A beneficiary deed is like a regular deed you might use to transfer your Arizona real estate, but with a crucial difference: It doesn't take effect until your death. At your death, the real estate goes automatically to the person you named to inherit it (your "beneficiary"), without the need for probate court proceedings. (Ariz. Rev. Stat. Ann. § 33-405.) In other states, this deed is also commonly called a transfer on death deed.
You must sign the deed and get your signature notarized, and then record (file) the deed with the recorder's office before your death. Otherwise, it won't be valid.
The beneficiary's rights. The person you name in the deed to inherit the property doesn't have any legal right to it until your death—or, if you own the property "as joint tenants" with someone else, until the last surviving owner dies. (More on this below.) The beneficiary doesn't sign the deed, but it's a good idea to let the beneficiary know you've recorded it. Otherwise, he or she might not know about it, even after your death.
Earlier wills or beneficiary deeds. If you have made a will or previous beneficiary deed that leaves the property to someone, your new beneficiary deed will override it.
Your rights. You keep complete ownership of, and control over, the real estate while you're alive. You pay the taxes on it, and it's not protected from your creditors. You can sell it, give it away, or mortgage it. Because you're not making a gift of the property, there's no federal gift tax.
Medicaid. In most states, creating a beneficiary or TOD deed won't affect whether or not you are eligible for Medicaid. Because you own the property and are not actually giving it away during your lifetime, a beneficiary deed won't help you "spend down" your assets to help you qualify for Medicaid. Beware, though, that if you do end up receiving Medicaid benefits—for example, to pay for nursing home care—your home might be liable for reimbursement of Medicaid expenditures in some states. In other states, a beneficiary deed might protect your house from Medicaid estate recovery. If you have questions, consult a local attorney.
Other creditors. When you use a beneficiary deed, the beneficiary receives the property subject to debts you owed.
Revoking the deed. If you later change your mind about who you want to inherit the property, you are not locked in. You have two options: (1) sign and record a revocation or (2) record another beneficiary deed, leaving the property to someone else. You cannot use your will to revoke or override a beneficiary deed.
How ownership is transferred. To get title to the property after your death, the beneficiary must record a certified copy of the death certificate in the recorder's office. No probate is necessary.
If you own the property with someone else, how to proceed depends on how you and the other co-owners hold title to the property. If you don't know how you hold title, start by looking at the deed that transferred the property to you. It might say, for example, "to Ellen Bauman and Edward M. Bauman, as joint tenants" or "to Jonathan G. Costa and Sandra L. White, as tenants in common."
There are a few common ways to co-own property in Arizona:
Joint tenancy (also called "joint tenancy with right of survivorship"). If you co-own real estate as joint tenants with right of survivorship, when one co-owner dies, that co-owner's share of the property will automatically go to the surviving co-owner(s). You can make a beneficiary deed together with the other joint tenant(s) or you can make one on your own, but it's important to understand the difference.
When you make a beneficiary deed together with the other joint tenant(s), you are naming someone to receive the property after all of the joint tenants have died.
Example: Claire and Kendra co-own their home as joint tenants. They make a beneficiary deed together and name Oscar as the beneficiary. When Claire dies, Claire's half of the home goes to Kendra, who becomes the sole owner of the entire home. When Kendra dies, the home goes to Oscar under the beneficiary deed.
If you make a beneficiary deed on your own, without the other joint tenants, the deed will be effective only if you are the last surviving owner of the property. If you die first, the surviving co-owner(s) will own the property, and the beneficiary deed won't have any effect.
Tenancy in common. If your deed doesn't state how you own the property, you and your co-owners are presumed to own it as tenants in common, unless you've agreed otherwise in writing. If you own your property as a tenant in common, it's best to create a beneficiary deed on your own (without the other tenants in common). That beneficiary deed will transfer only your share of the property to the beneficiary when you die.
Example: Raymond and Jack, who are brothers, own a house together as tenants in common. Raymond signs a beneficiary deed that leaves his half-interest to his daughter. At Raymond's death, his daughter will become a tenant in common with Jack.
Community property. Arizona real estate acquired by a married person is generally the couple's community property. Community property can be owned with or without a "right of survivorship." Again, look at your deed to find out how you co-own the property. If it says "community property with right of survivorship," then your beneficiary deed will work the same way as for a joint tenancy with right of survivorship (see above).
