A lot of angst seems to surround the word “probate,” due mainly to general unfamiliarity with its meaning. Simply put, probate is the legal process that takes place upon a person’s death, much of which is avoided if the decedent took proper steps during his or her estate planning. This process involves:
- Proving the validity of the decedent’s will
- Identifying and inventorying the decedent’s property
- Carrying out an appraisal of the decedent’s property
- Paying outstanding debts and taxes from the decedent’s assets
- Distributing remaining assets as per the will’s instructions, or following Arizona law if the decedent passed without leaving a will
An estate going through probate typically requires the involvement of an attorney to complete paperwork. The estate pays these fees prior to the distribution of assets. Again, proper estate planning can help your family avoid the probate process when you die.
What Happens During Probate?
In Arizona, the probate process begins when the person named to act as personal representative files the will (if one exists) and petition with the probate court. He or she is named the personal representative (PR) unless the court deems there is ample reason for this person not to serve. If there is no PR named, the court refers to state law to appoint one. In Arizona, the spouse is the first in line for this role.
From here, the court determines the will’s validity and provides the appointed PR with an official document called “Letters of Personal Representative,” which provides the legal authority for the PR to manage the estate. Once the PR has this, he or she notifies both creditors and beneficiaries. Notices to beneficiaries must happen within 30 days of death. For creditors, the PR publishes notice of death in local papers, and must mail formal notice to known creditors. Claims by creditors must generally be made within 120 days.
Next, the PR inventories the estate’s assets. Part of this appointment also requires asset management and protection until the PR distributes them to the beneficiaries, which happens after creditors have been paid. Once assets are distributed, the PR files a closing statement with the court.
Ways to Avoid Probate
Beneficiary Deeds are recorded documents that transfer the title of real property to whomever the decedent named as beneficiary. Recording the death certificate and affidavit of survivorship legally transfers the title, protecting said property from the probate process.
Joint Ownership “with right of survivorship” grants the surviving owner sole ownership upon the other owner’s death. Arizona recognizes two types of joint ownership:
- Community Property with Right of Survivorship: In a community property state such as Arizona, both married parties jointly own all property acquired during marriage, except in instances where legal measures were taken to keep certain properties separate. If a married couple holds this type of joint ownership, the death of one spouse automatically confers sole ownership to the surviving spouse.
- Joint Tenancy with Right of Survivorship: This option applies to any two people owning equal shares in a property, regardless of marital status, making it ideal for cohabitating, unmarried couples. If one owner dies, the property immediately transfers to the surviving owner without going through probate.
Living Trusts are arguably the best solution to avoid probate, but these do require the time and services of an attorney experienced in estate planning. Essentially, your attorney helps you create a trust document, transferring ownership and title of your assets into the trust and naming someone as trustee upon your death. During your lifetime, you serve as trustee. Upon your death, the person nominated as successor trustee transfers assets to the beneficiaries named in the trust, avoiding the probate process.
Payable on Death (POD) and Transferrable on Death (TOD) Designations create yet another way to avoid probate. Certain types of bank accounts, such as brokerage, checking and savings accounts, allow you to name a POD or TOD beneficiary who is unable to access the money during your lifetime, but can withdraw funds directly from the bank upon your death, bypassing probate. A TOD form exists for vehicles titled in Arizona.
Probate Shortcuts
If for some reason you are unable to avoid probate altogether, there are two shortcuts that minimize the probate process for smaller estates.
The small estate affidavit allows beneficiaries to claim their inheritance by completing the requisite form, attaching a copy of the death certificate (see the Arizona Department of Health Services website to learn how to do this), and presenting these documents to whatever entity holds the asset.
Arizona’s guidelines governing use of a small estate affidavit to claim personal property are:
- The estate’s personal property value must be less than $75,000
- There is a 30-day waiting period from time of death
- The estate may not be involved in formal probate
Arizona’s guidelines governing use of a small estate affidavit to claim real estate are:
- The real estate’s value must be less than $100,000
- There is a six-month waiting period from the time of death
- There is no court-appointed personal representative
- Payment of secured debts and funeral expenses is complete
- There is no estate tax due
The Three Types of Probate
Informal probate is used when there are no challenges or legal issues that must be decided by a judge. There are typically no hearings in a informal probate. The PR administers the estate with minimal supervision. This is the simplest probate type.
Formal probate comes into play when the court must resolve an estate’s legal issues, such as a will contest or to determine the validity of a will. There are court hearings in formal probate.
In a supervised probate, the court oversees each step of the process. In this instance, the court-appointed personal representative must receive court approval prior to any action, including paying creditors and distributing assets to beneficiaries. Supervised probate may be requested by any entity with an interest in the estate. This request is granted whenever the court agrees this entity’s interests need protection.
Who Benefits Most from Estate Planning?
Estate planning benefits both you and your beneficiaries. First, you have the peace of mind knowing your assets will be distributed according to your personal wishes, not according to the line of succession determined by Arizona. You name the person you trust to oversee this process, as well, rather than allowing the court to make that decision.
Probate rarely benefits your beneficiaries. In addition to the time cost, all expenses incurred during the probate process are paid through the estate. If you prefer those funds go to your beneficiaries, estate planning is vital.
To see how Cholewka Law can assist you in your estate planning needs, contact us today to schedule your confidential consultat
