Ask an Attorney: Consider all the consequences

Question: I am a widow and want my house to go to my daughter when I die. Should I sign a deed so that I own the property with her as joint tenants with right of survivorship?

Answer: Signing such a deed would accomplish the purpose of ensuring that the house goes to your daughter upon your death, and would also ensure that the house would not go through probate.

However, there are problems with this type of estate planning.

First, by making your daughter the co-owner of the property, you are making a gift to your daughter. Assuming that the value of the interest given to your daughter is worth more than $12,000 (the current annual gift tax exclusion amount) you will have to file a gift tax return to report the gift to the IRS.

In most instances, no tax will actually have to be paid at that time but the gift still has to be reported.

In addition, since your daughter would now be an owner of the property, any creditors of your daughter would be able to reach her interest in the property. Her interest would not be protected since she would not be a resident of the property.

Finally, if you and your daughter have a falling out, you have no power to remove her as an owner of the property.

A better approach would be to sign what is known as a “beneficiary deed.” A beneficiary deed states that, upon your death, all of your interest in the property will be transferred to the beneficiary named in the deed; to your daughter in this case. The deed must be signed and recorded before your death, but the transfer will not occur until you die.

The transfer under a beneficiary deed would also go outside of probate. You may revoke the deed or change the named beneficiary at any time. Beneficiary deeds have been allowed under Arizona law since 2001, and are a helpful tool for estate planning.

Q: Do I need a Living Trust so that my estate will not have to pass through probate? I have heard that if my estate goes through probate the state might take all my assets, and the process could take years.

A: Probate often does take longer than people anticipate, and having substantially all of your assets in a trust is one way to avoid the probate process. However, most of the horror stories that you hear about probate in Arizona are simply not true.

Every state has a different probate process; in Arizona it is relatively simple. Whether or not a trust is appropriate for you and your family should be decided on a case-by-case basis.

Many people I talk to have misconceptions about trusts and about probate.

I’ll address the probate process in detail in next month’s column.

Andy Heideman’s column appears as a public service. It is not intended as legal advice and addresses only general propositions. If you have a question about a matter that affects you, contact an attorney. If you have a question for Heideman, call his Green Valley office at 625-4405 or e-mail him at aheideman@ duffieldlaw.com.