Arizona Court of Appeals Division One holds that only a natural person who owns real property can execute a beneficiary deed pursuant to A.R.S. § 33-405.

The decedent, Augusta Ganoni, executed a beneficiary deed in 2003 to transfer her residence upon her death to her attorney, Whitney Sorrell.  At the time the deed was executed, the residence was property of a trust which had been formed in 2000, of which Ms. Ganoni was both the settlor and trustee.  Ms. Ganoni signed the beneficiary deed in her capacity as trustee of the trust.

In October 2011, Ms. Ganoni restated the trust to remove herself as trustee and appoint Mr. Sorrell in her stead.  In November 2012, Ganoni again restated the trust, removing Sorrell as trustee and appointing Joy Gaarde-Morton as trustee.  The 2012 Restatement also provided that Sorrell would no longer receive the house upon Ganoni’s death and that he would instead receive a gift of $10,000.

Ganoni died in December 2012 and in March 2013, Sorrell filed a petition for formal probate of Ganoni’s 2000 estate planning documents, sought appointment as personal representative, and requested that the court transfer the house to him pursuant to the beneficiary deed.  Gaarde-Morton objected, stating that she was trustee pursuant to the 2012 Restatement. 

Cross-motions for summary judgment were filed on the issue of the validity of the beneficiary deed and the trial court ruled in favor of Gaarde-Morton, concluding that the house was a trust asset and could not be conveyed via beneficiary deed.  The trial court also denied Sorrell’s motion for new trial in which he argued that Ganoni’s conveyance of the house in her capacity as settlor and trustee of the trust was authorized by A.R.S. § 33-405.  The trial court also awarded some $14,000 in fees to Gaarde-Morton.

Sorrell then appealed both the denial of his motion for summary judgment and the denial of his motion for new trial.  The Court of Appeals affirmed the trial court, concluding that the language used in A.R.S. § 33-405 “clearly indicates that only a natural person may execute a beneficiary deed.”  The statute provides that “[a] beneficiary deed transfers the owner’s interest in real property to a grantee beneficiary ‘effective on the death of the owner,” and “defines an ‘owner’ as ‘any person who executes a beneficiary deed.’”  The Court reasoned that the terms “death,” “person,” and “lifetime” which appeared in the statute “are words that apply to a natural person.”  Although Sorrell argued that a trustee qualified as a “person” under the terms of the statute, the Court disagreed, stating that the Court would “not expand A.R.S. § 33-405 to include trustees and trust property when, by its express terms, it does not do so.”  The Court also noted that Sorrell’s reading of the statute also would lead to confusing and absurd results, because “[t]he event that transfers property under a beneficiary deed is the ‘death’ of the owner” and “a trust . . . does not ‘die,’ it terminates.”  The Court further noted that “although a trustee can die, the death of a trustee does not automatically result in termination of the trust or distribution of the trust property.”  Additionally, the Court observed that, under Arizona law, trust property is distributed under the terms of the trust and A.R.S. § 33-405 provided no means to resolve conflicts between the language of the trust and a beneficiary deed.

Sorrell also argued in the alternative that the deed should be reformed to grant him the house.  The Court concluded there was no basis for reformation because the 2012 Restatement, “which Sorrell stipulated was valid and enforceable, shows that Ganoni’s most recent intent was to gift $10,000.00 to Sorrell, not the House.” 

Finally, the Court vacated the trial court’s award of attorneys’ fees to Gaarde-Morton, reasoning that Sorrell’s claims were not meritless or needless, and that the issue was one of first impression in Arizona. 

Judge Gould authored the opinion of the court, which was joined by Judge Howe and Judge Swann.