Wednesday, May 23, 2012
Personal Representative Compensation and Renunciation of Fee
If you were to ask someone who has served as a personal representative of an estate, you would probably learn that it was a significant, sometimes stressful, effort. It is not surprising, then to learn that personal representatives are entitled to “reasonable compensation” for their services (see A. R. S. § 14-3719). In fact, even if the will spells out the amount of compensation to be received by the personal representative, if that amount is not “reasonable,” then the personal representative can, by renouncing that provision of the will, and thereby become entitled to “reasonable compensation” (see A. R. S. § 14-3719). Of course, if the personal representative is otherwise contractually obligated to perform the services for a specified amount of compensation, a renunciation of a provision in the will does not void the contract (see A. R. S. § 14-3719).
In some cases, however, despite the fact that the law allows the personal representative to receive reasonable compensation for services, the personal representative may be better off by renouncing the right to such compensation. For instance, if the personal representative is the sole devisee or heir to the estate, it makes little sense to compensate the personal representative from the funds that will eventually go to him or her by inheritance. Among other things, income received for services as a personal representative are taxable income, whereas money received as an inheritance isn’t taxable income.
If a personal representative prefers not to be compensated, or prefers to receive less than the amount that would be considered to be reasonable compensation, he or she may renounce the right to receive all or any portion of such compensation (see A. R. S. § 14-3719). In addition, a written renunciation of fee may be filed with the court. AvidLaw Probate includes such a renunciation.
On the other hand, if the personal representative opts to receive reasonable compensation for services, the personal representative must keep detailed records that can substantiate the reasonableness of the fees. These records should account for such factors as the types of services provided, the time and skills required to accomplish the services, the novelty or difficulty of issues encountered, the impact of service as personal representative on other opportunities for compensation, fees customarily charged in the area for similar services, the size of the estate and its income, potential liabilities associated with the service, results obtained for the estate, time constraints imposed by various circumstances, the personal representative’s experience, reputation, diligence and ability, and the reasonableness of the efforts expended.
The Bond Requirement
In order to protect the interests of heirs, devisees and creditors against the possibility that the personal representative might mishandle the estate, A. R. S. § 14-3603 requires the Personal Representative to file a bond. However, because such risk is often minimal, the statutes also provide several exceptions to this bond requirement. In fact, the exceptions are such that the filing of a bond in an informal probate is relatively uncommon. In cases where a bond is required, the amount of the bond can be provided in the will (see A. R. S. § 14-3604(A)) or, if not, it will generally not be less than the amount of the Personal Representative’s estimate of the value of the estate (less encumbrances), together with the annual income expected to be earned by the estate (see A. R. S. § 14-3604(A)). Several other factors, mentioned below, can also affect the bond amount.
Exceptions to the Bond Requirement
There are three exceptions to the bond requirement that often apply to an individual personal representative in an informal probate. In a testate probate, the bond requirement can be expressly waived in the will (see A. R. S. § 14-3603(A)(1)). Even if the will doesn’t expressly waive the bond requirement, this requirement can be waived by writings signed by all of the devisees (see A. R. S. § 14-3603(A)(2)). Similarly, in an intestate probate, the bond requirement can be waived by writings signed by all of the heirs (see A. R. S. § 14-3603(A)(2)).
Certain entities are exempt from the bond requirement when they serve as personal representative. These include most banks, savings and loans, title insurance companies, and certified trust companies (see A. R. S. § 14-3603(A)(3)).
The final exception to the bond requirement applies in the limited situation in which the estate is small enough to qualify for summary administrative procedures under A. R. S. § 14-3973 and the surviving spouse is either applying to serve as personal representative or is nominating someone to serve as personal representative.
Although there is generally no bond requirement under these exceptions, A. R. S. § 14-3603(A) provides that the court may still require a bond if an interested party petitions for a bond requirement, providing reasonable evidence that the interested party’s interest in the estate “in danger of being lost because of the administration of the estate.” Such a petition can even be filed by a party who earlier waived bond.
