Probate

Probate has traditionally been defined as the court procedure by which a will is proved to be valid or invalid.  In current usage, the term probate has been expanded to refer to the legal process wherein the estate of a decedent is administered.  In Arizona, there are several ways to proceed in the handling of an estate.  Basically, an estate may be handled as a single supervised administration or as a series of separate proceedings, which may be either “formal” or “informal.”

An Overview of Probate Law in Arizona 

In the majority of cases, the administration of one’s estate is no longer the difficult process it once was. Arizona law provides for a flexible system for the administration of estates, which means there are several ways to proceed in the handling of an estate.  The procedure used will be dependent upon the nature of the estate and problems anticipated in the handling of the estate, if any.

As mentioned, an estate may be handled either as a single, supervised administration or as a series of separate proceedings which may be either “formal” or “informal.”  Supervised administration, reserved for more complex estates or unusual estates where supervision by the court is found to be necessary under the circumstances or where the will expressly directs supervised administration, is the exception rather than the rule and is rarely used.

The basic philosophy of the probate and administration sections of Arizona law is to minimize court involvement.  Therefore, the personal representative has full power to administer the estate, including the collection of assets, payment of claims, and distribution of the net estate to the successors of the decedent, without resorting to court order except where interested persons or the personal representative petitions the court.  Even actions requiring court involvement, for example probating the will to give it official status, appointing the personal representative, and closing the estate may be accomplished informally by the approval of a court officer called the Registrar without formal hearing and without advance notice.  Arizona law provides for formal proceedings where an informal proceeding is not available.

An informal proceeding does not have the same binding effect as an order in a formal proceeding, but it does have specified legal consequences which can be terminated only by court action upon the petition of an interested party in a formal proceeding.  An informal probate or appointment can be confirmed later in a formal proceeding brought by an interested party.  For example, a will may be informally probated and a personal representative appointed on application of the spouse who is named as personal representative.  A dissatisfied heir might contest the probate by petitioning in a formal testacy proceeding, or the spouse might anticipate such a controversy and file a petition in a formal testacy proceeding as soon as informal probate has been completed.  Either way, the informal probate would establish the will temporarily, and the formal testacy proceeding would adjudicate finally whether the informal probate should be confirmed or set aside.

An informal probate or appointment generally does not require notice in advance and is initiated by an application to the Registrar.  The Registrar acts on the basis of specified findings, and action by the Registrar has binding legal consequences unless and until set aside in a formal proceeding.

Arizona law also provides for summary administration of some estates where appropriate.  If the value of the entire estate does not exceed the allowance in lieu of homestead, exempt property, family allowance, costs and expense of administration, reasonable funeral expenses and reasonable medical expenses from the last illness, the personal representative may distribute the estate without giving notice to creditors.

The most urgent issue in the administration of an estate is to have a personal representative appointed.  Because an informally appointed personal representative has the same powers as though appointed formally, and because informal appointment can be obtained by application to the Registrar, there is ample reason for every estate to be opened by the informal process if possible.  Prior to appointment, a person named personal representative in a will may carry out written instructions of the decedent relating to the decedent’s body, funeral, and burial arrangements.  The acts of a nominated personal representative which are beneficial to the estate and were conducted prior to his appointment are given the same effect as those occurring thereafter.  A personal representative is entitled to reasonable compensation for his or her services.

The Probate Process in Five Parts

When I first meet with clients who are serving as personal representative of their loved one’s estate, I give them a road map of the probate process and discuss any potential problems they may anticipate.  While I go into more detail regarding the process when speaking with clients, I generally break the process down into five parts for ease of understanding.  Please be advised that every estate is unique and the following is only a general outline of the informal probate procedure.

The first part of the process is the drafting and filing of the required documents for the personal representative to receive their “Letters of Personal Representative.”  Informal probate in Arizona is a simplified process that allows a qualified personal representative to be appointed without the delay of the hearing process and provides the personal representative the ability to administer the estate with little, if any, court involvement.  Formal proceedings are required to appoint a personal representative in certain situations such as when there is a person with a higher order of priority who has not renounced or waived their right by appropriate writing filed with the court; if a priority is shared by two or more persons, as devisees or heirs, and one or more of them has not renounced or concurred in nominating the person whose appointment is applied for; or if appointment is sought by a person who does not have any priority, the court shall determine that those having priority do not object to the appointment, and that administration is necessary.  

The second part of the process involves providing notice to creditors of the estate by providing actual notice to known creditors and by publishing notice in a newspaper of general circulation for any unknown creditors of the estate.

