Using a Beneficiary Deed in Arizona to Transfer Property Without Probate

If you own a home or investment property and want to pass it on to others after your death, you may be wondering how to avoid probate in Arizona. A beneficiary deed allows real estate owners to pass their property to loved ones posthumously while retaining complete control over it during their lifetime. Along with bypassing the probate process, incorporating a beneficiary deed into your estate plan can provide for a smooth transfer of real estate to your heirs upon your death.

What Is a Beneficiary Deed?

A beneficiary deed, also known as a transfer-on-death (TOD) deed, is a legal document that allows a real estate owner to designate a beneficiary who will automatically inherit the property upon the owner’s death without the need for probate. By executing a beneficiary deed, you retain full control of the property during your lifetime, meaning you can sell it, refinance it, or rent it at any time. A beneficiary deed can also reduce delays, expenses, and administrative burdens for family members handling a decedent’s estate.

Benefits and Drawbacks of Using a Beneficiary Deed in Arizona

Using a transfer-on-death deed in Arizona to pass property to loved ones after your death can have various advantages and disadvantages. Some of the benefits of beneficiary deeds include:

• Revocability – A property owner retains the right to change or revoke a beneficiary deed and to sell, lease, or encumber the property at any time during their life, all without the consent of the named beneficiary.
• Maintaining lifetime ownership – Title to the property does not transfer under a beneficiary deed until the owner’s death, allowing the owner to continue residing in and treating the property as their own.
• Simplicity – Beneficiary deeds offer a more straightforward, cost-effective way to transfer property than other estate planning options.
• Clarity – Because a property owner must record a beneficiary deed with the county recorder’s office, the deed leaves no dispute as to who will inherit the property after the owner’s death.

Arizona beneficiary deeds also have some potential drawbacks you’ll want to consider before moving forward, such as:

• Continued encumbrances – When the property owner dies with encumbrances on the property, such as mortgages, unpaid property taxes, or other liens, the beneficiary inherits the property subject to those encumbrances and must pay them off to avoid foreclosure.
• No contingencies for predeceased beneficiaries – When a named beneficiary dies before the property owner, their death voids the beneficiary deed, meaning the owner’s property will pass through their probate estate unless they execute a new beneficiary deed or name an alternate beneficiary in their original beneficiary deed.
• Specific revocation procedures – A property owner cannot revoke a beneficiary deed through their will or another estate planning document. Instead, they must execute and record a new beneficiary deed or a document expressly revoking the beneficiary deed.
• Only accounts for real estate – If you have other real property or personal property that you want to pass to heirs, a beneficiary deed will not cover that. Other estate planning tools, such as trusts, could be used to avoid probate for those assets.

Steps to Create and Record a Beneficiary Deed

Establishing a beneficiary deed in Arizona involves several steps. First, a property owner must draft the deed. A beneficiary deed must include the name of the owner, a legal description of the property, a designation of the beneficiary(ies) along with any alternate beneficiary if the primary beneficiary passes away, and a provision expressly stating that the transfer of title will occur upon the property owner’s death.

The property owner must sign the beneficiary deed and have their signature notarized. After executing the deed, the property owner must record it with the county recorder’s office in the county where the property is located. Recorder’s offices typically charge fees to record deeds, so the owner must pay the applicable fee when recording the deed.

Why Choose a Beneficiary Deed?

A beneficiary deed offers a quick, straightforward way to transfer real estate to a designated beneficiary upon your death without requiring probate to pass ownership. Because the transfer is not effective until you die, you retain full control of the property during your lifetime, including the right to live in it, sell it, refinance it, or otherwise use it as you choose. If you include a beneficiary deed in your estate plan along with tools like powers of attorney, you can protect your property even if you become incapacitated. An experienced estate planning attorney in Arizona can help you devise a comprehensive plan to account for these contingencies.

Frequently Asked Questions

Some of the most common questions people have about Arizona beneficiary deeds include:

How can an owner revoke the deed or name a different beneficiary?

A property owner can revoke a beneficiary deed in Arizona either by recording a new beneficiary deed that names a different beneficiary or a document that expressly revokes the beneficiary deed. The property owner must sign a new beneficiary deed or revocation document and have their signature notarized. The document must also meet the formatting and size requirements under Arizona law. The owner must record the executed document with the recorder’s office in the county where the property is located. When an owner revokes a beneficiary deed without recording a new deed (e.g., records a revocation document), the last valid recorded deed becomes the operative deed for the property. 

What happens to the beneficiary deed if I sell my home?

When a property owner sells their home with a recorded beneficiary deed, the sale voids the beneficiary deed, and the named beneficiary no longer has any right to receive the property. An owner may sell their property at any time during their life without the consent of the named beneficiary in the beneficiary deed.

What happens if the property has an outstanding mortgage when the owner passes away?

If a real estate owner who recorded a beneficiary deed for their property passes away without having satisfied an existing mortgage on the property, the mortgage remains in place. That means the beneficiary becomes responsible for paying it off, along with any other liens on the property, or faces the risk of foreclosure. The beneficiary may enter an agreement with the mortgage holder to assume the mortgage payments, pay off the mortgage in a lump sum, or sell the property and use the sale proceeds to satisfy the mortgage.

What should a beneficiary do after the owner’s death?

After inheriting a house via a beneficiary deed, the beneficiary should record the deed with the county recorder’s office, along with a certified copy of the death certificate, to transfer title of the property to themselves. The beneficiary should also contact any mortgage or lienholders to assume monthly payments or to arrange paying off the mortgage or lien. The beneficiary should also update ownership records with the local property tax office and utility companies to begin paying taxes and utility fees. You do not need to confer with the personal representative (executor) of the deceased’s estate to transfer ownership.

Contact an Arizona Estate Planning Lawyer Today

With proactive planning, you can keep your real estate and assets out of probate, reducing the likelihood of disputes and saving your heirs time and court costs. A skilled estate planning lawyer from Pennington Law, PLLC can draft a beneficiary deed that complements your comprehensive estate plan, giving you confidence and peace of mind.

Our firm is nationally recognized for its estate planning and wealth preservation services. Firm founder Andre Pennington has over 20 years of experience representing Arizona clients and has been quoted in publications such as Forbes, The Wall Street Journal, and The New York Times, and has been included in the annual Super Lawyers, Lawyers of Distinction, and Best Attorneys in America lists.

To learn how a beneficiary deed works and whether it could be a valuable legal tool for you, contact us today for a free consultation.