A decedent who leaves no will has an intestate estate. In this event, it could be necessary to nominate an executor, the person responsible for administering the estate, and for determining who the rightful beneficiaries are.
When someone dies without a will, beneficiaries are determined by law, and will generally be the next of kin. However, what many don’t realize is that certain intestate property could be subject to distribution to the issue of a predeceased spouse. Moreover, as the executor can be any person legally able to serve, any competent adult could petition the court to serve as an executor, including persons whom the decedent would never have chosen to serve. Drafting a will, then, is critical if you wish to direct who is to benefit from your estate and who is to administer your estate.
A probate can also occur with a properly drafted will. While the will nominates the executor of the estate, this individual derives their powers through appointment by the court. This occurs when the nominated executor petitions the court for letters testamentary. These letters are the court order naming the executor, and empowering this individual to accomplish one of the most important functions of the probate: marshaling a decedent’s assets and ensuring that assets are distributed to the decedent’s named beneficiaries.
Losing a loved one is an extremely difficult and emotional time, which is why it’s important to consult with experienced Arizona probate lawyers. Attorneys help take the emotion out of the equation and ensure that the proper steps are taken.
Letters testamentary are issued by the court, naming an executor and identifying the powers the executor will have in administering the estate. These powers can be expansive, permitting the executor to conduct many responsibilities independent of the court, or they could be narrowly drawn, requiring court approval before many actions can be taken.
When considering who is best suited to serve as executor of a will, a person may consider a trusted friend or relative. In many cases, such an executor could be in the best position to know the family dynamics as well as understand the decedent’s intent, enabling the executor to faithfully administer the estate. And since it is often a good idea to choose an executor who is younger, since the executor will serve after a decedent’s death, many individuals will simply nominate one or more of their children to serve. Again, while the child may understand the testator’s intent as well as family circumstances, it may not always be prudent to name a child as executor.
Given the difficulties that friends or family members may encounter when serving as executor following a loved one’s death, an individual preparing a will should also consider alternatives, including professional fiduciaries. While a professional fiduciary must be paid, the experience of the fiduciary may make this a worthwhile investment in order to maximize the benefit to the beneficiaries of the will and maintain family harmony. Moreover, even a family member or friend serving as executor may be entitled to compensation, meaning the cost of employing a professional fiduciary is not necessarily greater.
Before probate can close, the liabilities of the decedent and the estate must be addressed. The decedent’s liabilities can include, among other things, a mortgage or a loan, credit card debt, expenses of the last illness, and taxes.
At the inception of probate, an executor will publish the filing to allow creditors to file their claims with the estate. It is the responsibility of the executor to ensure that all known, legitimate debts of the decedent are paid to the extent possible. An executor can negotiate these debts with creditors. While the executor is not responsible for paying the decedent’s debts with the executor’s own assets, willfully failing to address known claims could potentially subject the executor to personal liability. Additionally, negligently administering a decedent’s estate could expose the estate to liability.
A decedent’s child is in need of funds to purchase a house, start a business, pay off a credit card, or has some other urgent need for funds and has asked you, as executor, to distribute part of his inheritance early. Can you accommodate this beneficiary?
The answer is maybe. First, however, you should discuss the situation with your probate attorney to determine the necessity for a court order. While this is a common situation, the advantage of probate is to minimize the potential liability of an executor who might otherwise improperly administer an estate. The practice of when in doubt, asking the court, can provide the executor with judicial oversight to ensure that the administration of the estate is within the law and per the terms of the will.
The funeral is an occasion when many friends and family members travel to the decedent’s town. Often, close family or friends may ask the executor to stay at the decedent’s house or borrow the decedent’s car in order to minimize the travel expense, and an executor may be tempted to accommodate these requests.
However, this probably is not a good idea. While the family may be well-meaning, and perhaps stretched financially by travel expense, opening a decedent’s house or car to others exposes the estate to potential liability. A car accident, a house fire, or other damage to the property cause expense to the estate. It is the duty of the executor to preserve and protect the assets so that they ultimately may be distributed to beneficiaries. Damage to these assets could represent a breach of the executor’s fiduciary duty and could expose the executor to personal liability.
