Wills In Arizona:

Frequently Asked Questions

Will the state get all my money if I fail to write a Will?

Probably not.  The reason is that the legislature has passed a set of statutes called the "Laws of Intestate Succession" that control how your property passes at your death.  It has been said that effectively, the legislature has written your will for you if you fail to write one yourself.  According to the legislature, if you do not have children by a prior marriage, your present spouse, if you have one, is first in line to inherit all of your estate.  If you have no spouse at the time you die, your children take your probate estate. If you have no spouse and no children, your parents would inherit.  The statute becomes troublesome in the case of blended families. If you have children by a first marriage, they take all your separate property and your spouse takes all of your share of the community property. This runs counter to the desires of most people.

Another danger in relying upon the Laws of Intestate Succession as a substitute for a Will, is that these laws differ from state to state. If you should die a resident of another state, and you lack a Will, you may be unable to foresee who will receive your assets.

But back to the question, the State of Arizona becomes the taker of last resort of your assets, if there are no other takers under the Laws of Intestate Succession.

If I write a Will, can I disinherit my spouse?

Arizona law permits you to disinherit your spouse, but not completely. Upon your death, your spouse will be entitled to a package of statutory allowances from your estate, worth $37,000, or more. This means that your spouse will receive the first $37,000 from your estate, even ahead of your creditors. You can enter into a prenuptial agreement or a post nuptial agreement with your spouse to waive this right. Such agreements are strictly regulated by law; each side should be represented by legal counsel, and such agreements must be fair. 

If I write a Will, can I disinherit someone by just leaving him $1. 00 (one dollar)?

If you leave them a dollar, your Personal Representative will have to find them and give them the dollar after you die. That might be more trouble than it is worth. The better way to disinherit someone in your will is to mention their name specifically and to state your intention that the person receive nothing of your estate.

Does a Will have to be prepared by an attorney?

No. As long as a Will follows the requirements for execution set forth in the Arizona Revised Statutes, it may be valid.

What are the top 5 reasons NOT to write your own Will?

• People who write their own Wills OFTEN use language that is not precise, and so the Will beneficiaries and the Court have a tough time understanding who is leaving what to whom.
• People who write their own Wills OFTEN think that their Wills can control the passage of property that cannot be controlled by a Will. For example, if you are the joint owner of a bank account with another person, and that other person survives you, your WILL does not control the passage of that bank account, which goes automatically to the surviving account holder.
• People who write their own Wills often do so with Will Preparation Kits that they find in office supply stores. Sometimes, the kits are defective. More often, the kit is OK, but the instructions are not clear, so the person fails to use the right form or fails to fill it in correctly.
• Lawyers make a lot of money in post-mortem litigation arguing over the meaning and the validity of handwritten Wills and Will Kit Wills.
• When you go to an attorney to do a Will, part of the process is for the attorney to learn about your assets to the end that they will pass in a manner consistent with your wishes. The point is that you are not just paying the attorney to fill out a form; you are getting much more.
  

Does a Will avoid probate?

No. A Will is a set of instructions to the Court on how your property is to pass at death. If you own property that needs to pass to others at your death by probate, the Will is what a Court will rely upon to decide who is appointed your Personal Representative. In contested cases, the Court will rely on your Will to decide who is entitled to your probatable assets upon your death.  Many assets avoid probate just with the way they are titled. Life insurance policies, for example, do not pass through the probate process if you have named beneficiaries.  Other assets that are owned by your Trustee under a Living Trust are not probatable because you do not own them at your death, your Trustee does!

Do all my assets have to be probated on my death?

No. Let us use the example of husband and wife who own the house as joint tenants with right of survivorship.  Upon the death of the first spouse to die, the title to the house can be changed to the sole name of the surviving spouse without a probate.

There are other examples of assets passing without probate.  In Arizona, your Will beneficiaries (or your heirs if you do not have a Will) can collect your personal property (bank accounts, stocks, etc. ) up to $50,000, without filing probate. The same applies to real property where the equity is $50,000 or less according to the county tax assessment immediately prior to the date of death, however the collection of the property must wait at least six months after the date of death.

Does a Will control the passage of all my assets at death?

Not necessarily. Assets which pass by way of beneficiary designation are not controlled by the Will, if you have named a beneficiary.  This applies to IRA's and other qualified retirement plans, life insurance policies and annuities. Bank accounts which pass to surviving joint holders are not probate assets and their passage is not controlled by your Will. Title to real estate held as joint tenants with right of survivorship passes outside the Will to the surviving joint tenant.

If I have a Trust, do I need a Will?

