Arizona’s beneficiary deeds are governed by A.R.S. § 33-405.
Beneficiary deeds are estate planning instruments that allow owners of Arizona real estate to retain absolute control over their property, with the freedom to use, modify, or sell the land at will. When lawfully executed and recorded, beneficiary deeds convey a potential future “interest in real property, including any debt secured by a lien on real property, to a grantee beneficiary designated by the owner and that expressly states that the deed is effective on the death of the owner transfers the interest to the designated grantee beneficiary effective on the death of the owner,” subject to all the owner’s related obligations (§ 33-405(A)).
The titleholder may also change the beneficiary or revoke the deed (Revocation of Beneficiary Deed Form) without any obligation to notify the beneficiary because the transfer of the remaining property rights is not finalized until the recipient records the appropriate documentation.
For simplicity, much of the language relating to beneficiary deeds refers to a single owner. If two or more people share rights to the property, things get a little bit more complicated. In general, Arizona allows multiple individuals to hold title in one of three ways: tenancy in common, joint tenancy, and community property (§ 33-431).
According to § 33-431(A), Arizona presumes tenancy in common for two or more owners (who are not married to each other) unless otherwise specified in the deed. Tenancy in common is the simplest form of co-ownership because each individual owns a separate portion of the title, which they may sell without consent from the others. In effect, tenants in common are a group of single owners, which means they may include their share in a will, and therefore, in a beneficiary deed.
Under § 33-431(B), a “grant or devise to two or more persons may by express words vest the estate in the survivor on the death of a grantee or devisee when expressly declared in the grant, transfer or devise to be a joint tenancy with right of survivorship.” Joint tenants share full ownership with each other, and the right of survivorship means that when one owner dies, his/her portion of the rights gets distributed to the remaining owners (survivors). As a result, individual owners should not include this property in a will or a beneficiary deed unless they’re the only one still living.
Community property is the third main form of real property co-ownership in Arizona, and is only available to a married couple. To qualify as community property, the couple must acquire the real estate during their marriage and clearly state their intention to vest as community property with right of survivorship. For our purposes, it makes sense to view this type of vesting as a form of joint tenancy, but be aware that it is an incomplete definition. See § 33-431(C) for more information, or discuss community property in greater detail with a legal professional.
So, is it possible to use a beneficiary deed for jointly-held real estate? The short answer is yes. As explained in § 33-405(D), “a deed that conveys an interest in the real property to a grantee beneficiary designated by all of the then surviving owners and that expressly states that the deed is effective on the death of the last surviving owner transfers the interest to the designated grantee beneficiary effective on the death of the last surviving owner.” So, in this instance, if all joint owners agree to the future transfer and sign the deed,the beneficiary will gain the title when the last of them dies.
The same statute goes on to say that if a beneficiary deed is executed by “fewer than all of the owners of real property owned as joint tenants with right of survivorship or community property with right of survivorship, the beneficiary deed is valid if the last surviving owner is one of the persons who executes the beneficiary deed. If the last surviving owner did not execute the beneficiary deed, the transfer shall lapse and the deed is void.” Here is where things start getting tricky, because “the rights of a surviving joint tenant or a surviving spouse of an estate held in community property prevail over a grantee beneficiary named in a beneficiary deed.”
These rules also apply to revoking a recorded beneficiary deed. Under § 33-405(F), if the real property is “owned as joint tenants with right of survivorship or community property with right of survivorship and if the revocation is not executed by all the owners, the revocation is not effective unless executed by the last surviving owner.”
Each case is unique, and this information may not apply in every situation. Contact an attorney with specific questions or for complex situations.