February 22nd, 2017
How to Transfer Property Out of Trust for Beneficiary Deed
Question: My mother is the trustee of her revocable living trust (“RLT”), and I am the sole beneficiary. The only asset in the RLT is my mother’s Sun City home. My mother wants to execute a beneficiary deed to me for her home which will not be effective until her death. Can my mother, as the trustee of her RLT, execute a beneficiary deed to me? Or does my mother, as the trustee of her RLT, first have to deed the home to herself individually, and then execute a beneficiary deed to me for the home?
Answer: The Arizona Court of Appeals recently ruled that a beneficiary deed is only effective upon the death of a “natural person” who was an owner of the real property. In re Estate of Ganoni, 238 Ariz. 144. Therefore, your mother’s home owned by her RLT cannot be transferred to you by beneficiary deed. Your mother, as trustee of her RLT, must first deed the home to herself individually, and then execute a beneficiary deed to you. The recording of this beneficiary deed, if not revoked by your mother in her lifetime, will automatically transfer the home to you upon your mother’s death.
Note: A beneficiary deed allows a natural person to transfer real property to a family member or other person effective upon his or her death. Beneficiary deeds have the substantial advantage of avoiding probate, and are very popular for simple, inexpensive estate planning. A.R.S. § 33-405 is the statute authorizing beneficiary deeds of real property, and has a simple form of a beneficiary deed. Beneficiary deeds can be improperly used, however, and may have implications on taxes and title in complicated situations.