Introduction
In each probate case, a personal representative is either designated by the will, volunteer basis, or assigned by the court. The personal representative plays a very important role in this process. They are required to assess and distribute assets owned by the decedent.
Duty to Create an Inventory
AZ probate law imposes on personal representatives to give adequate notice. As you can probably guess, this is but one of the many duties that personal representatives have under the Arizona Probate Code. In addition to giving adequate notice, personal representatives must create an inventory of the probate estate to which they are appointed to oversee.
Creating an inventory is sometimes more difficult than others, depending on the size of the estate and the types of assets that the decedent owned. Regardless of the difficulty, however, personal representatives must make a good faith effort to create an inventory that lists the fair market value of all estate property. With real property, and even some personal property, this might require personal representatives to seek a professional appraisal.
Upon completing the inventory, personal representatives are required by the Arizona Probate Code to file it with the court, or mail a copy of it to every heir or devisee. Further, if at any time the personal representative learns of an error in the inventory, he or she must make the proper amendments to the official inventory, and provide adequate notice to interested parties. It is not uncommon for personal representatives to have trouble abiding by the inventory requirements, and an Arizona probate lawyer can help them stay on track.
The court does not take it lightly when personal representatives do not keep their obligations under the Arizona Probate Code. Certain breaches can cause personal representatives to lose their position, or even be held personally responsible to the estate. Personal representatives who have any confusion or concerns about issues such as creating a suitable inventory should consult with an Arizona probate attorney.
Repaying Creditors Under Arizona Probate Law
If you are a personal representative, appointed to administer a probate estate under Arizona probate law, you are probably aware that you need to repay the decedent’s creditors. In fact, to make sure that creditors are properly repaid, you have a duty under Arizona probate law to give notice to all creditors that you know exist. When a personal representative is appointed in your probate case, they’re required to send out an official notice to all creditors who may have a claim on the estate. This official notice, known as the Notice to Creditors, allows creditors the chance to assert their rights.
Ideally, a probate estate has enough funds to not only repay creditors, but to also provide the decedent’s heirs with an inheritance. Many times, however, this is not the case, and personal representatives must then decide how to divide and distribute the insufficient funds. If you are in this situation, know that Arizona probate law provides guidance so that you will know precisely how to divide the estate. More specifically, Arizona probate law provides a very specific framework that you must follow if the estate that you are handling has insufficient funds to repay all of the creditors.
- Pay for the costs and expenses of administering the estate, which includes a fair and reasonable fee for your services as the personal representative
- Make sure the funeral expenses are paid for
- Pay debts and taxes under federal law
- Pay for the expenses that arose from the decedent’s last illness
- Pay debts and taxes that arose under Arizona law
- With whatever is remaining, repay all other legitimate claims
Although Arizona probate law is clear on the order in which you should repay creditors, creditors themselves will not line up in an orderly fashion and wait for their disbursement. Rather, they will likely demand immediate payment, and operate under the assumption that the estate has the funds to repay their claim. As such, you should have a game plan of how you will repay creditors well before you make the first payment. To help you establish such a plan, you should work with an Arizona probate attorney who is familiar with this area of the law.
Duty to Properly Manage Finances
While it sounds simple enough, managing estate finances can actually be very difficult in certain instances. For example, Arizona probate law requires personal representatives to make tax considerations for the estate, which can be particularly complicated in larger estates where several properties are involved. Further, Arizona probate law requires personal representatives to take efforts to preserve the estate, which often requires them to make important investment decisions on the estate’s behalf.
Personal representatives cannot be expected to know everything there is to know about finance. However, personal representatives are expected to inform their decisions wisely to protect the financial health of the estate, and this many times involves seeking the assistance of a qualified Arizona probate attorney. If you have recently been appointed to serve as a personal representative, it will be a tremendous help to seek legal counsel who can make help you keep your duties to the estate.
Avoiding Conflicts of Interest
Under the Arizona Probate Code, personal representatives have a fiduciary duty to act in the best interest of the estate to which they are appointed to oversee. This fiduciary duty prohibits personal representatives from advancing their own interests. Many times, however, personal representatives are also situated to inherit a portion of the decedent’s estate. Because these situations are inherently susceptible to conflicts of interest, the Arizona Probate Code provides specific instructions on how to approach them. Under the Arizona Probate Code, the following situations may give rise to a conflict of interest:
Conflicts of interest include any sale or encumbrance to the personal representative, his spouse, agent or attorney, or any corporation or trust in which he has a substantial beneficial interest, or any transaction which is affected by a substantial conflict of interest on the part of the personal representative. A.R.S. §14-3713.
Where a personal representative enters into a transaction that creates a conflict of interest, any person with an interest in the estate can petition to have the transaction voided. This general rule has certain exceptions, however, that an Arizona probate attorney can help you understand. To learn more about how to avoid conflicts of interest as a personal representative, or how to challenge a perceived conflict of interest, feel free to contact a probate attorney at JacksonWhite.
Arizona Probate Court Supervision in Administration
The Arizona probate court does not always supervise the probate process. In fact, supervised administration is much less common than unsupervised administration. Unsupervised administration is the usual way that probate estates are administered, so unless the will or the Arizona probate court says otherwise, every estate goes through probate without supervision. Nevertheless, even in an unsupervised administration, any interested person can petition the court for supervised administration to protect his or her interest in the estate.
Supervised administration is where the Arizona probate court formally supervises the estate’s administration. Under a supervised administration, the court can order inventories, appraisals, and accountings at any time, to which the personal representative has to submit. Further, if the administration is supervised, personal representatives cannot make any distribution without first obtaining the court’s permission. Because it is expensive and it requires heavy involvement from the court, supervised administration is quite rare, but the court can decide to supervise a theretofore unsupervised administration upon the petition of an interested party.
Generally speaking, interested parties will request a formal testacy proceeding before they will request fully supervised administration. Formal testacy proceedings are commonly used for will contests and disputes between personal representatives and creditors. With formal testacy proceedings, the Arizona probate court supervises only the matter at hand, and then the proceeding returns to unsupervised administration. Where the formal testacy proceeding does not resolve the matter, however, or if the interested party continues to have issues, then the court can decide to supervise the administration.
Call our Probate team at (480)467-4365 to discuss your case today.