Most people who set up a Trust during their lifetime (hence the term "Living Trust") do so to avoid probate. The Trust succeeds in avoiding probate only if all otherwise probatable assets are retitled in the name of the Trustee of the Trust. Sometimes people establish a living Trust but don't get around to retitling all the assets into the Trust before they die. Sometimes they become incapacitated as the result of an accident and they then receive settlement proceeds which are probatable. So in order to put the Trustee in control of how assets move after death, one does a Will leaving all assets to the Trustee of the Living Trust. Such a Will is called a "Pour-Over Will" because it pours over into the Trust.

When should I make changes in my Will?

• Review your will with a lawyer every 2-5 years.
• Consider changing your will if a beneficiary dies.
• STRONGLY consider changing your will if your spouse is going into a nursing home and will use the Medicaid Program to pay for long term care. In such an instance, if you leave your assets to your spouse, it may render him or her ineligible for Medicaid.
• STRONGLY consider changing your Will if you are married and your joint assets come to exceed $650,000 (remember to include life insurance). A different kind of Will is required to avoid estate taxes.
  

To change a Will, can I just cross out stuff on the old Will and write in new stuff?

If you do that, make sure that the estate has enough money in it to be able to afford handwriting experts, lawyers and other expenses of litigation.

Does a Will have to be witnessed?

A Will that is entirely in the handwriting of the Testator is a Holographic Will.  Arizona Courts will give effect to a Holographic Will.  Just remember that a Holographic Will is subject to the same shortcomings as any other Will you might write on your own. See What are the top 5 reasons NOT to write your own Will?Otherwise, Arizona law requires two adult witnesses on a Will.  Interestingly enough, the Witnesses can have been named in the Will as beneficiaries.

Is a Will prepared in some other state valid in the State of Arizona?

Not automatically. The Will needs to pass Arizona's test for validity.

Is there a reason to do a Will even if I do not have much in the way of assets at present?

Yes, there are several reasons. You may acquire assets you never expected to own.  One example is when you have an accident and your family secures an accident recovery for you. Your Will would direct the passage of those settlement proceeds upon your death. A second reason to have a Will, even if you have few assets, is to name a guardian for your minor children.  A third reason is to settle the question of who you want to be Personal Representative of your estate.

Should a husband and wife do a joint Will?

For some reason, a lot of people from Missouri do Joint Wills.  Joint Wills are a bad idea.  When the first spouse dies, the Will of both the parties is filed in Court.  How do you probate it in the second estate?Even if you overcome that hurdle, the other problem with Joint Wills comes when the second spouse dies years later. Then families fight over whether the making of a Joint Will constituted the making of a contract between Husband and Wife that neither would be permitted to change his or her Will after the death of the first spouse to die.

Where should I store my Will?

Put it in a fireproof place.  Your freezer is not such a place.  If you choose to store it in a bank safe deposit box, your survivors will have access to it after your death with very little trouble.  Word to the wise: Let your Personal Representative:

a) know that you nominated him to be your Personal Representative

b) be a signer on the safe deposit box

c) know where you hid the key to the safe deposit box

Is it a good idea to use my Will to "get even" with those who have wronged me during my lifetime by complaining about their bad deeds within the text of the Will?

Bad idea. It is possible for your estate to get sued for libel for the bad things you say about others in your Will.

Probate in Arizona: Frequently Asked Questions

What is the origin of the word "Probate"?

The root of the word is "provar" which in Latin means to prove.  Probate historically included a process where a Court needed to ascertain whether the Will is really the will of the decedent.  The Will needed to be "proved" to be authentic.

Probate has since taken on a wider meaning.  It has become synonymous with estate administration after death.  So the estate of a person dying without a will (dying "intestate") is administered in court, as well as the estate of a person dying with a will (dying "testate").

 Why is a court in charge of estate administration after death?

The normal way that we transfer ownership of property that comes with a title is to sign the title over to someone else.  An example is signing the back of your car title to transfer it to a purchaser.  After a person dies, signing their name becomes a little difficult (unless you are from Chicago where for years the people in the cemeteries voted).  And so it becomes necessary for a Court to authorize another individual called a "Personal Representative" to sign transfers of titled property on behalf of the decedent.

So, for example, in the case of estate administration involving   real estate, first the Court would appoint a "Personal Representative".   Then the personal representative would obtain evidence from the Clerk of the Court of his having been appointed the Personal Representative.  The evidence is called "Letters of Administration".  Then the Personal Representative issues a deed of distribution of the land to whomever is designated to receive it under the Will.   Both the deed and the Letters of Administration would be recorded in the office of the County Recorder to establish on the public record that the Personal Representative really had the power to sign the deed.

Are there some kinds of property that do not need Court Estate Administration?

