Recent Changes to Arizona Informal Probate Law and Procedure

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or call us at 480-361-1324

In 2011, there were a number of changes in both statutes and rules of procedure relating to probate in Arizona. While the lion’s share of these changes affect Guardianship and Conservatorship proceedings,  some of them apply in Informal Probate cases and a few have resulted in changes in the AvidLaw Probate forms. This article summarizes some of the changes that impact Arizona informal probate practice.

New laws and rules about fees and budgets. If you have paid attention to the news about changes in the laws and rules, you have no doubt heard about new requirements with respect to attorneys fees and to budgets required to be filed in some cases. The fee changes (see ARS 14-5109 and 14-5110) affect guardianships and conservatorships, but do not currently affect informal probate practice. The changes requiring the submission of a budget (see ARPP Rule 30.3) affect only conservatorships. It appears, however, that the Statewide Fee Guidelines, expected to come out in September, will apply to attorneys for Personal Representatives. When that happens, we will deal with them in the software.

The following changes that have taken place over the last year or so affect informal probate practice.

ARS 41-313 has been amended to require additional information to be included with a notarial certificate “if a notary attaches a notarial certificate to a document using a separate sheet of paper.” Some practitioners have raised concerns about the vague nature of this language. The AvidLaw Probate forms now give users an option to always include the additional information with notarial certificates or to omit this information. It may be helpful to review this provision in determining when this additional information is appropriate for documents you draft.

ARS 14-1104 now specifically requires fiduciaries to consider costs when making decisions about how to act, and to make reasonable decisions to limit those costs. This statute has been revised to require personal representatives to apply cost/benefit analysis in decisions relating to administration of the estate. Any will provision that directs otherwise will apply. It is possible that this provision will lead some testators to include in the will sufficient direction to allow the personal representative to accomplish the testator’s wishes where a pure cost/benefit analysis might not be appropriate. This change should be considered in the representation of personal representatives, but it has not caused any changes in the AvidLaw Probate forms.

ARS 14-1105 allows parties or attorneys to be charged with some or all of the costs that are incurred because of their “unreasonable conduct.” Similarly, the new Rule 10(G) in the Arizona Rules of Probate Procedure provides for remedies in the case of “vexatious conduct,” including a prohibition against filing pleadings and other papers without first obtaining a court order. Also, ARS 14-1109 allows the court to rule on a repetitive filing before responsive filings and without a hearing. These provisions should be explained to clients who might otherwise want to engage in “unreasonable” or “vexatious” conduct or in repetitive filings. These provisions have not, however, caused any changes in the AvidLaw Probate forms.

ARS 14-1108 encourages alternative dispute resolution in probate cases. It not only encourages arbitration, but also other options. As with the other statutory and rule changes discussed so far, this change did not affect any AvidLaw Probate forms.

ARS 14-5652(B) requires any attorney who is acting as the personal representative (or as a trustee) to disclose in writing to everyone with an interest in the matter the names of anyone with an interest in the matter for whom the attorney either is performing or has previously performed legal services. This disclosure is required within a reasonable time after the attorney learns that the client or former client has an interest in the estate. This means that an attorney serving as personal representative must make such a disclosure upon learning that a client or former client is a creditor, heir, devisee, or some other person with an interest in the estate.

Rule 8 of the Arizona Rules of Probate Procedure now sets forth specific consequences that can apply in the case of a failure to serve required notice on an interested party in a probate action. The court has the option to dismiss the case without prejudice, to require service within a specified time. The provision allows the court to extend the time for service for good cause shown.

Rule 10(D)(1) of the Arizona Rules of Probate Procedure requires the attorney for a Personal Representative to “encourage the fiduciary to take those actions the fiduciary is authorized to perform and can perform competently on the fiduciary’s own to fulfill the fiduciary’s duties.” While this provision hasn’t changed any AvidLaw Probate forms, it may be good practice for practitioners to edit engagement letters to include such encouragement, at least generally, and perhaps to discuss some specific actions that clients might take.

Rule 15.2 of the Arizona Rules of Probate Procedure establishes proceedings for lack of prosecution. In general, the court must issue a notice of impending dismissal two years after the case is filed unless a closing statement, a petition to settle the estate, an order terminating the appointment of a special administrator, or an order extending the administration of the estate. Cases will be dismissed 90 days after the notice has been issued unless one of the items discussed above has been filed or there has been a request for hearing or conference, a petition to terminate the appointment, or a status report describing unresolved matters. A similar process takes place six months after filing if there has been no action or hearing in the case. Dismissals under this rule are without prejudice. No AvidLaw Probate forms have been changed due to this rule.

Rule 22(A) of the Arizona Rules of Probate Procedure requires each order appointing a personal representative (including a statement of informal probate) to include a warning that the appointment isn’t effective until letters are issued. The applicable AvidLaw Probate forms have been modified to include this warning.

Rule 22(C) of the Arizona Rules of Probate Procedure has specific provisions relating to restricted accounts. This rule requires certain wording in the letters of any fiduciary for whom funds will be restricted. The AvidLaw Probate forms don’t deal with restricted accounts in informal probate cases, because there is rarely a bond requirement, so property is seldom restricted. However, if you have such a case, you should be aware that the language of the letters needs to comply with this rule.

Rule 22(D) of the Arizona Rules of Probate Procedure has provisions similar to those of Rule 22(C) with respect to restrictions on the authority to transfer or manage real property.

Rule 27.1 of the Arizona Rules of Probate Procedure requires all unlicensed individuals (and some entities) to receive training prior to serving as Personal Representatives. This rule, which is effective on or after September 1, 2012, will require changes to the AvidLaw Probate forms. AvidLaw will make these changes by the time the rule becomes effective.

