When a loved one passes, the whirlwind of emotions is often accompanied by financial and legal questions, especially around assets like IRAs. You might be wondering: Do IRAs go through probate in Arizona? 

Let’s break down this process, making it as straightforward as possible so you can feel more prepared for what lies ahead.

What Is Probate?

Probate is the court-supervised process of distributing someone’s assets after they’ve passed away. It ensures that any outstanding debts are settled and that assets go to the right people. But this process can be time-consuming and costly, and, in most cases, it becomes public record. Naturally, many people hope to avoid probate for their assets to save their families time and expenses.

So, when it comes to your Individual Retirement Account (IRA)(An IRA is a retirement savings account that provides you with tax-free investment growth) the goal is often to avoid probate if possible. IRAs, as we’ll see, have a few special rules that can make them easier to pass along outside of probate, provided they’re set up correctly.

Do IRAs Go Through Probate in Arizona?

The answer largely depends on one thing: whether you’ve designated a beneficiary. IRAs typically have a spot for naming beneficiaries, and when you’ve named one, the IRA usually bypasses probate. In Arizona, just having a named beneficiary generally means that your IRA will go directly to them without needing to pass through the court.

IRAs and Beneficiary Designations

Beneficiary designations are a powerful tool that simplifies the process. When you name a beneficiary for your IRA, it ensures that they receive the funds directly. This designation typically overrides instructions in your will, meaning even if your will says to divide assets one way, the IRA beneficiary designation will take precedence for that account.

For example, let’s say you named your daughter as the beneficiary of your IRA. In this case, once the paperwork is submitted, the funds can be transferred directly to her, skipping the probate process entirely. If no beneficiary is named, or if they are deceased and no contingent beneficiary is listed, the IRA will have to go through probate to distribute the funds according to your Will, if you have one, or according to your state’s distribution plan if there is no Will. 

In Arizona, an added benefit is that inherited IRAs also enjoy protection under Arizona’s exemption statute – A.R.S. § 33-1126, which means that creditors can’t typically touch these assets—even in bankruptcy cases. This law ensures that these funds remain secure for the person you’ve designated, but only if you designated a beneficiary. The IRA funds are available to satisfy any approved creditor debt against the estate if the IRA funds are paid to the estate as part of a probate.

Potential Complications and Scenarios

While most IRAs avoid probate with a named beneficiary, certain scenarios can pull them into the process. Here’s a closer look at each one:

No Beneficiary Designated

If you haven’t named a beneficiary—or the form was never completed—the IRA becomes part of your estate. When this happens, the IRA must go through probate, which means the funds are subject to any estate debts and could be delayed in reaching your heirs.

Estate as Beneficiary

Some people name their estate as the beneficiary, either intentionally or by default. When an estate is named, the IRA must go through probate. This setup can result in higher taxes and added delays, so it’s generally advisable to name a person (or persons) directly as beneficiaries instead. It also makes the IRA funds available to any creditor of the estate.

Minor as Beneficiary

Naming a minor as a beneficiary introduces another layer of complexity. Arizona law requires that minors have a conservator to manage the IRA until they come of age. If the IRA designates a minor as a beneficiary a probate proceeding to appoint a conservator for the IRA until the minor comes of age will be necessary.

Predeceased Beneficiary

If your primary beneficiary passes away before you, the IRA might will go to probate unless there’s a contingent beneficiary listed. A contingent beneficiary ensures that the funds have somewhere to go even if your primary choice is unavailable. Without this, the IRA may become part of your estate, pushing it into probate.

Each of these situations can complicate the process, but with careful planning, most of them can be avoided. For instance, by setting up a trust for a minor or reviewing your beneficiaries regularly, you can keep your IRA out of probate and save your loved ones from unnecessary hassle.

Why It Matters?

Probate can be a lengthy process, with Arizona’s probate cases sometimes taking months or even longer, especially if there are disagreements among heirs or complexities in the estate. IRAs that avoid probate are distributed more quickly, privately, and with fewer costs involved. Plus, avoiding probate means there’s no public record of the asset transfer, offering a layer of privacy that many families appreciate.

Protecting Your Loved Ones with an Estate Plan

A well-thought-out estate plan provides peace of mind. Knowing that your family will have direct access to funds, without the additional burden of court processes, can be a source of comfort. Setting up your IRA with clear beneficiary designations and periodically reviewing them is a smart step toward securing your legacy.

Taking time now to structure your assets thoughtfully can help your family avoid unnecessary costs and delays later.

Don’t Leave Your Loved Ones in the Dark

At PayneLess Law, we’re here to simplify your estate planning. Let’s create a plan that respects your wishes and protects your loved ones, sparing them unnecessary legal challenges. Your family’s future will be more secure the sooner you start planning. Contact us today at 480-420-7199 or schedule a consultation to start your planning easily. Planning ahead is an act of love. Reach out and let us make the process PayneLess.