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Potential Perils of Non-Probate Transfers

Berk Law Group, P.C.

People often wonder how can I avoid probate, how can I save the expenses of having my loved ones, my survivors go through probate. So they want to do non-probate transfers and have all of their assets distributed upon their death without going through probate. I’m Kent Berk. I’m an attorney with the Scottsdale, Arizona law firm of Berk Law Group, P.C. where we handle probate, estate, property, and other types of matters here in Arizona.

So non-probate transfers, while there is a significant benefit of avoiding probate, also have some perils. For example, take real estate. You can transfer real estate under Arizona law and avoid going through probate by having a joint tendency with right to survivorship deed, meaning that two or more people hold the property as joint tenants and then after the initial people died, whoever’s the last to survive ends up getting the property. You can also have property transfer by what’s called a beneficiary deed where the person designates who they want to get their property upon their death. But those deeds, a joint tendency deed or a beneficiary deed, also have a problem because that property, upon the receipt by the beneficiary or the survivor, could be subjected to the creditor’s claims of the survivor, whereas if the property was transferred upon the person’s death to a trust, that trust may provide some credit or protection for the survivor or the beneficiary.

Let’s take bank accounts, for example. There’s ways to transfer bank accounts outside of probate. One way is to having multi-party account where you put on the title to the account the parties who you want to get your bank account when you die. The problem with that is that once you put them on the account, the joint account holders are actually treated by the bank as joint owners of the account and could have access to and could withdraw your money while you’re still living. Also if you put less or all of the people who you intend to be beneficiaries of that account, the one who survives is on that account could end up taking the money and not giving the money to all of the beneficiaries you actually intend to receive it. Other ways that you could distribute a bank account without having to go through probate is a payable upon death designation. But just like a multi-party account or a pay on death designation and the deed situations that I described, the bank account could be open to creditor’s claims of your beneficiaries, whereas if the money, the bank accounts are put into a trust or other avenues were used, the those creditor’s claims may be able to be legally avoided. The important thing here is to consult with a knowledgeable estate planning attorney to determine what your real intent is, who you want to get the money, and to think about unforeseen circumstances like bankruptcy or a creditor’s claims, and other situations that may arise, to make sure that those situations don’t interfere what you really want to have happen to your assets.

If you have any questions regarding a probate, a trust, and estate matter here in Arizona, please don’t hesitate to give us a call. Thank you.