12 Aug What Types of Assets Are Subject to Probate in Arizona?
Probate is the legal process of transferring the ownership of a deceased person’s property to their heirs, and it can take a long time to complete. There are many types of assets that are automatically subject to probate, unless you place them in a trust. However, not all assets are required to go through the process, even if they don’t get placed in a trust. Let’s take a look at a few examples of probate assets, and how to turn them into non-probate assets.
Four Types of Assets That Are Subject to Probate In Arizona
1: Titled Individual Assets
Vehicles, real estate property, and other titled assets that the decedent owns are all subject to probate under Arizona law. This includes real estate property owned by both the decedent and another individual as tenants in common.
However, if the real estate property is held in joint tenancy or as community property with the right of survivorship, then it is not subject to probate. The surviving co-owner (typically the spouse) automatically receives full ownership of the property after the death of the other.
Real estate property valued at more than $100,000 is also subject to probate in Arizona. But real estate property that does not exceed this limit qualifies for a more streamlined form of probate reserved for small estates.
If you want your titled assets to avoid probate, you must place them in a trust and transfer ownership to the trust.
2: Personal Possessions
Personal possessions without a title are also required to go through probate. This may include household items such as jewelry, clothing, collectibles, furniture, artwork, electronics, etc. To avoid probate, any sentimental personal possessions should be placed in a living or irrevocable trust.
3: Financial Assets
Bank accounts and brokerage accounts, business ownership interests, stocks, bonds, and other financial assets are also subject to probate. However, bank accounts, life insurance policies, and retirement accounts that have a designated beneficiary are not considered probate assets. They will automatically transfer to the beneficiary after the account owner’s death.
There is no financial limit to transferring a bank account, but transferring a life insurance policy valued at over $16,000 will be subject to the gift tax. The tax will only need to be paid after your death if your estate exceeds the federal gift and estate tax exemption of $12.06 million (as of 2022). Retirement accounts, however, are subject to federal and state income taxes, which beneficiaries will need to pay. Luckily, Arizona does not impose income taxes on inheritances.
4: Assets with Predeceased Beneficiary Designations
Although assets with beneficiary designations can avoid probate, the designation is no longer valid if the beneficiary dies before the decedent. To ensure that your assets avoid probate, it’s important to make contingent (backup) beneficiary designations. That way, someone else can receive the asset in the event that the primary beneficiary dies or disclaims their inheritance.
What Are Non-Probate Assets?
Assets that are not subject to probate in Arizona include:
- Jointly owned assets (assets held in joint tenancy or as community property with right of survivorship)
- Income that the decedent earned before their death. However, the estate’s personal representative must declare this income on the decedent’s final income tax returns
- Assets with valid transfer-on-death deeds
- Assets placed in a living trust or irrevocable trust
- Accrued pension plan distributions
Probate Lawyer in Mesa and Chandler
Whether you’re settling a loved one’s estate or want to make sure your own assets avoid probate, you’ll need an experienced probate lawyer. The experts at Phelps LaClair have been helping Arizona families in Mesa, Chandler, and the surrounding areas with a variety of estate planning services for over 40 years. Call us at 480-892-2488 today to schedule a consultation.
Images used under creative commons license – commercial use (8/12/2022). Photo by Beth Macdonald on Unsplash