Reductions in the Bond Amount.
In cases where bond is required, the registrar may permit the amount of the bond to be reduced by the value of assets deposited in a restricted account with a domestic financial institution (see A. R. S. § 14-3604(A)). On petition by the personal representative or another interested party, the registrar may further reduce the bond amount, eliminate it altogether, or even increase it (see A. R. S. § 14-3604(A)).
Friday, March 30, 2012
Arizona Tardy Probate
Tardy Probate and Other Exceptions to the Two Year Requirement
A. R. S. § 14-3108 provides that in most cases a probate proceeding, whether formal or informal, “shall not be commenced more than two years after the decedent's death.” There are, however, four exceptions to this general rule.
The first three of these exceptions are fairly narrow. We will first mention these unusual exceptions, then we will discuss the fourth exception, tardy probate, which is very common.
The first exception to the two year requirement deals with the rare case in which a prior proceeding has been dismissed because of doubt about the fact of the decedent's death. In such a case, a proceeding can be filed “anytime thereafter” if it can be shown that the decedent did, in fact, die before the prior (dismissed) proceeding and it can be shown that the person bringing the case (applicant or petitioner) didn't “unduly” delay the subsequent proceeding. In this case, the date the case is filed is to be treated as the date of death for purposes of other provisions that relate to the date of death.
The second exception deals with the unusual case of a person who had been missing, absent or disappeared and for whom a conservator had been appointed. A probate proceeding for such a person can be filed within two years after the conservator is able to establish the death of that (protected) person. In this case as well, the date the case is filed is to be treated as the date of death for purposes of other provisions that relate to the date of death.
The third exception covers another uncommon situation. If a will has been informally probated, a proceeding to contest the probate of the will can be brought within the later of two years after the decedent's death and twelve months after the informal probate.
Tardy Probate
The fourth exception is the tardy probate exception. This exception allows a probate proceeding to be brought after the two years have passed if none was brought during the two years. There are two limitations to a probate proceeding brought under the tardy probate exception. First, the Personal Representative may only possess estate assets to the degree necessary “to confirm title thereto in the rightful successors to the estate.” Second, the only claims that can be presented against the estate are expenses of administration. Because there is no need to deal with creditor's claims, there is no need to publish notice to creditors or to wait for creditors to file claims against the estate. Consequently, the property can be transferred as soon as letters are issued and the probate can be closed as soon as the property has been transferred.
This “tardy probate” exception has proven very useful—particularly in cases in which the need for a probate is only made evident to the successors in interest years after the death when they are preparing to sell or transfer assets still held in the decedent's name. A common situation is when the estate property passes the surviving spouse, but no probate takes place to transfer estate assets to the spouse. Later, when the surviving spouse decides to sell the home, it is realized that this property is still held in the name of the decedent. Clear title to the home can often be obtained at this late date through the “tardy probate” process.
AvidLaw Probate easily identifies a tardy probate, asks the relevant questions, and prepares the applicable documents, saving you time and increasing profitability even if tardy probates are not common to your practice.
A. R. S. § 14-3108 provides that in most cases a probate proceeding, whether formal or informal, “shall not be commenced more than two years after the decedent's death.” There are, however, four exceptions to this general rule.
The first three of these exceptions are fairly narrow. We will first mention these unusual exceptions, then we will discuss the fourth exception, tardy probate, which is very common.
The first exception to the two year requirement deals with the rare case in which a prior proceeding has been dismissed because of doubt about the fact of the decedent's death. In such a case, a proceeding can be filed “anytime thereafter” if it can be shown that the decedent did, in fact, die before the prior (dismissed) proceeding and it can be shown that the person bringing the case (applicant or petitioner) didn't “unduly” delay the subsequent proceeding. In this case, the date the case is filed is to be treated as the date of death for purposes of other provisions that relate to the date of death.