Many kinds.  Here are some examples:

• Real property which is held in joint tenancy with right of survivorship passes to the surviving joint tenant without probate.  There is a need to complete some paperwork, however.
• Real property which is held in Community Property with right of survivorship passes to the surviving spouse without probate.  There is a need to complete some paperwork, however.
• Insurance policies pass directly to a beneficiary, if one has been designated.
• IRA's pass directly to a beneficiary, if one has been designated.
• Annuities pass directly to a beneficiary, if one has been designated.
• Bank accounts held jointly pass to the survivor automatically.
• Bank accounts and securities accounts held as TOD ("Transfer on Death") accounts move to the designated beneficiary.
• Bank accounts held as ITF ("In Trust For") accounts move to the designated beneficiary.
• Property in the name of a Trustee who has been instructed to convey the property from the person who set up the trust to the named beneficiaries of the trust.

Do all estates need to go through probate?

No.  First look to see if the estate contains probatable property.  If it all passes by joint tenancy designation or beneficiary designation, there is no need for probate.

Second, if there are probatable assets, look at the amount.   If the real property located within the State of Arizona is worth $50,000 or less according to the assessor's statement current at the date of death, the real property can be collected by affidavit.  If the personal property in the estate is worth $50,000 or less, it too can be collected by affidavit.

What is Collection by Affidavit?

In the case of real property, you have to wait six months after the date of death.  If you do not want to wait the six months, you can file a regular probate immediately.  Once the six months elapses, you open a court case and ask the court's Probate Registrar for an order allowing you to record your affidavit with the County Recording, evidencing the transfer of ownership of the real property.   Obviously, this only works in simple cases where the Probate Registrar is clear on who is supposed to inherit the property.  The law requires that the affidavit contain a representation that the debts of the estate have been paid, after the statutory allowances for widow and family have been met.

Personal property, which includes things like tangible wage claims, personal property, automobiles, bank accounts, and even brokerage accounts.   These are collectible by presenting an affidavit, provided the value of all such property does not exceed $50,000.

What is the relationship of probate to estate taxes?

Henry VIII relied on probate to raise taxes to finance his armies.  When land passed through probate, the estate paid a tax.  Then the Church created the idea of a trust, which avoided probate and deprived the King of his tax revenues.  Henry VIII went to Parliament and had them pass the "Rule Against Perpetuities" which effectively said that a trust can't go on forever, so that its contents can be probated and taxed.

Today, there exists little relationship between probate and estate taxes.  If you own it, it is counted toward computing your estate tax obligation, whether or not it has to be under a court's estate administration in order for title to pass to others.   However, the person who is appointed by the Court to be the Personal Representative of the estate is required to file the estate tax return, if one is required.  Further, the Personal Representative can become personally liable for the estate taxes, if he distributes the assets of the estate to beneficiaries, failing to pay all or a portion of the tax bill to the taxing authorities.

How long does probate take?

Let us assume that the beneficiaries of the estate are not fighting.  Let us assume further that everybody knows what are the assets of the estate, where they are, and that the taxes on the estate, if any, are easy to compute.   That estate will likely settle in six months.  But more important, the Personal Representative, once appointed in Arizona, has immediate authority, in ordinary circumstances, to transfer some or all  of the assets to the estate beneficiaries.

What are the duties of a Personal Representative?

Distilled down to the basics:

• Obey Court orders
• Locate and collect the estate assets
• Pay the just debts of the estate, including taxes
• Deal in good faith with estate beneficiaries and account to them
• Distribute the estate assets as called for in the Will or otherwise by law

Is a Personal Representative entitled to be compensated?

He is entitled by law to "reasonable" compensation.   This is usually on an hourly basis, so it is essential to keep a log of the dates of service, the description of the service, and the amount of time expended.

Are probate lawyers in Arizona entitled to take a percentage of the estate as the fee for probate?

The probate court has to be satisfied that the lawyer's fee was reasonable in each case.  There is no statute, like other states have, providing that an attorney gets a percentage of the estate.  As a practical matter, Arizona is a Sunbelt state.  Lawyers love to practice here, which means that there is a lot of competition.  Therefore, you should be able to find a lawyer who is willing to probate a non-contested estate on a flat fee basis.

Trusts in  Arizona - Will or Trust?

Frequently Asked Questions

What is a Trust?

A trust is a set of instructions to a Trustee contained in a legally enforceable document. The instructions deal with the following issues:

• How are my assets to be used?

• Who gets my trust assets when the trust ends?

• Who is going to be my trustee and my successor trustees?

• What debts and taxes are to be paid from my trust?

• What powers do my trustees have?

• How are my assets to be invested?

Should I do a trust or a Will?

Do not do a trust because you are afraid of a probate.  Probate is a relatively simple and painless procedure in Arizona. Do a trust because you are afraid of two probates. It becomes cost effective to do a living trust in lieu of two probates. In cases where there is out of state land, and land in Arizona, the decedent will face multiple probates.

