The term “undisposed” can have several meanings in probate cases depending on the context. “Undisposed assets” typically refer to estate property that wasn’t bequeathed in the decedent’s will, while an “undisposed estate” usually means an estate that hasn’t been probated.
In both cases, the term “undisposed” isn’t necessarily a bad thing. Undisposed assets that aren’t covered in the will may pass to the decedent’s legal heirs according to the state’s intestacy laws. Assets that aren’t subject to probate can transfer to beneficiaries outside of probate. Undisposed estates that qualify for the state’s small estate exemption may settle the estate outside of probate, and estates that are comprised entirely of non-probate assets can transfer the estate’s assets without opening probate.
When you pass away without a will, you die “intestate,” and your property will be distributed through probate according to the state’s intestacy laws. These laws also apply to estates where the decedent left a will, but there are some undisposed assets that were not covered by the will. In such cases, only the undisposed assets would be subject to intestate succession laws.
In the state of Arizona, intestacy laws favor the decedent’s surviving spouse and children. If the decedent had a spouse and only had children with that spouse, then all undisposed assets would transfer to the surviving spouse. If the decedent had a spouse but had children with another partner, then the surviving spouse would receive half of the undisposed assets, with the other half split between the children from separate relationships (ARS 14-2102).
When the decedent doesn’t have a surviving spouse, Arizona law (ARS 14-2103) dictates the following order of succession:
- To the decedent’s descendants by representation (children, grandchildren, etc.)
- If there are no surviving descendants, to the decedent’s parents
- If there are no surviving descendants or parents, to the decedent’s siblings by representation (includes nieces and nephews if the decedent’s sibling is deceased)
- If there are no surviving descendants, parents, siblings, nieces, or nephews, to the decedent’s grandparents by representation (includes aunts, uncles, and cousins if the grandparents are deceased)
- If there are no surviving family members, the undisposed assets will transfer to the state
Again, intestacy laws only apply to undisposed assets that can only be transferred through probate but are not covered in a will. Assets that aren’t subject to probate are permitted to transfer to designated beneficiaries outside of probate regardless of whether or not they are covered in a will. As such, it’s important to distinguish between assets that require probate, and assets that are not subject to probate.
Generally speaking, individually-titled assets can only be transferred through probate. That includes individually-owned bank accounts, brokerage accounts, real estate, and personal possessions like vehicles, boats, ATVs, art, jewelry, and collectibles. Real estate that’s owned as tenants in common is also subject to probate, as the decedent’s share of ownership will need to pass to a beneficiary or legal heir. If any of these assets are undisposed by will, they’ll be subject to intestate succession.
Assets that have a designated beneficiary listed on the account are permitted to transfer ownership outside of probate. These assets are commonly referred to as non-probate assets, and they shouldn’t be disposed of by will. In fact, if non-probate assets are mentioned in the will, the designated beneficiary that’s listed on the account will trump the beneficiary listed in the will. As such, it’s best to leave non-probate assets out of your will to avoid unnecessary legal battles between competing beneficiaries.
The following assets are considered non-probate assets:
- Bank and brokerage accounts with a payable-on-death or transfer-on-death beneficiary
- Real estate that’s owned as joint tenants or tenants in the entirety
- Retirement accounts (401k, IRA, etc.)
- Life insurance policies
With proper advance planning, most (if not all) assets can be positioned to transfer ownership outside of probate. Non-probate transfers can be initiated immediately upon the owner’s death and the transfer can take place in as little as 1 – 2 weeks, so they’re significantly faster and easier than probate transfers.
Small estate exemption
To simplify the process of settling small estates, Arizona law allows estates with less than $75,000 in personal property and less than $100,000 in real estate to skip the probate process. After providing creditors with at least 6 months to submit claims against the estate, the estate’s executor can settle the decedent’s liabilities and transfer all assets (including probate assets) without opening probate. When the estate is settled, the executor simply needs to submit a small estate affidavit to the county probate court to close the estate.
How to transfer undisposed assets outside of probate
Any interested party to a non-probate asset can initiate the transfer of ownership when the owner passes away. The petitioner is usually the estate’s executor (also referred to as the personal representative in Arizona), but it’s not uncommon to see the beneficiary or another family member petition for the transfer. If you qualify as an interested party to the asset in question, here’s how to process the non-probate transfer of ownership:
- Obtain a certified copy of the death certificate – this is the most important document in the non-probate transfer process. To get a certified copy of the death certificate, contact the state or county vital records office and pay the printing fee for each copy you require (typically in the ballpark of $5 per copy). Don’t make the common mistake of ordering one certified copy and making copies of the original—some financial institutions are okay with that, but most will require an original certified death certificate, not a copy.
- Identify the asset’s custodian and account information – as long as the decedent properly registered the designated beneficiary for the asset in question, the financial institution with custody of the asset will handle the transfer of ownership. To identify the custodian and account information, look for the title, deed, or a recent account statement. You can call the financial institution for verification, but keep in mind they will be extremely limited on what information they can divulge due to privacy laws. The only person who the financial institution can legally share private information with is the estate’s court-appointed personal representative.
- Submit the required forms – while the financial institution can’t provide you with private information about the owner, they should be able to provide you with the paperwork you’ll need to process the transfer. Fill out the paperwork, get the required signatures (paying special attention to any signatures that need to be notarized), and submit the forms along with an original copy of the death certificate.
- Confirm the transfer – most non-probate transfers take 7 – 14 days to process, but the timeline will depend on the financial institution. If you’re not the beneficiary to the assets in question, keep in contact with the beneficiary to confirm when the assets are transferred. If the financial institution doesn’t process the transfer within the expected time window, don’t be afraid to call them and check on the status of the transfer. When it comes to transferring assets—especially large accounts—even the smallest technicalities can bring the process to a grinding halt, so you may need to resubmit the forms with new signatures if any errors are discovered.
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.
At JacksonWhite, we can make probate a clear, easy-to-understand process. If you’d like help with probate matters, call the talented team at JacksonWhite Law today.
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