The second exception deals with the unusual case of a person who had been missing, absent or disappeared and for whom a conservator had been appointed. A probate proceeding for such a person can be filed within two years after the conservator is able to establish the death of that (protected) person. In this case as well, the date the case is filed is to be treated as the date of death for purposes of other provisions that relate to the date of death.
The third exception covers another uncommon situation. If a will has been informally probated, a proceeding to contest the probate of the will can be brought within the later of two years after the decedent's death and twelve months after the informal probate.
Tardy Probate
The fourth exception is the tardy probate exception. This exception allows a probate proceeding to be brought after the two years have passed if none was brought during the two years. There are two limitations to a probate proceeding brought under the tardy probate exception. First, the Personal Representative may only possess estate assets to the degree necessary “to confirm title thereto in the rightful successors to the estate.” Second, the only claims that can be presented against the estate are expenses of administration. Because there is no need to deal with creditor's claims, there is no need to publish notice to creditors or to wait for creditors to file claims against the estate. Consequently, the property can be transferred as soon as letters are issued and the probate can be closed as soon as the property has been transferred.
This “tardy probate” exception has proven very useful—particularly in cases in which the need for a probate is only made evident to the successors in interest years after the death when they are preparing to sell or transfer assets still held in the decedent's name. A common situation is when the estate property passes the surviving spouse, but no probate takes place to transfer estate assets to the spouse. Later, when the surviving spouse decides to sell the home, it is realized that this property is still held in the name of the decedent. Clear title to the home can often be obtained at this late date through the “tardy probate” process.
AvidLaw Probate easily identifies a tardy probate, asks the relevant questions, and prepares the applicable documents, saving you time and increasing profitability even if tardy probates are not common to your practice.
New Auto Update Feature
With our latest quarterly update, AvidLaw Probate now has an auto-update feature that greatly simplifies the process of keeping the template set up-to-date. After you install this latest quarterly update, future updates will happen almost automatically. When we upload an update to the Internet, your software will automatically sense that the update is available. Then, whenever you initiate the assembly of a template (whether an AvidLaw Probate template or not), you will be notified that there are updates available and be given instructions on how to find and install them.
One of the greatest benefits of this new feature is that it lets us update the software a little more often. We will continue to do one major update each quarter and we will continue to let you know, through this newsletter and email, when a quarterly update is available. In addition, if we make a small but very helpful change between quarterly updates, we now have a means to provide the change to every user before anyone assembles another AvidLaw Probate template.
As we mentioned, this feature is only available to you after you install the latest quarterly update in the traditional manner. If you haven’t already done so, please follow the instructions in the quarterly update email as soon as possible, so that the Auto Update feature will be available to you for all future updates.
Here is a link to a short video that demonstrates how the new auto update feature works. Please, let us know if you have any questions, concerns or comments. Thank you!
One of the greatest benefits of this new feature is that it lets us update the software a little more often. We will continue to do one major update each quarter and we will continue to let you know, through this newsletter and email, when a quarterly update is available. In addition, if we make a small but very helpful change between quarterly updates, we now have a means to provide the change to every user before anyone assembles another AvidLaw Probate template.
As we mentioned, this feature is only available to you after you install the latest quarterly update in the traditional manner. If you haven’t already done so, please follow the instructions in the quarterly update email as soon as possible, so that the Auto Update feature will be available to you for all future updates.
Here is a link to a short video that demonstrates how the new auto update feature works. Please, let us know if you have any questions, concerns or comments. Thank you!
The Finish Button
Some of you have reported inconsistent results relating to the Assemble
ALL Documents feature within AvidLaw Probate. In some cases, the documents are
not all being assembled when, at the End of Interview screen, you click on “Send
the assembled document to Microsoft Word and close this window.” For this
reason, we have changed our instructions for assembling all documents from the
End of Interview screen. In the future, please click on the Finish button
located in the lower right hand corner of the End of Interview screen in the
Assemble window. This button will consistently assemble the document or
documents associated with the interview. Also, be aware that this button is
available throughout the interview and, if selected, will begin the assembly of
the document or documents associated with that interview.
