When you’re trying to determine which assets need to go through probate, it’s important to consider how the asset is titled. Generally speaking, assets that are titled solely in the decedent’s name need to be probated, while assets that are jointly-owned or have a designated beneficiary can transfer ownership outside of probate.
For example, a car. If the car in question is titled individually in the decedent’s name, it’s safe to assume that the car will need to go through probate. If the vehicle title lists a joint owner, then the car will automatically transfer to the joint owner.
In the latter scenario, you may need to mail a copy of the decedent’s death certificate to the title company for them to remove the decedent’s name from the title, but you won’t need to do anything to actually transfer ownership to the joint owner.
What is Probate?
Probate is the legal process of transferring ownership of a decedent’s property to his or her heirs. The process typically involves validating the decedent’s will (if applicable), settling the decedent’s liabilities, and distributing the remaining assets. These activities are usually handled by the estate’s personal representative (aka the executor).
Assets That Are Subject to Probate
When someone passes away, all of the assets in his or her name are locked until an authorized person transfers the assets to the rightful heir. Assets with a joint owner or designated beneficiary may be unlocked and transferred by the financial institution or title company with a copy of the death certificate and some light paperwork, but individually-owned assets can only be unlocked by an authorized personal representative and transferred by a probate judge. Without probate, individually-owned assets would remain frozen in the decedent’s name indefinitely.
Assets that are subject to probate include:
- Individually-owned bank and brokerage accounts
- Real estate owned individually or as tenants in common
- Personal property (vehicles, art, jewelry, collectibles, other valuable possessions)
Assets That Are Not Subject to Probate
While probate is often necessary, the cumbersome process can often be avoided with advance estate planning. Most (if not all) assets are allowed to transfer ownership outside of probate court providing there is a joint owner or designated beneficiary on the account. Some examples of non-probate assets include:
- Bank and brokerage accounts with a joint tenant with rights of survivorship
- Bank and brokerage accounts with a payable-on-death or transfer-on-death beneficiary
- Real estate owned in joint tenancy or as tenants in the entirety
- Retirement plans (IRA, 401k, etc.)
- Life insurance policies
- Living trusts
Where probate can take 6 months or longer, non-probate transfers can take place in days or weeks. Joint accounts with rights of survivorship transfer automatically upon the decedent’s passing, and accounts with a designated beneficiary can transfer to the intended recipient as soon as the financial institution receives a copy of the death certificate.
Note that because non-probate assets have a joint owner or designated beneficiary, they aren’t subject to a decedent’s will. Even if the decedent included some non-probate assets in their will, the joint owner or designated beneficiary listed on the account always trumps the beneficiaries listed in the will.
Small Estate Exemption
In Arizona, small estates with less than $75,000 in personal property and less than $100,000 in real property are permitted to settle all liabilities and transfer all assets outside of court by affidavit. Creditors and interested parties have up to six months after the decedent’s passing to submit their claims to the estate before the court will accept a small estate affidavit.
Formal vs. Informal Probate
Probate proceedings in Arizona are guided by the Uniform Probate Code (UPC), a universal set of standards adopted by a number of states that’s intended to simplify probate and keep probate proceedings consistent across state lines. Under the UPC, there are three types of probate proceedings:
- Informal probate – this is the most common type of probate. As long as there aren’t any contests or objections, informal probate allows the personal representative to handle the entire probate process outside of court without any supervision. The court’s only involvement is usually to initiate the proceedings (validate the will, appoint the personal representative, confirm that the interested parties have received notice of probate, etc.), and to close the estate when everything is finished. Informal probate usually takes about 6 – 8 months to complete.
- Formal unsupervised probate – when an interested party contests the will or objects to the personal representative’s activities, the court will suspend informal probate until the matter can be heard and resolved. Once the issues are resolved the personal representative should be free to complete the remainder of the probate process outside of court (similar to informal probate), though the judge may need to issue a final approval before the assets are ultimately distributed. Formal unsupervised probate typically takes 8 – 12 months.
- Formal supervised probate – this type of probate is rare, as it’s only required when there are serious irreconcilable contests or objections that require litigation. The personal representative will likely need court authorization before taking any actions, so the process takes significantly longer. Depending on the situation, formal supervised probate cases can take a year or longer.
How to Probate Assets
Whether probate is formal or informal, the actual steps in the process are largely the same:
- Submit the will – if the decedent left a will, the party in possession of the original document is required to submit the will to the county probate court within a reasonable amount of time (usually 30 – 120 days after the decedent’s passing). The court will then validate and authenticate the will.
- Appoint a personal representative – if the will nominates an executor, the court will usually honor the decedent’s wishes and appoint this individual to serve as the estate’s personal representative. The personal representative will be tasked with managing the estate through the probate process, and the court will issue Letters that authorize him or her to work with the estate’s financial institutions, creditors, and beneficiaries. Depending on the situation, the personal representative may be required to complete state-approved training before taking control of the estate’s assets.
- Serve notice of probate – the personal representative is required to serve notice of probate to all of the estate’s interested parties and file proof of service with the court. He or she will also be required to post a notice of probate in the local newspaper once a week for three weeks to notify any unknown creditors of the probate proceedings.
- Settle the liabilities – while the personal representative is free to transfer non-probate assets at any time, he or she will need to pay the decedent’s bills, taxes, and debts before probate assets can be transferred to the beneficiaries listed in the will.
- Distribute the assets – once the estate’s bills, taxes, and debts are settled, the personal representative can distribute the remaining assets to the beneficiaries. The court will issue an order for the appropriate financial institutions to issue new titles in the beneficiaries’ names.
Do You Need Help with Probate Matters?
As you can see, AZ probate laws can be complex. It requires a number of steps and without the right approach, it’s easy to get lost in the details.
Call our Probate team at (480)467-4365 to discuss your case today.