Probate Involves Wills, Heirs, and Much More
Written by Ana Perez-Arrieta
The word “probate” is probably one of those terms that you’ve heard people use, but you may not be totally sure what it means. Technically, probate refers to the process whereby the probate court appoints a Personal Representative (aka Executor) of a decedent’s estate and then supervises the administration of the decedent’s estate. During the process, the legal title to the assets transfers from the decedent to the beneficiaries or heirs.
Many people believe that having a Will means the estate will avoid probate, but that is not the case. In Arizona, there are two ways that assets will be subject to probate. First, if you have real property that is titled in your name, and you have not recorded a beneficiary deed, then the real property will be subject to probate, regardless of whether you have a Will. (There is a simplified procedure if the assessed value of the property is less than $100,000.) Second, if you have personal property (e.g., bank accounts, brokerage accounts, stocks, etc.) that is titled in your name and does not have a beneficiary designation, and the personal property has an aggregate value of $75,000 or more, then those assets will need to go through probate. Again, this is true regardless of whether you have a Will. There are ways to avoid probate, and reasons why you should still have a Will even if your assets will go through probate, but those are topics for another day.
There are several steps required to probate an estate. First, the court authenticates the decedent’s Will, which involves confirmation that the Will is valid, was properly executed, and is the most recent Will signed by the decedent. If the decedent dies without a Will, then the laws of intestate succession apply. Intestate succession means the state’s laws dictate how the decedent’s property gets apportioned among the decedent’s relatives. There is a popular myth that if you die without a Will or if your estate goes through probate, then the state gets everything. This is not true. In Arizona, the assets go to the state only when the decedent had no living relatives or when they cannot be found. The term for this process is “escheat.” Although it’s very uncommon for assets to escheat or pass to the state, you still don’t want the state’s rules to decide who gets your property when you die. To avoid this, everyone should prepare a Will.
Next, the court appoints a Personal Representative (Executor), who is the person responsible for doing the work in the estate administration. The decedent’s Will typically nominates the Personal Representative, and the court appoints that person. In the absence of a Will, the court may appoint a relative or professional fiduciary.
Once a Personal Representative is appointed, he or she needs to identify and protect all of the decedent’s assets. This includes valuing assets, because the Personal Representative has to prepare an inventory of the probate assets; and eventually, the Personal Representative has to provide an accounting of the estate administration. Identifying the estate assets and obtaining their values as of the decedent’s date of death is the beginning point of the estate accounting.
In Arizona, the Personal Representative also is required to publish notice to creditors in a local newspaper to inform them of the decedent’s death, and creditors have four months from the first date of publication to present their claims against the estate. Any claims presented after the four-month period expires are generally barred. The advantage of publishing notice and giving notice to known creditors is that the Personal Representative has finality with regard to creditor claims.
There is also a similar period where interested parties have a right to contest the Will, and if no action is taken within that time period, family members are legally barred from raising issues as to the validity of the Will. Therefore, this time period also gives the Personal Representative finality as to the terms of the Will.
At the end of the creditor period, the Personal Representative pays bills, files any required tax returns, including the decedent’s final income tax returns, and pays any taxes that may be due. If an estate tax return is required or recommended, the Personal Representative usually has nine months from the decedent’s date of death to file it with the IRS. An estate planning attorney can explain when an estate tax return is required or recommended.
Finally, the Personal Representative will provide an estate accounting to the beneficiaries (if there was a Will) or heirs (if the decedent died without a Will), and the balance of the estate will be distributed to the beneficiaries or heirs. Once the Personal Representative fully distributes the estate assets, then the court is notified, and the estate is closed.
A properly drafted Will and a simple inventory of your assets will greatly simplify the probate process for your Personal Representative and beneficiaries.
If you need legal advice regarding any aspect of the probate process, whether you are the Personal Representative, a beneficiary, or an heir, Bogutz & Gordon can help. If you are considering your estate plan, we also can talk to you about reasons you might want to avoid probate and the ways to avoid it. Some topics are easier to discuss than others, but in our view, the best final gift you can give your loved ones is to think about and plan your estate with an attorney who specializes in this area.