JULY 4, 1994 VOLUME 2, NUMBER 1
In last week’s Elder Law Issues, we told you about various changes to Arizona law made during the most recent session of the state Legislature. This week we will attempt to explain the significance of a single piece of new legislation, the Revised Arizona Probate Code.
This year’s adoption of an updated version of the Uniform Probate Code did not change most provisions of the existing probate law. Several new provisions, however, promise to be beneficial for most elderly Arizonans.
“POD” and “TOD”
It has long been possible to hold bank accounts as “payable on death” to another person. Usually, the acount title will look something like “Mary Jones POD Susie Jones.” Such an account avoids the necessity of probate altogether (since the account goes to Susie Jones automatically on Mary Jones’ death). At the same time, Mary Jones avoids the risks she would have run if she had placed the account in joint tenancy with Susie.
Unfortunately, it has not been possible to hold stocks, bonds, mutual funds and brokerage accounts in a similar fashion. That has meant that people with modest estates are required to go to the trouble and expense of establishing living trusts if they wish to avoid probate without placing stocks and bonds in joint tenancy with their children.
Beginning January 1, 1995, stocks, bonds, mutual funds and brokerage accounts can be held in “transfer on death” (TOD) accounts. This form of account title will work just like POD accounts at banks, and should be very attractive to the modestly well-off older person who does not wish to establish a living trust. With the new law, it is even possible to name a “substituted beneficiary” who will receive the account if the first beneficiary is deceased.
Right of Survivorship
Most married couples hold all or most of their property in joint tenancy. This permits the property to pass to the surviving spouse without having to go through the probate process, and real estate agents and title companies routinely recommend joint tenancy on all real estate.
Unfortunately, there are some modest income tax benefits to holding property (particularly investment property) as community property. The trade-off has been that property titled as community property must be probated on the first death, and the cost of probate often erased any tax benefit.
Now married couples will be able to have it both ways. They can hold property as “community property with right of survivorship,” avoid probate and still get the income tax benefit at the first death.
Without becoming too technical, there are a number of other changes to the probate laws designed to make the process more logical and consistent with modern views. For instance, step-children are treated as more like natural children in some circumstances. Divorce now has the effect of revoking all the provisions of a deceased spouse’s will, trust, life insurance policy or other benefit for the ex-spouse (unless the decedent made it clear he intended to leave things to his ex in spite of the divorce). Slightly larger estates can avoid the probate process altogether. And several archaic common-law principles have been limited or abolished outright.
As always, we welcome general inquiries on behalf of patients, residents and clients. We will try to help caregivers and health care providers determine whether further legal assistance is needed, and provide general information about the effect of the law on the elderly and disabled.