When someone experiences the loss of a loved one, it can be a very difficult time. As if the loss was not enough, add to the grief the prospect of being nominated to handle and close the affairs of that person, making all the decisions that need to get made while being tugged in different directions by everyone from the funeral director to Uncle Henry, and then having to navigate through the court system; this can be quite intimidating.
Probate is the process by which a nominated personal representative or executor, acting in a fiduciary capacity, becomes authorized to transfer title of a deceased person's assets to designated beneficiaries. Those beneficiaries are either selected by the deceased through his or her last Will and Testament or determined under the state’s laws of intestate succession where the person passed away. Depending on whether there is a last Will or not, determines the next step in the probate process. Depending on whether one is a nominated personal representative (executor) or has priority to be one, also impacts the next steps to be followed. If you are nominated to be a personal representative or have priority to be one, continue reading. Otherwise, if you are a beneficiary looking to understand your rights, please jump to our webinar about “Are you an Heir”.Probate or Non-Probate Assets
Not all assets are subject to probate. Furthermore, depending on the value of the assets it may not require a formal probate be opened. Someone charged with serving as a personal representative (executor) needs first to conduct an initial inventory of the assets, determine the actual ownership of the assets, and estimate the value. Depending on the ownership or if a beneficiary designation exists, will determine if probate is necessary. If it is owned in the deceased’s individual name, and there is no beneficiary designation, then it likely requires probate. In Arizona, if the total value of the personal assets is under $75,000 or under $100,000 if the asset is real estate, then there is a small estate simplified probate process. If the assets exceed these amounts, then a more complex probate process will be required. Otherwise, assuming the assets are under the small estate amounts above, no formal probate is necessary, but the other administrative steps described in our trust and estate administration section still need to be accomplished.What Does Probate Accomplish?
In essence, probate allows a personal representative (executor) to transfer title of property from the deceased to the beneficiaries. Since the deceased person is not available to transfer an asset themselves, the probate process substitutes a judge's signature to accomplish a transfer in place of the deceased person. For example, to transfer title to real estate while you are alive, one signs a deed over to another. However, if the owner is deceased, there would be no one to transfer title but for the probate judge's signature, and hence the need for probate.Small Estates
If the estate you are being asked to be a personal representative (executor) has less than $75,000 personal property or $100,000 in real property value, Arizona provides for a small estate probate process. Depending on the assets involved, this process can be utilized as soon as 30 days after date of death (180 days if real property is involved). There are several different affidavits used and what one does with it varies depending on the asset in question. For instance, the Arizona Department of Motor Vehicle has its own form available through its website to facilitate the transfer of a car to a rightful heir. One needs to identify the asset and to whom it needs to be presented in order to complete the correct affidavit.Informal/Formal Probate
The decision to file for an informal or formal probate is driven by the terms of the Last Will, what it says, and how much time has transpired since the person passed away. The difference mainly concerns whether the probate court Registrar can “informally” appoint a personal representative based on the documents presented at the court filing window or whether it requires a judge to “formally” review the information at a hearing. The majority of probate filings in Arizona are done informally. In either instance, the paperwork to be completed is extensive, and should be completed with care.Can I Do This Myself?
Most people if they are lucky have not been asked to serve as personal representative of someone’s estate. As a result, most people do not understand all the tasks necessary to accomplish everything that is required. Worse, it is a thankless job. Most beneficiaries are not aware of all the tasks that a personal representative must perform or what steps the law requires them to take to fully complete the administration of an estate. In short, a probate administration is not instantaneous and will take some time to complete. The best-case scenario is approximately six months. However, the ability to quickly sell an asset while avoiding a fire sale price as well as getting all the required tax returns completed generally makes the timeline longer. If someone is diligent, well-organized and patient, you might be able to handle a probate on your own. However, our experience is that most people greatly benefit from the assistance of counsel to help them navigate through all the required tasks.Arizona’s 2012 New Probate Rules
Arizona enacted a series of laws in 2012 to create more accountability during the probate process. This adds to the number of tasks already required of a personal representative. For example, a personal representative is required to take a class in how to be a fiduciary (think personal representative or executor). If he/she does not complete the course work, the court will not approve his/her appointment as personal representative (executor). There are a number of other requirements too. For instance, if a personal representative (executor) wants to get paid from the estate for the services he/she provides, proper notice and disclosure must be made within 120 days of the appointment. Generally, personal representative (executor) compensation is based on a reasonable $25 to $50 hourly rate standard. Lastly, a court can terminate after two years any probate matter where a personal representative (executor) has not filed a closing statement with the court or timely completed all the tasks necessary to settle the estate.Personal Representative (Executor) Pitfalls
Many people do not understand that, if they accept the appointment to act as personal representative or executor, they become legally responsible to fulfill the directions of the deceased person. They stand in a fiduciary relationship to the beneficiaries. This means that they will put everyone else ahead of themselves and act loyally to the estate. If one fails in this endeavor, they are accountable to the other beneficiaries and could be liable for any damages.
Arizona law requires a personal representative (executor) to be transparent in his or her dealings with beneficiaries. It imposes numerous duties on the personal representative (executor) and requires him or her to act in the beneficiary’s best interest and avoid any appearances of impropriety or use of estate assets for his or her own personal benefit. Some of the duties are outlined below:
- Provide notice of court appointment of personal representative (executor) within ten days of appointment. A.R.S. 14-3705.
- Provide a copy of the Last Will and Testament to all heirs with ten days of having the Will admitted for probate. A.R.S. 14-3306.
- Publish “notice” to creditors. A.R.S. 14-3801.
- Provide an inventory and initial accounting of assets to heirs within 90 days of court appointment as personal representative (executor). A.R.S. 14-3076.
- Keep detailed records of all receipts and expenses of the estate, and provide such an accounting to heirs. A.R.S. 14-3933.
If the personal representative (executor) fails to perform the duties required of them, the probate court may hold a personal representative personally liable and responsible for any damage or loss to the estate resulting from a violation of the personal representative's duties. See A.R.S. 14-3712 and 14-3703.
Finally, be wary of anyone (professional or lay person) that gives advice that an administration is not necessary. Remember, there is a difference between going through probate and administering the assets correctly. One may not need to go through probate to ultimately transfer assets to heirs. However, there is always going to be an administration even if no probate is required. Be sure to review the four administration steps outlined elsewhere in this website.What Steps Should a Personal Representative (Executor) Initially Take:
Here’s what a personal representative (executor) initially needs:
- Order at least ten (10) death certificates from the funeral director.
- Locate the original Last Will and Testament.
- Locate veteran's papers.
- Locate life insurance policies and annuities.
- Locate the last three years tax returns.
- Locate birth certificates and marriage license.
- Locate real property deeds and any bank statements.
- Secure estate assets.
- Keep an accurate record of last illness expenses and burial costs.
- Compile a list of children and beneficiaries including address and social security number, if known.
- Maintain records of income received and expenses/taxes paid during the period of administration.
- Do not change insurance coverage(s) until you get a chance to consult with an attorney about what is appropriate to maintain.
And, if the decedent was living alone:
- Remove important documents and valuables to a safe location.
- Forward mail to the person handling estate matters.
If you would like to discuss the probate process further with our office, please do not hesitate to contact us at 602-424-5547.