AvidLaw is pleased to be able to provide general explanations of law changes to those who use our forms. We look forward to any comments you may have about these changes and how they affect your practice.

The Inventory and Appraisement

© AvidLaw, LLC

Learn more at avidlaw.com

or call us at 480-361-1324

A Personal Representative has three main duties—to possess the estate, to preserve it, and to distribute it to the appropriate parties. To fulfill the first of these duties—the duty to possess the estate—the Personal Representative must first find out what property was owned and what debts were owed by the decedent at the time of death.

Identify and Possess the Estate. As the Personal Representative becomes aware of property owned by the decedent, he or she must take control of the property (see ARS 14-3709). In the case of titled property, this means that title to the property should be changed to: “Estate of DECEDENT NAME, PERSONAL REPRESENTATIVE NAME as Personal Representative.” In the case of other property, the Personal Representative must take possession of the property and preserve it for the beneficiaries of the estate.

Identifying Debts Owed by the Decedent. The process of establishing what property is in the estate must take into account the debts owed by the estate, which, of course, diminish the amount of property that can go to the heirs or devisees. The Personal Representative has an affirmative duty to notify any “known creditor” of the Decedent (see ARS 14-3801(B)) by mail or delivery. The Personal Representative must also publish notice to all other creditors once a week for three successive weeks (see ARS 14-3801(A)). Claims that are not presented by the deadline are forfeited (see ARS 14-3803). The Personal Representative must respond to each presented claim either by allowing it or disallowing it in whole or in part (see ARS 14-3806).

The Estate Inventory. Because the Personal Representative is responsible to see that all identified property is preserved for the beneficiaries, he or she is required to inventory all such property (see ARS 14-3706). The inventory is also an “appraisement.” In other words, the inventory must state the value of the property in the estate. The settlement of the estate will require the Personal Representative to give an account of what happened to all property included in the inventory. The Inventory must be prepared within ninety days of appointment.

List Estate Property in the Inventory. The inventory must list the property “with reasonable detail.” This doesn’t require a listing for each item of property in the estate, but the categories listed should be clear. Items of significant value should be listed separately. The greater the value of an item, the less reasonable it is to list it only as part of a group of items. For married decedents, community property must be listed separately from separate property (see ARS 14-3706(A)). Real property should also be listed separately from personal property. The fair market value must be given for each item (or category) of property listed in the inventory. If the fair market value it is an appraised value, the name of the appraiser should also be given. If an item of property is subject to debt, the amount and type of debt must also be listed.

The Public and Private Options. The statute provides two options for filing and mailing the inventory. The more common is the private option, which doesn’t require the details of the inventory to be filed with the Court. Under this option, a copy of the inventory must be sent to each beneficiary of the estate (heir or devisee) and to each other interested party that requests one. Only a proof of such mailing needs to be filed with the court. Under the public option, the inventory must be filed with the court and a copy sent to each interested party requesting one.

Supplemental and Amended Inventories. If, after the inventory is prepared, the Personal Representative becomes aware of “any property not included in the original inventory” or that the valuation or description of any property was “erroneous or misleading,” then a supplemental or amended inventory must be prepared and filed or mailed in the same manner as the original inventory. A supplemental inventory lists changes from the original inventory. An amended inventory lists all property again, noting the changes from the original inventory. The statute calls for a supplementary inventory, but, because an amended inventory includes everything required in the supplementary inventory, it also fulfills the statutory requirement.

AvidLaw is pleased to be able to provide general explanations of Arizona probate law and practice to those who use our forms. We look forward to any comments you may have about these summaries, including ideas for enhancing them.

Tips and Tricks: Distributing estate assets

AvidLaw Probate is designed to save you time across the entire probate process. One time-saving tool we’ve built into AvidLaw Probate helps you quickly list assets as you prepare the appropriate distribution documents. To take full advantage of this tool, you need to plan in advance.
As you list the inventory, you should keep in mind how the various items will be distributed. This awareness will allow you to identify items of property in the inventory in the same way that they will need to be identified upon distribution. Real property should be identified by its legal description. Any specific items that are listed in the will or in a separate writing should be identified in the inventory the same way they are identified in such documents. Groups of property that will be distributed together can sometimes be listed in the same groups in the inventory. For instance, if a stamp collection will be distributed to an individual, you will save time by identifying the collection as an item in the inventory, rather than as part of “items stored in the attic.”
When you use AvidLaw Probate to prepare the Inventory and Appraisement, you will group the various items as community or separate property and as real or personal property. In addition, you will identify each item with a description and a value. If you have appropriately identified each item in the inventory with a view towards its eventual distribution, you will often be able to use the same description and, perhaps, the same value, at the time of distribution. In the distribution documents, you again need to identify each item with a description and value. Each item also needs to be identified as separate or community property and as real or personal property.
AvidLaw Probate allows you to quickly use the information for an inventory item as a starting point for an item being distributed. In many cases, copying this information is all you will need to do to identify the item being distributed. In other cases, some editing of the description or other information will be required, but the process will usually be relatively fast and painless if your inventory descriptions anticipate the eventual division and distribution of the property.
On the other hand, if you have not planned ahead, then you will probably take longer preparing the distribution documents. For example, if all furniture is grouped together in the inventory, but the dining room set goes to John and the living room furniture goes to Sally, then each of these sets will need to be described separately when it is distributed.
As you draft any distribution document, you can follow these 3 easy steps to copy the inventory information for use in the distribution document:
1. To identify the item being distributed, click Yes when asked if you want to copy the asset description from the inventory.
2. Select the correct asset from the drop down menu.
3. If needed, edit the inventory description or other information to match the actual distribution.