To Go: Video Transcription
Once (1) all the assets have been identified, (2) expenses and taxes of the estate have been addressed, and (3) beneficiaries identified, the executor will submit a plan of distribution to the court.
This plan could include an accounting of the estate – a formal recitation of the assets at the beginning of the probate, the expenses paid, anticipated expenses to be paid, including executor fees, and any income earned. The court will review this documentation, and if appropriate, order the distribution of the assets as stated. The executor is then charged with distributing assets and transferring title.
Probate can be an efficient means of ensuring a decedent’s estate is distributed, but it can be complicated and fraught with liability for the inexperienced, and therefore, it is prudent to consult early with experienced counsel. Contact the Phoenix-based probate lawyers at Stewart Law Group today to ensure that the legalities don’t add more stress during this already difficult time. With 8 offices around Arizona; Phoenix, Scottsdale, Chandler, Peoria, and more, you can rest assured that the help of expert attorneys is always nearby. Serving Maricopa County, Pinal County, and all of Arizona.
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Hi, my name is Erica Merrill, I’m the founder of Perfect Legal Video, and I’m very excited to welcome to the show for his second time. Attorney Brian Winter. He works at the Stewart Law Group out of Phenix, Arizona, and he takes care of mostly their estate planning.
I know he does some divorce as well. And we’re going to be talking about the estate planning portion, though, today. We’re going to talk about probate, which is such a complicated issue for so many. And so, Brian, I want to welcome you to the show.
I want to thank you so much for coming on today to talk about this complicated issue. Well, thank you. And thank you for having me back. I appreciate that. I absolutely loved our first interview. So let’s just start off like we normally do.
Just defining some of the terms for those that are watching or listening that don’t know what the heck is probate. Probate is the court-supervised process by which A, the season’s estate is administered. There are a couple of ways that it could be done in the state of Arizona, but we have an informal probate procedure, which is the majority of probate in a formal procedure. An informal procedure is when a person dies, either testate with the will or intestate without a will. And the estate is administered within two years of the dissidents passing. And there is nobody contesting the estate plan.
A formal probate by comparison is the more supervised process by the court, and that is if somebody is contesting who is going to serve as the personal representative or executor of the estate, if somebody is contesting the will that was submitted, maybe there’s another will or people have competing wills or the estate is being administered more than two years after the date of the decision. I can imagine that once somebody passes away, if they have a family, that might even be it might even be that they have a family that’s harmonious. All of a sudden, when the will comes out, that often brings out a totally different side of certain people.
Have you seen that? Absolutely. It is always quite amazing to me how siblings or parents and children or other relatives will fight over an estate after somebody passes. And you’re correct, sometimes people get along very well, but in many families they don’t all along.
And there are always questions or resentment about who is getting what property. Maybe somebody is getting an inheritance and somebody feels that’s not fair that that person shares in the inheritance. And so when you’re fighting over money, unfortunately, there are people going to be at odds with each other.
And that’s why they have you so so probate is the process. Do they have to have probate? Is it possible that sometimes people just don’t have that process? Probate is not always necessary. You can avoid probate or not have probate if you don’t have any what we call probate table assets on somebody’s death.
A non-probate bill asset would be an asset that is held jointly with another person that passes to the survivor of them. Or it could be assets that passed to a beneficiary on somebody’s death, such as a life insurance policy or a retirement account, things of that nature.
So you could certainly set up your estate so that you do not have to go to the probate process. That’s good to know. Do most people go through the probate process? Is that. Normal probate is a very normal process, and I think most people do go to the probate process because most people do not set up effective estate plans prior to their passing. So if I owned a house, for example, when I die and I’m the only person on the title, the only way to transfer that asset to my heirs or to a third party is through the probate process.
