Family Law Guide – Probate & Trust Administration

The probate system serves one function: facilitate the progression of property rights in the state. Probate is the default system used where the new owner(s) of a piece of property is identified and thereafter given marketable title. The role of the Court is to oversee, not execute, the process; thus, the Court appoints an interested party to act in the place of the deceased with a set of defined procedures. It is a public process. Because the government is involved, there are due process elements to the procedures, but it is usually not actively monitored.

1. “I want to avoid probate, what do I need to do?”

Answer: There are several ways to avoid probate. The real question is which method is the right way to avoid probate for your particular circumstance. What must be done to avoid probate depends on the type of asset involved. Generally, the planner sets up a mechanism so that the transfer of title of a piece of property is both direct and clear.

Practical Example: Frank and Marge were a couple for fifteen years, but were never married. Marge never got along well with Frank’s children from his prior marriage. Because Marge’s credit was bad at the time, Frank only financed the house they lived in for fourteen years. Frank and Marge never did estate planning because they weren’t “rich.” After Frank suddenly dies from a heart attack, Frank’s house is now legally owned by Frank’s children. After probating Frank’s estate, Frank’s children demand a high market rent for Marge to continue to live in the house. Marge is eventually evicted for failure to pay rent. Marge is homeless due to Frank’s failure to identify Marge as the next owner in an estate plan instrument.

2. “How do I set things up so that the government does not take all of my money in probate?”

Answer: In Arizona, the idea that the Government takes a large portion of an estate is false. Probate is court-based process which has fees but the fees charged are not grossly unreasonable. Probate assistance, such as attorney’s fees, and other administrative costs can be expensive depending on the needs of the administration, but those costs are rarely paid to the Government. If the desire is to minimize costs, a detailed and maintained estate plan is advised.

Practical Example: Joe Average calls non-estate planning attorney and states, “I need a will, and I want to avoid probate.” Non-estate planning attorney responds, “Great, our firm does simple wills for cheap.” When Joe Average dies his estate goes to expensive probate because ALL WILLS, IF USED, GO THROUGH PROBATE. Joe Average calls estate planning attorney and asks, “I need a will, and I want to avoid probate.” Estate planning attorney responds, “Then you need more than a will, and I can help you with a custom strategy that avoids your Will being sent through probate.”

3. “How long does probate last? How long before I can get my inheritance?”

Answer: The probate process is at least 4 months, but can last several years depending on the issues particular to the estate.This extended wait period is one additional reason having an estate plan that avoids probate is desirable. The timing and manner of distributions in probate are usually decided by the personal representative of the estate.

Practical Example: Children open probate on Father’s estate. Father died with two large assets, a house and sole proprietor business. Children are closing down Father’s business, but there is one large outstanding debt from a commercial lease which father personally guaranteed before he died. After notice from children that lease debt is being disallowed by estate for insufficient assets, the commercial lease company pursues father’s estate for the outstanding debt by suing in the probate proceeding. Depending on the outcome of that suit, and any potential appeals, Father’s children may inherit nothing; regardless of the outcome, the remaining inheritance, if any, would not be paid out to the children until after the proceeding concludes.

4.“My parent/spouse passed away what am I supposed to do next?”

Answer: Administrations typically start around 3-4 weeks after someone passes away. After burial services are complete, a consultation to review the estate plan is proper because estates are often unique. When available, obtain copies of the death certificate and start making a list of known assets. Items of personal property should not be distributed until the details of the estate plan are known.

5.“What should I do about inheritance taxes?”

Answer: Generally, estate taxes can be assessed on a state and federal level. In Arizona, there is no inheritance tax on estates. Federally, the applicable tax depends on the size of the estate. Although there may be no tax due, there may still be a duty to file. Always seek advice from an estate planning professional or Certified Public Accountant familiar with estate taxation rules and regulations before distributing inheritance.

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Practice Tip: It is easy for clients to take for granted how complex their personal affairs are. If a key player is removed from the game, what usually happens? Estates are no different. Life insurance funds help, but money only goes far and it is only as effective as the person directing the grand plan. Throwing money at a bad plan usually amplifies harm. Complex life situations or complex asset structure dictate a detailed planning need.

Administering the last affairs of a deceased person can be a difficult or a simple process depending on the underlying plan utilized. One of the most important decisions in the planning process is choosing the person or persons who will execute the plan. When any administration experiences problems, the concerns of potential clients are most often related to the persons who are administering the estate. Indeed, the problems are usually caused by the ineptitude or character of the administrator.

*Watch for big “life” events. Birth, marriage, death, divorce&disability, trigger these kinds of questions.

*The information provided in this article is of a general nature and reflects only the opinion of the author at the time it was drafted. It is not intended as definitive legal advice, does not create an attorney-client relationship, and you should not act upon it without seeking independent legal counsel.