Do a trust if you are leaving assets to a beneficiary who will blow them if he receives them outright.

Do a trust if you believe that a Trustee should stand in between your intended beneficiary and people who would charm or defraud that beneficiary out of his trust money.

Do a trust if you want to give a beneficiary income for life, with a remainder interest in a different beneficiary.

Do a trust if you want to plan effectively for the possibility of your own disability and you desire the accountability and the efficiency of a Trustee.

Do a trust if you are married and need to minimize estate taxes.  There are two types of trusts that are particularly helpful in this regard.  The first is called a "Credit Shelter Trust" or an "A-B-Trust"  The second is called a Q-Tip Trust. 

If I do a trust, do I still need a Will?

Most people who set up a Trust during their lifetime (hence the term "Living Trust") do so to avoid probate. The Trust succeeds in avoiding probate only if all otherwise probatable assets are retitled in the name of the Trustee of the Trust. Sometimes people establish a living Trust but don't get around to retitling all the assets into the Trust before they die. Sometimes they become incapacitated as the result of an accident and they then receive settlement proceeds which are probatable. So in order to put the Trustee in control of how assets move after death, one does a Will leaving all assets to the Trustee of the Living Trust. Such a Will is called a "Pour-Over Will" because it pours over into the Trust.

If I do a trust, do I still need a Durable Financial Power of Attorney?

• There is no law that says people have to do business with the Agent under your Power of Attorney. But because your trustee becomes the legal owner of your property, they have to deal with your trustee.
• Powers of Attorney don't usually contain provisions requiring the Agent to give you a periodic accounting of your financial affairs.
• The Agent under a Power of Attorney cannot make decisions after your death, but a Trustee can.
• Even so, it is still a good idea for you to do some kind of financial power of attorney. Why? Because there may be a need to move property out of your individual name and into the name of your trust while you are disabled.
  
  

Whom should I select to be my Trustee?

• A trustee often has full and unrestricted access to your trust assets. An unscrupulous trustee can steal them. So you need to pick someone you can trust not to steal.
• A trustee has to invest the trust assets. Your trustee should be knowledgeable about investing, or at least be willing to obtain competent advice.
• A trustee needs to be able to resist the temptation to invest in high risk investments.
• A trustee needs to avoid self-dealing and conflict of interest..
• A trustee needs to know how to say "No" to the unreasonable and unlawful demands of beneficiaries, and creditors.
• A trustee needs to be sufficiently well organized to be able to account completely for all the affairs of the trust.
• A trustee needs to have the time, energy and interest to give consideration to the individual needs of the trust beneficiaries.
• An individual acting as a trustee may be judgment proof. An institution like a trust company or a bank trust department may be better able to satisfy a judgment against a trustee.

Should my Trustee be bonded?

Corporate trustees rarely operate under a bond. If you are selecting an individual trust, you may afford the trust beneficiaries an added degree of protection by requiring that the trustee purchase a surety bond. They are readily available, but seldom used.

What are the differences between a revocable trust and an irrevocable trust?

A person who sets up a trust is called either a Grantor, or a Settler or a Trustor. Let's use the term Grantor. In a revocable trust, the Grantor retains the right to revoke or amend the trust. The Grantor does not part with the incidents of ownership of the property that he has put into the trust. He is considered the "equitable owner" of the trust assets, despite the fact that the Trustee is considered the legal owner of the assets. For tax purposes, a person who has established a revocable trust has not given away the ownership of the property in the trust to anyone else.

In an irrevocable trust, the Grantor cannot revoke. The Grantor has parted with the incidents of ownership of the assets of the trust. He has no right to have the assets returned to his individual ownership. He is not considered the "equitable owner" of the assets. For tax purposes, a person who has established an irrevocable trust has given away the ownership of the property, unless other factors are present.

Does a trust put my assets out of reach of the nursing home or Medicaid?

A simple, garden variety revocable living trust does not make the assets contained in the trust any less vulnerable to the cost of long term care.

Making a gift to an irrevocable trust which returns income to the Grantor may put the assets out of reach for ALTCS/Medicaid eligibility purposes, however, the making of the gift will result in certain eligibility penalties. Can a trust be a valuable Medicaid planning tool?

In the case of a married couple with liquid assets less than $160,000 and a house, a revocable living trust can dramatically increase the amount that the community spouse can retain as the nursing home spouse qualifies for ALTCS. A qualified Medicaid planning attorney has to explain how this favorable outcome is obtained.

An irrevocable trust which is designed to return all its income to the people making the trust can result in assets passing free of an ALTCS estate recovery claim. Such a trust can also preserve some important tax benefits for the transferees of the property.

Estate Planning