust, according to your wishes. This helps avoid the negative impacts of probate. A trust is a good way to avoid probate on business assets, LLCs, and real estate assets.
Utilize a Beneficiary Deed
Another effective method to bypass probate with real estate is a beneficiary deed. A beneficiary deed transfers ownership immediately upon death of the current owner, pursuant to Arizona statutory law A.R.S. § 33-405. This transfer avoids probate for that specific real estate asset. However, we would usually not recommend a beneficiary deed if a person has more than one heir, as it creates joint ownership in the real estate among the heirs. This can lead to legal headaches down the road. Further, if both persons die simultaneously or closely in time, probate will probably still occur.
Designate Beneficiaries on Accounts
Almost all accounts, such as life insurance or retirement accounts, allow the owner to designate beneficiaries. Naming beneficiaries ensures that these assets will transfer immediately upon death, bypassing probate. In the finance industry these are known as payable-on-death (POD) or transferable-on-death (TOD) accounts, and either pay out or transfer ownership upon death of the account owner. These transfers occur by operation of Arizona statutory law, A.R.S. §§ 14-6212, 14-6307, and they do occur before probate. However, you should consult with a financial advisor and tax professional before designating beneficiaries on your accounts, especially pre-tax money accounts, like traditional IRAs and 401(k) accounts.
Avoid Joint Ownership for Estate Planning
By jointly owning property or assets with another person, ownership can automatically transfer to the surviving joint owner upon your passing. While this avoids probate, our firm would not normally recommend this as an estate planning tool. Owning an asset jointly could lead to that assets’ seizure in a lawsuit or other debt proceedings. Further, if both persons die simultaneously or closely in time, probate is still on the table. One exception might be joint ownership with a spouse. Even so, using a trust, or even a beneficiary deed, is almost always better than joint ownership.
Be Proactive with your Estate Planning with these tools
Probate can cause delay, expense, and conflict for your loved ones. By implementing some simple estate planning tools such as creating a trust and designating beneficiaries, you can mostly avoid probate court. Being proactive with estate planning should make the process relatively hassle-free for your loved ones.
Brittany Labadie is the Managing Partner at Lewis Labadie. She has been working with Lewis Labadie since it opened. Her current focus is with adoption cases, including juvenile adoptions, adult adoptions, foster care adoptions, same-sex adoption, surrogacy adoptions, and when necessary termination of parental rights. She works throughout the State of Arizona.