The third part of the process involves preparing an inventory of property owned by the decedent at the time of his or her death, and the hiring of an appraiser to assist in determining the value of the assets, if necessary.  Creditors will begin to present their claims, the home of the deceased may be sold, the personal representative will begin collecting, securing, and documenting the deceased’s assets and will provide an inventory of those assets to the deceased’s beneficiaries, and partial distributions may be made to the beneficiaries of the estate if prudent.  The personal representative will also perform or refuse performance of the decedent’s contracts that continue as obligations of the estate, as he or she may determine under the circumstances.  Dependent upon the nature of the decedent’s estate, the personal representative may invest estate funds; purchase, dispose of, or sell assets; make ordinary or extraordinary repairs or alterations in buildings or other structures; vote stocks or other securities in person or by general or limited proxy; purchase insurance; effect a fair and reasonable compromise with any debtor or obligor, or extend, renew, or in any manner modify the terms of any obligation owing to the estate; pay debts and expenses of administration; continue a business; and employ persons, including attorneys, auditors, and investment advisors to advise or assist the personal representative in the performance of his or her administrative duties.                                                 

At this point, the personal representative will have a good understanding of the value of the estate.  The fourth part of the probate process generally involves the payment of valid claims, handling of any tax issues, and distribution of assets to the decedent’s beneficiaries.  The distribution checks are mailed to distributees of the estate by certified mail, along with a “Receipt of Final Distribution” for signature.  Unless a personal representative is certain the decedent’s estate will be solvent, it is unwise to pay any creditors or distribute any assets until the four month time for presentation of claims has run.

The final part of the administration of one’s estate involves the closing.  The personal representative may close an estate informally by filing a verified statement with the court no earlier than four months after the date of original appointment, unless prohibited by court order, and except for supervised administration proceedings.  The personal representative must prepare a final accounting and this accounting must be sent to all distributees affected by this accounting.  A “Waiver of Formal Accounting and Release and Consent to Discharge Personal Representative” is sent to all distributees of the estate, along with the accounting.  This document states the distributee is entitled to a formal accounting but, instead, accepts this informal accounting which has been prepared by the personal representative or his or her attorney.  The “Closing Statement” is signed by the personal representative and is then filed with the court.

A word about the personal representative – The person who is to serve as personal representative must have priority and be over eighteen years of age.  Nonresident individuals may serve, and anybody who objects to an appointment has to do so by a formal proceeding.  In addition to filing a bond, if required, the personal representative must file a statement accepting the duties of a personal representative.  A personal representative is appointed by the Registrar in an informal proceeding or by order of the court in a formal proceeding.  Letters are issued to the personal representative by the Registrar, and administration of the estate is commenced by the issuance of the letters.

A good amount of thought and care should go into the decision of who to name as one’s personal representative, and a number of factors should be considered. The position is one of trust, and the person who serves as personal representative will shoulder a number of responsibilities as he or she is the person who will take care of a person’s affairs once they die. The person named as personal representative should be competent, responsible, and possess the ability to be objective and fair-mined. In cases where a person has already named someone as their agent in a General Durable Power of Attorney, it is a good idea to name the same person as personal representative of their estate.

The personal representative will be named in the decedent’s will. If the decedent died intestate (meaning he or she left no will), his or her spouse has the right to be named personal representative. If the decedent was not married at the time of his or her death, any of his or her heirs is entitled to be appointed personal representative, provided that all the other heirs renounce or waive their right to be appointed personal representative.

The general duties of a personal representative are set forth in A.R.S. 14-3703. It is important to note that a personal representative is a fiduciary who shall observe the standards of care applicable to trustees, which are set forth in the Arizona Trust Code, and include the duty to administer the estate in good faith, the duty of loyalty to the beneficiaries, the duty of impartiality, and the duty to minimize costs and expenses to be borne by the estate. A personal representative owes duties of undivided loyalty, fairness, and impartiality to the creditors and beneficiaries of the decedent’s estate. He or she must be cautious and prudent in dealing with estate assets.

The Court will issue an “Order to Personal Representative and Acknowledgement and Information to Heirs” setting forth the duties and responsibilities of serving as a personal representative, which include, but are not limited to, the duty to gather and control all assets that belonged to the decedent at the time of his her death and, after any valid debts and expenses are paid, the duty to distribute any remaining assets to the beneficiaries; within thirty days after appointment, the personal representative must mail notice of said appointment to the heirs and devisees whose addresses are reasonably available to him or her; within thirty days of the admission of the will to informal probate, the personal representative must give written notice to all heirs and devisees of the admission of the will to probate, together with a copy of the will; heirs must be given notification that they have four months to contest the probate (by commencing a formal testacy proceeding); within ten days of appointment, mail a copy of the “Order to Personal Representative and Acknowledgement and Information to Heirs” to all the heirs and devisees of the estate, along with any other persons who have filed a demand for notice; file proof of compliance with the court; publish a notice once a week for three consecutive weeks in a newspaper of general circulation announcing the appointment as personal representative and informing creditors that their claims must be filed within a certain time period; immediately find, identify, and take possession of the estate assets and make proper arrangements to protect them; determine statutory allowances; prepare an inventory of the decedent’s probate assets and their values as of the date of death; keep detailed records of all receipts and expenses of the estate; pay valid debts and expenses; pay taxes; distribute the remaining assets; notify the court of changes of address; determine what is a reasonable compensation for serving as personal representative; and close the estate.

