Probate refers to the court proceedings that occur after you die, when the assets you owned are transferred to the people who inherit them. If you have a last will and testament, the document will give instructions to the court on how your assets will be distributed. If you die without a will, the court will follow Arizona’s intestate succession laws.
Probate court can be expensive and time consuming. With careful planning, you can avoid most of the cost and stress associated with probate court.
Rather than have your family go through this process while they are grieving your loss, here are some ways you can avoid or limit probate during the last days of your life.
Since probate applies to the assets you own at the time you die, giving away your assets before you die will limit the amount of property that has to pass through probate.
Although Arizona does not levy gift taxes, the Federal government imposes a tax on annual gifts. In 2018, you can give up to $15,000 per person per year without being taxed. Giving away your assets during your life to avoid putting them through probate is a common practice.
If you own a home or other real estate properties, you can avoid probate by titling the property a certain way.
Arizona recognizes two forms of ownership with rights of survivorship, meaning that after one owner dies, their ownership interest will automatically pass to the other joint owner(s) and will not go through probate. Creation of these survivorship rights may take some time, so you should not leave this task until the last minute.
In this form of joint ownership, two or more people own a share of the same property. When one of the joint tenants dies, their share passes to the other owner(s). Unlike community property, the owners do not need to be related to one another. In Arizona, each joint tenant must own an equal share of the property.
Arizona allows married couples to own property in this form of joint ownership. When one spouse dies, the other spouse will automatically own the entire property without having to go through probate.
Other states, including New York and Florida allow a third form of joint ownership with a survivorship interest called a tenancy by the entirety. This form of ownership is only allowed for married couples, but it works in a similar way to joint tenancies.
Most retirement accounts and all life insurance policies require you to designate a beneficiary when you create the account. This allows these accounts to automatically bypass probate, because they are a private contract between you and the financial company.
Your personal bank accounts can also have a designated beneficiary. These accounts are sometimes known as “pay on death,” or “transfer on death,” because the assets automatically transfer to the beneficiary when you die or can be transferred on your death to their account.
Speak with your bank to ensure that you have completed the required paperwork so that your bank accounts do not have to pass through probate after you die.
In Arizona, small estates may not be required to go through probate. These estates may have less than $100,000 in real property or $75,000 or less in personal property. One of the heirs may close the estate by using a Small Estate affidavit.T his exemption relieves the burden on families and the courts.
Even if your estate would be considered small, consider having a last will and testament drawn up, to ensure your property is distributed the way you want it to be.
Even though you might feel entirely “with it” up until the end of your life, there is a possibility that you may be diagnosed with dementia, Alzheimer’s disease, or become otherwise mentally incapacitated before you get around to planning your estate.
If you reach that point, you will not be legally capable of managing or distributing your assets. It is always better to contact an estate planning attorney sooner, rather than later. This will give you the peace of mind that your affairs are in order and let you have peace in your last days knowing that your family will be cared for after you are gone.
Starting earlier will also give you more time to create a living trust and fully fund it. Putting your assets into a trust can allow you to avoid probate altogether because you will not own these assets – they will be owned by the trust for your, and your beneficiaries’ enjoyment. You need to allot time to transfer your assets into your living trust once it is completed.
This article does not provide legal advice. To discuss your estate plan, and how you can limit or avoid probate proceedings altogether, contact me to set up a consultation today.