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Benefits of Beneficiary Deeds

Posted On: August 11th, 2021 9:02PM

An Arizona beneficiary deed form has several benefits that make it a popular estate planning tool:

  • Probate Avoidance– Most people who create a beneficiary deed do so to avoid probate. Probate can be a time-consuming and expensive legal proceeding. Property that passes by a valid beneficiary deed skips the probate process and passes directly to the beneficiaries without court involvement.
  • Retained Control– A property owner who signs a beneficiary deed form keeps complete control over the property during his or her life. The owner can sell, mortgage, or rent the property without involving the named beneficiaries. If the owner changes his or her mind, the owner can simply revoke the deed or name different beneficiaries. This retained control distinguishes beneficiary deed form from the olderlife estate deed form.
  • Local Tax Benefits– Because the beneficiary deed does not become effective until death, the owner is treated as continuing to own the property during life. This allows the property to continue to qualify for local tax benefits like homestead exemption or other favorable tax status.
  • Federal Tax Savings– The owner’s retained control over the property means that the gift to the beneficiaries is not a completed gift during the owner’s life. This means that no gift tax is owed if the property is transferred by gift. It also means that the property will qualify for the full basis step-up at the owner’s death, effectively erasing any capital gains.
  • No Legal Fees– The benefits described above can all be achieved with aliving trust. But living trusts are more complex and can cost thousands of dollars. A beneficiary deed provides a lower-cost alternative with many of the same benefits.

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