Looking for Assets – Some Tips

Talk to family members or old friends the deceased person may have confided in.  There really may be cash under the mattress or an old shoebox in the closet.

To locate financial assets such as stocks, bank accounts, and insurance policies, look for the documents that concern them.  Check for bills, tax returns, investment records, and monthly or quarterly statements from brokers, banks, and mutual funds.  Check checkbook registers and credit card statements.

In most cases, the decedent will have left lists of assets and their locations, or other clues which can be followed to locate bank accounts, securities accounts, deeds, securities, insurance policies, annuities, IRAs, employee benefits, vehicle titles, storage receipts, and even trusts.  Even if the decedent did not leave a careful, up-to-date list of assets, a person who lived with the decedent, such as a spouse or child, may help locate assets.  However, if the nature and location of the decedent’s assets cannot be determined in this manner, a more creative approach may have to be taken.  Files and papers in the decedent’s residence may contain account statements for cash and securities, copies of deeds, tax bills, tax returns, cancelled checks, and other hints leading to assets.  A checkbook may show deposits of income from employment, rental property, business interests, or investments.  The decedent’s accountant could also provide clues to asset identification and location.

The personal representative can arrange to have the decedent’s mail forwarded to provide additional clues, such as periodic account statements, proxy information for securities owned, and Forms 1099 at year end.  Additional information available from sources discovered in this manner can be obtained by the personal representative by use of certified copies of his or her “Letters of Personal Representative,” which entitle the personal representative to all of the information required.

Finally, don’t overlook online records.  Some bills and statements may come only through e-mail.  If you don’t have passwords to online accounts, you’ll have to contact the companies, explain the situation, and supply some proof that you’re entitled to act on behalf of the deceased person.

The following are records and/or documents to look for when beginning to look for assets.

  • annuity policies
  • bank statements
  • birth certificates (of the deceased person and of any minor children)
  • brokerage account statements
  • business co-ownership agreements
  • checkbooks
  • child support documents
  • credit card statements
  • disability-related documents
  • divorce papers (including property settlement agreements)
  • health insurance policies
  • immigration and citizenship documents
  • investment records
  • life insurance policies and premium payment records
  • marriage license
  • military service records (branch, dates of service, discharge papers)
  • pension records
  • prenuptial agreement
  • real estate deeds and tax records
  • registration papers for vehicles or boats
  • retirement account statements
  • social security records
  • tax returns
  • W-2 form(s)
  • worker’s compensation paperwork
  • documents related to storage unit rental
  • documents related to safe deposit box rental

Unclaimed Property 

It is also a good idea to check for any unclaimed property the estate of the deceased may be entitled to.  The following links are to two websites one may use to uncover unclaimed property.

National Association of Unclaimed Property Administrators – Here you can search every state, though you must do it one state at a time.  Search any state where the deceased person lived, as well as Connecticut, where many insurance companies are based, and Delaware, where many companies are incorporated.

http://www.unclaimed.org/

ACS Unclaimed Property Clearinghouse – This site lets you search all states at once, but not all states participate.

http://www.missingmoney.com

A Note on Safe Deposit Boxes 

How does a named personal representative (that is, one who has been nominated as personal representative in the deceased’s Will) obtain access to the decedent’s Will when the Will is locked in a safe deposit box at a bank and the only person allowed access to the safe deposit box is the decedent?  Arizona Revised Statutes 6-1008, the text of which I’ve provided below, provides a remedy for this situation.  Essentially, when a person dies, two employees of the bank may open the safe deposit box for a person who claims to be interested in the contents of the safe deposit box.  For example, a named personal representative in a Will located in the safe deposit box would qualify as an “interested person” under the statute.  Employees of the bank may also remove any life insurance policies and deliver them to the beneficiaries named in the policies.

6-1008. Procedure on death of lessee

In the event only one lessee is named in the lease of a repository and the lessee dies, or on the death of last surviving lessee under a tenancy in two or more names, the repository may be opened by two employees of the lessor in the presence of any person who presents himself and claims to be interested in the contents. The employees may remove any document which appears to be of a testamentary nature and deliver it to any person named in the document as executor or to a clerk of the superior court. The employees may also remove any policies insuring the life of the deceased lessee and deliver them to the beneficiaries named in the policies. All other contents of the repository shall be retained by the lessor and shall be delivered only to the person legally entitled to them.

 

 

 

 

 

 

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