Non-Probate Transfers – Estes & Madine, PLLC

Co-Ownership:

It is common for people to own their assets as co-owners with other people (e.g., spouses, children, siblings, etc.). Common forms of co-ownership include the following:

Tenants in Common: Each owner owns an undivided interest in the asset. Upon the death of a co-owner, the deceased co-owner continues to own his or her interest in the asset, which becomes an asset of his or her probate estate.
Joint Tenants with Right of Survivorship: Each owner owns an undivided interest in the asset. Upon the death of a co-owner, the deceased co-owner’s ownership interest terminates and the asset continues to be owned by the surviving owner(s).
Community Property: Married couples in Arizona can own property as community property. Like tenants in common property, each spouse owns an undivided one-half interest in the community property assets. Upon a spouse’s death, the deceased spouse continues to own his or interest in the asset, which becomes an asset of his or her probate estate.
Community Property with Right of Survivorship: Married couples in Arizona can own their property as community property with right of survivorship. Each spouse owns an undivided one-half interest in the community property assets. Upon one spouse’s death, however, the deceased spouse’s ownership interest in the asset terminates and the surviving spouse becomes the sole owner of the asset.

Beneficiary Designations:

Whether an account is owned by one person or more than one person (e.g., a married couple), it is common for the owner(s) of the account to designate a beneficiary to become the new owner of the account upon the death of the current owner(s), which enables the beneficiary to collect the assets held in the account just by providing to the financial institution a certified copy of the death certificate(s) of the owner(s). These accounts can include:

Bank Accounts: Owner(s) of bank accounts can complete a bank beneficiary designation form to designate their account to be paid on death (“POD”) to a named beneficiary. The completed form authorizes the bank to convert the account to a POD. The named beneficiary is not entitled to any of the money in the account while the owner(s) is still alive. However, on the death of the owner(s), the bank account will “pay on death” to the named beneficiary.
Brokerage Accounts: Owner(s) of brokerage accounts can complete a beneficiary designation form to designate their brokerage account to be transferred on death (“TOD”) to a named beneficiary. The completed form authorizes the financial institution to convert the account to a TOD. The named beneficiary is not entitled to any of the assets in the brokerage account while the owner(s) is still alive. However, on the death of the owner(s), the brokerage account will simply “transfer on death” to the named beneficiary.

Other Beneficiary Designations:

Individuals may own assets as their sole and separate property, but they may provide that ownership of these assets should pass “automatically” to certain named beneficiary(s) upon the death of the owner (simply by the beneficiary providing to the financial institution a certified copy of the owner(s)’ death certificate(s)). Common usages for beneficiary designations include:

Life Insurance Policies: For most life insurance policies, the owner/insured will name one or more beneficiaries. Typically, the owner will name a “primary beneficiary” (e.g., a spouse) and one or more “secondary beneficiaries” (e.g., children). It is possible for the owner to name his or her Trust as the beneficiary.
Retirement Accounts: Most retirement accounts (e.g, Individual Retirement Accounts, Profit-Sharing Plans, 401(k) plans, etc.) permit the account owners to name one or more beneficiaries. Because these accounts typically are tax-deferred accounts (i.e., withdrawals from the accounts will be taxable income to the individuals who make the withdrawals), decisions regarding whom to name as beneficiary(s) can be more complicated than for other assets.
Beneficiary Deed: A Beneficiary Deed is a deed that conveys an interest in real property (which may include a debt secured by a lien on real property) to a beneficiary wherein the deed expressly states that the deed is effective only upon the death of the owner of the property. Until the owner dies, the owner alone is the sole owner of the property; and he or she may sell it, encumber it, or transfer it without the knowledge or consent of the named beneficiary. The Beneficiary Deed may name multiple beneficiaries, or it may name secondary beneficiary(s) (e.g., if a primary beneficiary predeceases the owner). The owner may revoke the Beneficiary Deed, or the owner may replace it with a subsequently executed and recorded Beneficiary Deed.