The Probate Process in Arizona

More often than not, estate property must pass through probate before getting to beneficiaries.  Somebody close to the decedent generally bears the responsibility of properly distributing the assets.  This person is bound by Arizona probate law to exercise a great deal of oversight and attention.  More specifically, Arizona probate involves taking the following steps:

1. Initiate probate and prove the Will

The decedent’s Will is the starting point for determining who should handle the estate because it should name a personal representative.  Where a person dies without a Will, the court appoints a personal representative.  The personal representative initiates probate by filing a petition for probate with the court.  Before opening the probate estate, the court must first determine that the Will is valid.

2. Obtain letters of administration

After deeming the Will valid, and formally appointing a personal representative, the court provides the appointed person with letters of administration.  Letters of administration provide the personal representative with authority to act on the estate’s behalf.  The personal representative must produce these letters to financial institutions as evidence of his authority to handle the decedent’s affairs.

3. Post bond

Personal representatives must be bonded unless the heirs and devisees, or the Will itself, specifically waive this requirement.  Having the bond waived can expedite probate, so it is generally in a personal representative’s interest to seek a waiver.  Personal representatives can petition the court to waive the bond requirement or modify the bond amount, and it is within the court’s discretion to do so.  Where a bond is necessary, however, the amount may be specified by the Will or determined by the size of the estate.  In the absence of specific Will instructions, personal representatives generally become bonded for an amount totaling the value of the decedent’s estate, plus any income the estate is expected to generate during the next year.

4. Provide notice

Upon appointment, Arizona probate law requires personal representatives to notify the decedent’s creditors that he or she has taken control of the estate.  The personal representative must publish the notice in a local newspaper and mail the notice directly to each known creditor.  Additionally, Arizona probate law requires personal representatives to notify the decedent’s heirs and devisees about the appointment within 30 days of being appointed.

5. Take possession of estate assets

The Arizona Probate Code allows personal representatives of an estate to take possession of all estate property unless the Will states otherwise.  But, this does not mean that personal representatives must take possession.  Sometimes, it makes sense for personal representatives to leave certain property in the hands of those who are entitled to receive it.  If, at any time the personal representative decides it is necessary to take possession of estate assets to properly administer the estate, he may do so in accordance with Arizona probate law.

6. Create an inventory

 

The real work for personal representatives begins once probate is officially opened.  The process begins with locating all of the estate property, which must be appraised and inventoried.  Personal representatives have a duty to provide detailed and accurate information in the inventory.  The inventory must describe the nature of all estate properties as community or separate; the fair market value of all properties; and every lien or encumbrance that exists on any of the properties.  Upon completing the inventory, the personal representative must make it available to all interested parties by either filing a copy of it with the court or providing a copy to all those who may receive a portion of the estate.  Time is of the essence because personal representatives only have 90 days from the day of appointment to complete the inventory.

7. Pay taxes

Arizona probate law gives personal representatives the responsibility of paying taxes on an estate.  While Arizona does not have an estate tax, the federal estate tax will once again take effect beginning in 2011.  As for 2010, the federal estate tax has been repealed, but the repeal sunsets in 2011, at which point estates with more than $1 million will be subject to the tax.  In addition to the estate tax, personal representatives must pay property and other applicable taxes, so it is important for personal representatives to consult with an Arizona probate lawyer who is familiar with tax law.  With the proper insight and planning, personal representatives can minimize tax obligations and help preserve the estate.

8. Manage and preserve the estate

Under Arizona probate law, personal representatives have a fiduciary duty to manage and preserve the estate appropriately.  They must apply the same standard of care that is required of trustees, and any breach of this duty may cause the personal representative to become personally liable for loss to interested parties.  Managing the estate includes not spending estate funds frivolously, as well as using estate funds for legitimate costs that arise.  For instance, personal representatives may use estate funds to pay for funeral expenses, court costs and attorney fees; and can charge a reasonable fee for their time and services.  Personal representatives should also use estate funds to repay creditors and lenders where appropriate.

9. Set aside community property

Arizona is a community property state, so any property acquired during the marriage belongs to the married couple in equal shares under the law.  Community property should be set aside before the personal representative transfers estate property to beneficiaries.  If the decedent was married, then, the personal representative must make an accounting to set aside community property for the spouse, and then determine how much of the remaining property should be devised under the Will or transferred under Arizona probate law.  This accounting can become quite complicated, and personal representatives are not advised to make the division without an Arizona probate lawyer.

10. Distribute estate property

Distributing estate property is the final step for personal representatives.  Personal representatives should not take this step, however, until first repaying creditors and handling tax issues.  The remainder of the estate can then be divided and distributed.  If the decedent left a Will, the personal representative must make distributions according to its terms.  In the absence of a Will, personal representatives must make distributions in accordance with the Arizona Probate Code.  With every transfer they make, personal representatives must fill out certain documents to transfer title and possession.

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