Introduction
In the state of Arizona, probate law is governed by Arizona Revised Statutes Title 14 Chapter 3 (ARS 14-3301). Probate proceedings are based on the Uniform Probate Code (UPC) which has been adopted by 18 states in an effort to standardize the probate process in the United States.
Probate is the process of settling a deceased individual’s estate through probate court. The purpose of probate is to validate the decedent’s will, appoint someone to manage the estate, pay the estate’s debts and taxes, and distribute the remaining assets to the rightful heirs.
Validating the Decedent’s Will
The first step in the probate process is to validate the decedent’s will. An authentic last will and testament will dictate how the estate should be handled through probate. A fraudulent, forged, or unduly influenced last will and testament will result in the document being tossed out, and the estate will be distributed according to the state’s intestacy laws. To validate the will, a judge will assess the following factors:
- Is the will properly signed and dated by the decedent?
- Is the will signed by two witnesses?
- If the will is handwritten (holographic), does the signature and core elements of the document match the decedent’s handwriting?
- Was the decedent an adult of sound mind at the time the will was drafted and signed?
- Was the decedent subject to undue influence when the will was drafted and signed?
Unless the will was notarized (e.g. self-proved), the judge may summon the two witnesses to testify to the document’s authenticity. Assessing the decedent’s mental capacity and the presence of undue influence is a bit more challenging. Typically, the court will proceed under the assumption that the decedent had a sound mind and was not unduly influenced unless an interested party contests the will on those grounds.
If the decedent does not have a last will and testament, the estate will be distributed according to the state’s intestacy laws (same as if the will is invalidated).
Appointing a Personal Representative
If the decedent left a will, the document should nominate someone to serve as the estate’s executor. If the decedent didn’t have a will, the court will appoint an administrator. In either case, the executor or administrator will be the decedent’s personal representative and will be authorized to handle all of the estate’s affairs. The personal representative is usually a trusted family member or friend, though it’s not uncommon to see professionals (an attorney, financial advisor, etc.) appointed to manage complex estates. If there are no qualified family members or friends, or if there is too much discord amongst the family members to come to a consensus, the judge can appoint a third-party special administrator.
Appointing a personal representative is an important part of probate because financial institutions, title companies, and insurance companies will not release the decedent’s assets to an unauthorized person. The court will provide the personal representative with letters testamentary (commonly called “letters”) that allow these institutions to legally release the decedent’s assets.
Settling the Decedent’s Liabilities
The estate will need to settle the decedent’s final debts, bills, obligations, and taxes before any assets can transfer to the beneficiaries. The personal representative—who by now has most likely consolidated the decedent’s liquid assets into an estate checking account—will need to settle the liabilities in the following order:
- Administration costs (legal fees, court fees, professional appraisals, etc.)
- Funeral expenses
- Debts
- Taxes
- All other claims
If there are not enough liquid assets to settle the liabilities, the personal representative is authorized to sell assets (houses, property, vehicles, etc.) to cover the costs. If there are still not enough assets to cover the liabilities, the estate is considered insolvent. The probate court will approve which creditors and entities are entitled to full or partial payment, and unfortunately none of the assets will be allowed to pass to the decedent’s beneficiaries.
Distributing the Residual Estate
When it comes to distributing a decedent’s assets, it’s important to note that some assets can pass to beneficiaries outside of probate, while others cannot transfer until a probate court legally changes the title of ownership to the recipient’s name. Without probate, assets in the latter category would be indefinitely frozen in the decedent’s name. So, while probate can be a headache at times, it’s absolutely necessary when the decedent has some of these assets in their estate.
The following assets are considered probate assets, and will require transfer of ownership through probate court:
- Individual bank and brokerage accounts
- Real estate owned individually or as tenants in common
- Personal property such as art, jewelry, collectibles, furniture, guns, vehicles, etc.
While probate assets can take 5 – 6 months to transfer to beneficiaries, non-probate assets that are designed to transfer ownership outside of probate can change hands in as little as 1 – 2 weeks. These assets typically have a contractual beneficiary listed on the account. When the financial institutions holding the assets receive the decedent’s death certificate, they’ll release the assets to the contractual beneficiaries fairly quickly. Non-probate assets include:
- Individual bank and brokerage accounts with a payable-on-death (POD) or transfer-on-death (TOD) beneficiary
- Real estate owned in joint tenancy or as tenants in the entirety
- Retirement accounts (IRA, 401k, etc.)
- Life insurance policies
- Trusts
Closing the Estate
After the decedent’s liabilities are settled and all of their assets are distributed, the probate court will formally close the estate. This is an important step as it plays a pivotal role in an estate’s statute of limitations. When probate is closed, distributions to the beneficiaries are binding and conclusive. An interested party can still reopen the matter up to one year later or up to two years after the decedent’s death (whichever comes first), but assets that have been lawfully distributed are extremely difficult to retake.
How Long Does the Probate Process Take?
Most probate cases can wrap up in 5 – 6 months, but in cases where there is a contest to the will the process can take up to a year or longer. The actual probate process is the same in either case, the only difference being the level of court supervision. Unsupervised cases proceed through informal probate and tend to be the quickest, while supervised (contested) cases require formal probate and take significantly longer.
Call our Probate team at (480)467-4365 to discuss your case today.