In the state of Arizona, probate is only required if the decedent has any assets that did not transfer automatically upon their death. These assets tend to be titled individually in the decedent’s name and will require a probate court to transfer the title of ownership to the intended beneficiary.
Which Assets Are Subject to Probate?
The following assets are subject to probate:
- Individual bank and brokerage accounts
- Real estate held individually or as tenants in common
- Personal property, such as vehicles, art, collectibles, and jewelry
These assets (sometimes known as probate assets) cannot pass to the decedent’s heirs until a judge transfers title of ownership through probate. As long as the decedent has a will, their probate assets will transfer to their intended beneficiaries. If the decedent died without a will (known as intestacy), their probate assets will transfer to their legal heirs according to the state’s laws of intestate succession. Unfortunately, intestate succession does not leave family members with much say in the distribution of assets, and it can significantly lengthen the probate process.
In Arizona, intestacy laws give preference to the surviving spouse and children (ARS 14-2102). If the decedent was single and did not have children, the estate can pass to the decedent’s parents, siblings, or other extended family members (ARS 14-2103). In rare cases where there are no immediate or extended family members to claim the assets, the state can claim the estate (ARS 14-2105).
Which Assets Are Not Subject to Probate?
Probate can be a long and costly process, so it’s always best to avoid probate court as much as possible. Fortunately, most assets can transfer to beneficiaries outside of probate with proper planning. Assets that include a contractual beneficiary are designed to automatically transfer to the intended owner upon the decedent’s death. The financial institution holding the assets will usually transfer the assets as soon as they receive a copy of the death certificate. These assets (sometimes called non-probate assets) include:
- Bank and brokerage accounts with a payable-on-death or transfer-on-death beneficiary
- Real property held in joint tenancy or as tenants in the entirety
- Life insurance policies
- Retirement accounts
If the decedent has properly positioned all of their property as non-probate assets, probate will not be required. That said, even if all of your assets are positioned to bypass probate, it may still be wise to draft a will, so it’s important to discuss your needs with a qualified estate planning attorney.
Is It Possible for Probate Assets to Bypass Probate Court?
The state of Arizona allows small estates to transfer probate assets outside of probate court under the following conditions:
- The decedent’s personal property is less than $75,000
- The decadent’s real property is less than $100,000
Under the small estate exemption, a family member will need to submit an affidavit with the county court. The affidavit will list an inventory of the decedent’s assets, the names and addresses of family members, and a copy of the will. Once granted, the estate’s personal representative will be free to transfer the assets with a simple rubber-stamp approval from a probate judge.
What Happens During the Probate Process?
There are 5 important steps in the probate process:
- Validate the will
- Appoint a personal representative
- Gather the assets
- Settle the liabilities
- Distribute the assets
Validate the Will
If the decedent left a will, the probate court will need to validate the document. Specifically, the court needs to ensure the testator was over 18 and of sound mind (ARS 14-2501), and that the testator was not subject to undue influence. They’ll also check to make sure the document is properly signed and dated by the testator and at least two witnesses (ARS 14-2502). If the will isn’t notarized, the judge may summon the witnesses to testify as to the document’s authenticity; if the will is notarized, it’s consider self-proved and will not require calling the witnesses.
Appoint a Personal Representative
If the decedent nominated an executor in their will, this individual will serve as the estate’s personal representative. In the absence of a will, a family member can petition the court to be appointed as personal representative. If the judge cannot find a qualified family member, or if there is too much discord among family members to agree on a personal representative, the judge can appoint a third-party special administrator to handle the estate’s affairs.
Gather the Assets
The personal representative will be asked to take an inventory of the decedent’s assets. This includes collecting account statements for liquid assets, and hiring professional appraisers to determine the fair market value of illiquid assets such as real estate, art, jewelry, etc.
Settle the Liabilities
Once the personal representative has an inventory of the assets, he or she will need to use the assets to satisfy any outstanding liabilities in the following order:
- Administration expenses (court costs, legal fees, appraisals, etc.)
- Funeral expenses
- Taxes (a final income tax return, and estate taxes if applicable)
- All other claims
In most cases, the personal representative will use the liquid assets (bank accounts, brokerage accounts, cash, etc.) to cover the estate’s liabilities. If there aren’t enough liquid assets, the personal representative is authorized to sell assets to cover the debts. If there are more liabilities than assets, the estate is considered insolvent, and all of the assets will be liquidated to cover as much of the liabilities as possible.
Distribute the Assets
When the liabilities have been settled and the final distribution is approved by the court, the personal representative can finally transfer any remaining assets to the decedent’s beneficiaries. As long as there is a valid will, the distribution will be dictated by the decedent’s instructions. In the absence of a will, the distribution will proceed according to the laws of intestate succession.
Formal vs. Informal Probate
Informal probate takes place when there are no contests to the will or objections to the distribution. Informal probate allows the personal representative to manage their responsibilities with minimal court supervision, so it tends to be faster and more cost-effective. Generally speaking, informal probate proceedings can wrap up in 4 – 6 months.
If anybody contests the will or objects to any aspect of the probate process, the proceedings will shift to formal probate. With formal probate, the court will hold additional hearings to address the contests and objections, and the judge will need to supervise the personal representative’s actions. Formal probate proceedings can take up to a year or longer.
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.