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Reclassify Your Assets to Avoid Probate

Non-probate property is property that may pass directly from a decedent to a beneficiary, without needing to go through the probate-court process.  
This type of property passes to a named beneficiary automatically, and is handled through private documents that were set into place during the life of the decedent.  

A person must take affirmative steps, while he or she is still alive, in order to turn assets into non-probate property.  This includes drafting specific documents based upon individual preferences and goals for each piece of property.  Several techniques exist that enable individuals to take advantage of non-probate property.

Most financial accounts, whether it be a simple bank checking account or an employer-sponsored retirement plan,include a payment-on-death (P.O.D.) clause.  When the account is initially set up, the application paperwork includes a beneficiary section.  This is where the account holder instructs the bank (or other financial institution) where to send the funds in case the account holder passes away.

Life insurance is an agreement between the insured and the insurance company that upon the passing of the insured, benefits will be paid to a named beneficiary or beneficiaries who were selected by the insured.  Life insurance contracts were the first  – and for a long while the only -- type of contact with a payment-on-death clause that qualified as a valid will substitute.  However, the modern trend is to recognize all contracts with a P.O.D. clause as non-probate property.

A Beneficiary Deed is a document that functions like a payment-on-death clause for real estate. It is used to transfer real property upon the passing of the homeowner.  This instrument was signed into Arizona state law on April 11, 2001, and is currently recognized in nine states; however, this number will likely grow over the years to come.  A Beneficiary Deed allows an owner of Arizona real property to cause his or her interest in the real property to be transferred to people or entities upon the his or her death.  Even though the document is drafted during the life of the property owner, this transfer of ownership does not take effect until the death of the owner.  The owner of the property is free to change an Arizona Beneficiary Deed at any time, and the owner may also revoke the deed at any time.