If you're not sure how you co-own the property or whether or not your spouse has any rights to it, consult a lawyer. While the guidance here fits most situations, if you have a complicated situation or more complex aims, you should turn to a lawyer for a more tailored solution.
Revoking a jointly made deed. If you sign a beneficiary deed with a co-owner, the effect of revocation depends on how you co-own the property and who does the revoking.
If you co-own the property as joint tenants and/or with "right of survivorship," your co-owner will automatically own the entire property upon your death (and vice versa). So:
If you co-own the property as tenants in common, we do not suggest making a beneficiary deed with your co-owner in the first place (see above). But if you did, here is how revocation would work:
Trust property. If you hold real estate in a trust, you probably won't need to use a beneficiary deed, because trust property doesn't need to go through probate anyway. If for some reason you want to use a beneficiary deed instead, you'll probably need to transfer the property out of the trust first. Talk to a lawyer about your estate plan.
You can name anyone you please to inherit your real estate—a person, more than one person, or an organization such as a favorite charity. But if you want to name more than one person, or a minor, there are some issues you should consider.
More than one beneficiary. Before you name multiple beneficiaries on your beneficiary deed, make sure you consider 1) how the co-beneficiaries will hold title to the property after you die, 2) what will happen if one of the co-beneficiaries dies before you do, and 3) how the beneficiaries will feel about co-owning the property.
As to the first issue, when you make WillMaker's beneficiary deed for Arizona, your property will transfer to your beneficiaries in equal shares with right of survivorship. In other words, your beneficiaries will own the property as joint tenants.
Example: You name Mina and Connor as your beneficiaries. After you die, they will own the property as joint tenants with right of survivorship. Later, if Mina dies before Connor, Connor will own the entire property, and vice versa.
As to the second issue (what happens if a co-beneficiary dies before you do), WillMaker asks you to decide:
Choice 1: If a beneficiary dies before you do, that beneficiary's share of the property goes to the remaining beneficiary or beneficiaries in equal shares.
Example: If you name Abigail, Bennett, and Carmen as your beneficiaries and Bennett dies before you do, Bennett's share of the property will go to Abigail and Carmen. Abigail and Carmen will each receive half of the property.
If you make this choice, your deed will say, "If a grantee beneficiary predeceases the owner, the conveyance to that grantee beneficiary shall become null and void."
Choice 2: If a beneficiary dies before you do, that beneficiary's share of the property will go to the deceased beneficiary's estate.
Example: If you name your children Abigail, Bennett, and Carmen as your beneficiaries and Bennett dies before you do, Bennett's share of the property would go to Bennett's estate—that is, to the person or people named in Bennett's will or, if Bennett has no will, to Bennett's heirs (for example, Bennett's children) as determined by the intestacy laws of Bennett's state.
If you make this choice, your deed will say, "If a grantee beneficiary predeceases the owner, the conveyance to that grantee beneficiary shall become part of the estate of the grantee beneficiary."
If you have a more complex situation than these choices are able to accommodate, or if two of your beneficiaries are married to each other, consult a lawyer.
Finally, think carefully about how your beneficiaries will feel about owning the property together. Co-ownership is cumbersome and often causes tension. For example, one co-owner could force a sale of the property even if the other co-owners didn't want to sell.
Children under 18. Think twice about naming a child under age 18 as a beneficiary. A child can take title to the property, but an adult will need to manage it.
When making a beneficiary deed with WillMaker, you can name an adult "custodian" under the Arizona Uniform Transfers to Minors Act (UTMA) to manage the property. Under Arizona's UTMA, the beneficiary becomes the outright owner of the property at age 21.
You may have other options for naming an adult property manager, including:
For more information, see Naming a Minor Beneficiary for Transfer on Death Deeds. For help setting up a property management method, consult a qualified estate planning lawyer.
Several kinds of legal descriptions are used in Arizona. Just copy what's on the previous deed that transferred the property to you. Here are a few examples:
If the legal description is too long to safely type out (they can even run several pages long), simply photocopy or scan and print it, and attach it to the beneficiary deed as "Exhibit A."
Accurate, plain-English legal information can help many people create useful legal documents. But general information is never a substitute for personalized advice from a knowledgeable lawyer. If you want professional advice about the best way to craft or use legal documents in your particular circumstances, consult an attorney licensed to practice in Arizona.