That makes a lot of sense. So you had mentioned the term personal representative and kind of an interchangeable term with executor. Can you justify what that is? And also, who has the priority to be one? Certainly a personal representative is the person appointed by the court to administer the deceit, insisting they’re the person who has the obligation to the court and to the heirs and creditors to make sure that they follow the decedent’s wishes and administer the estate according to the laws of the jurisdiction where the person resided at their passing or where the probate is being opened.
Now, as far as who has that right in the state of Arizona and every state has their own rules, a person who has a valid last will and testament could always nominate who they want to serve as the personal representative if they do not nominate somebody or the nomination fails.
For example, say, I nominated my spouse, but my spouse predecease me or I’m divorced. In that case, the you go by a statute and it would be first, a spouse, second, and adult child over the age of 18.
Any other legal heir predators who have waited more than forty-five days after the date of passing or a private fiduciary. There is an issue at times, though, when you have people with competing interests, say, for example, that I passed and I don’t have a spouse, but I have two children and both children want to serve in that capacity if they do not agree on who’s going to serve as the personal representative. Then you’ll probably have to go to a formal probate process to have the court determine who will serve. That’s how things happen when you can’t agree, right, and that decisions have to be made.
So that’s that’s good that they have the process and it probably will incentivize them to come up with some kind of decision on their own. Usually it does anyway. I certainly agree with you, because if you don’t, what’s going to end up happening is you’re going to end up spending the money that would otherwise go to the heirs on the legal process. And it doesn’t make a lot of sense unless in certain cases you need to confess something because something’s being done improperly or somebody did something they should not do or to protect assets, because otherwise you’re spending the money that you would inherit.
So. I think I’ve heard in the past that. A bond is required or it’s used sometimes. I wanted to know what is the bond used for and is it in fact, required? A bond is what is required by a court.
If there is no will, that says if the bond is waived or the heirs agree not to have a bond for the personal representative, the purpose of a bond is to protect the estate. So if the personal representative steals the money, for example, or does things that they should not do, then the bond company would pay the heirs the amount of the bond based on what happened with the estate. But the court would send set the amount of the bond based on the total gross assets of the estate to make sure that the heirs are protected.
And that makes a lot of sense, because you don’t want somebody all of a sudden in control of the estate and then they have nefarious ideas about what they should be doing. Absolutely. And the bond is there to protect against that many people who draft their own estate plans or through a lawyer they trust the person that they’re appointing. So often people will waive the bond. But if you don’t have that waiver in your actual will, then absent the agreement of all the heirs, the court is required to have the personal representative post the bond.
I’ve heard it suggested that sometimes you could, while you’re still alive and of sound, mind and body, because I mean, it’s not always that you die, that somebody might all of a sudden have control of your assets and your estate.
You might have had some sort of terrible accident that takes you a long time to heal from or that you never fully heal from mentally. So sometimes testing it where you give someone a little bit of control or something just to see if they go to Vegas and gamble away all the money or not.
Is I mean, have you heard that suggestion before? No, I’ve never heard of anybody testing it. And if somebody is going to take that type of control, it means that the person is either incapacitated or incompetent. So they really wouldn’t be able to do that as a practical matter.
So what is the probate process? The probate process in Arizona is fairly straightforward. First, you have to file an application for the appointment of a personal representative. And that could be either by the nomination of the will or if there is no will, who is willing to serve in that capacity under the statute by priorities.
Once you do that, the personal representative gets appointed, then their job is to marshal all the assets together of the deceased so that we know what is in the estate. The person who represented it is also required to publish in a local newspaper a notice to creditors in the state of Arizona.
Creditors have four months to present a claim against the estate after the date of first publication. So the first sort of representative job is very much administrative. That’s why they administer the estate. So they hold and control the assets, protect them, safeguard them, so to speak, and then they wait for the claims to come in and they make sure that there are sufficient assets in the estate to pay the claims. If they’re not, then they have to negotiate with creditors and maybe compromise the claims or deny the claims. After all of the claims that had been made, then the personal representative would distribute the assets that are due to the heirs.
And that’s done after paying the creditors and administrative expenses of the estate. And once the final distributions are made, then the personal representative files a closing statement with the court stating that all distributions were made either in accordance with the will or the statute if they died intestate, and that all their creditors had been paid.
I mean, that’s good, at least to get this process over with before they give money to anybody that has claims on the inheritance rights, that those people don’t have to worry about it later. That is correct, and that is a common mistake that laypeople sometimes make, say, for example, that my father passed away and I have two siblings and one of my siblings needs money and we know there’s money in the estate. So they say, can you please give me an advance or give me my inheritance now? And many people will say, fine, that’s great.
I’m happy to help you out. I know that you’re going through a hard time. The problem is that you don’t always know what creditors your loved one had when they passed. I mean, there are situations often where people don’t file their taxes in the last two or three years prior to their death.
So then they end up showing a large sum of money to the Internal Revenue Service or Department of Revenue Services, plus interest and penalties, which can be quite steep. Or there could be other creditors that you didn’t know about.
There are creditors such as payment associated with the last illness of the deceased, credit cards or other types of loans that are taken out. So the unfortunate part is when you make these advanced distributions, you may now not have enough money in your estate to pay the creditors.
And that puts the personal representative in a very difficult position with both the creditors and the court. I mean, that’s good to know, I had thought about this before, and I’m glad that now we are delineating the process here because.
You’re right. Many people make that mistake, and on the subject of mistakes, what are the biggest mistakes that people make when they’re going through probate? The biggest mistakes are that they don’t understand what the statutes and the state require of them as far as who gets paid and when, how creditors are notified, which creditors have priority, certain creditors have more priority than others. For example, the IRS has priority over most predators. But in the state of Arizona, a spouse has certain allowances or exemptions that even take precedence over the IRS so that the spouse is able to live and have money during the probate process.
So people aren’t always aware of that process, and especially if you then have other relatives who are questioning what you do. It could become very complicated and very difficult to untangle at times. And that’s really good to know and honestly, one of the biggest reasons that you should have an attorney help you through these processes if you’re setting up your state, planning your wills. I mean, really having an attorney will they can absolutely help you figure out, you know, what can come up after you’re gone, because there could be a huge mess to clean up.
If the probe gets in the wrong hands or things are set up properly to begin with, you want to try to avoid all of the fights, all of the missed opportunities to pay off predators before you hand out the inheritance.
I mean, people don’t think of that. It’s not like this is something that they do every day and it is something that you work with every day. So I would absolutely suggest people work with an attorney. I suggest that as well, because attorneys are aware of people’s legal responsibilities.
And that’s important because things need to be done in a certain way and according to law. One of the other mistakes that people make is sometimes when somebody passes, they never open a probate. I have people come to me and say, my parents passed away six years ago.
I want to sell my house. And the real estate agent title company is telling me I don’t have authority to sell. What do I do? So it’s always important to seek the advice of an attorney after somebody passes so that you make sure that these things can be taken care of in a timely fashion according to the law. So you don’t find yourself in situations where now you’re playing catch up and delaying the sale of the house or other things so that you can get a proper title passed on to the heirs. We thank you for letting us in on all of these probate tips.
Did we forget anything else pop up in your mind while we were discussing this topic? I think we covered the basics of the probate process. I mean, obviously, once you get into each individual case, every case is different.
No two cases are exactly the same. Many people seem to think, well, this happened in such and such as probate. Why is it not happening here or this probate was resolved after the creditor bar period of four months.
Why are we a year out who are still in it? Because every case is different. There are different competing interests. You may have difference in creditors. You may have will contest. I mean, there are so many different factors that go into it that no two cases are exactly alike.
That’s really great advice. So thank you very much for letting us in on these tips. As I said before, we are looking forward to some more very interesting topics in the areas of both estate planning and perhaps divorce in the future with you, Brian.
And I hope everybody out there has a great day. Thank you so much for listening. And we will see you next time. Thank you. I look forward to seeing you again.