Also, because we no longer recommend that you use the “Send the
assembled document to Microsoft Word and close this window” button, we suggest
that you change your HotDocs Options to remove this button from the End of
Interview screen. To do this, open AvidLaw Probate and select the Tools tab and
then Options. Click on the plus sign next to the Interviews and Dialogs
folder to see the subfolders. Select the End of Interview subfolder and,
within it, unselect “Send the assembled text document to the word processor.”
While you’re here, we suggest that you also unselect “Close this window without
saving the assembled document.” This option simply performs the same function
as the red X in the upper right hand corner of the Assemble window.
If you need help with these steps or have any questions please let
us know.
New Referral Program
Now your friends and colleagues who are new to AvidLaw Probate can
use it on one matter for free. If they mention your name when they sign up, we’ll
also credit you with a free AvidLaw Probate matter of your own (or, if you have
an annual license, we’ll add two months onto your next annual subscription).
It’s a win-win opportunity!
We’ve learned that your good word is easily our most effective way
to get the word out about AvidLaw Probate. We have set up a way to make it
easier than ever for your friends to take AvidLaw Probate for a spin—with a
significant benefit both for them and for you. Just have your friend call me,
Garth Pedersen, at 480-361-1324, asking for our special offer and mentioning
your name. We’ll set them up with AvidLaw Probate and credit you for sending
them our way.
Thank you for your help. We look forward to sharing with your
colleagues all the benefits of AvidLaw Probate.
Thursday, February 23, 2012
Ancillary Probate in Arizona
This article discusses some of the basic laws and procedures that apply to the probate of the Arizona property of a decedent who died while domiciled in another state (a foreign domiciliary). Arizona statutes provide several potential alternatives to the estates of decedents who were domiciled in another state at the time of death and owned property in Arizona.
The first option needn't involve any probate of the estate in Arizona or elsewhere. If the entire estate of the decedent (the entire estate, not just the Arizona property) is small enough to allow for the use of small estate affidavits.
Secondly, if the principal administration of the estate is being handled in the state of domicile, then the Arizona property can be administered either through a local ancillary probate administration (formal or informal) (see ARS 14-4207) or without local administration through a proof of authority filing (see ARS 14-4201 through 4205).
Finally, if no principal administration of the estate is taking place in state of domicile, a principal administration of the estate could take place locally in Arizona (see ARS 14-4207).
Small Estate Affidavits
These affidavits (see ARS 14-3971 through 3974) can be used to transfer the decedent's Arizona property whether the decedent was domiciled in Arizona or elsewhere at the time of death. The details of the use of these assets is the topic of a separate article, but, in general, if there is no probate proceeding with respect to the decedent's property in any estate and if the net value of all real property in the estate is $75,000 or less, it is possible that any Arizona real property can be transferred through the use of an Affidavit for Transfer of Title to Real Property. Similarly, if there is no probate proceeding with respect to the decedent's property in any estate and if the net value of all the decedent's personal property (tangible and intangible) is $50,000 or less, it is possible that any Arizona personal property can be transferred through the use of an Affidavit for Collection of Personal Property.
A Proof of Authority Filing
If principal administration of the estate is taking place in the state of domicile, and no local administration has begun in Arizona, the decedent's personal representative (or executor) in that state (the domiciliary personal representative) can become authorized to transfer the decedent's Arizona property through proof of authority. A proof of authority is not a local administration of the Arizona estate. Rather, it is a filing in Arizona probate court that authorizes the transfer of Arizona property under the authority given in the domiciliary administration. In many cases, filing a proof of authority is a much simpler and less expensive process than a full blown ancillary proceeding.
A proof of authority filing is made by filing with the probate court in a county where the property is located an affidavit that recites the applicable facts, to which is attached a certified copy of the Letters in the domiciliary administration. If there is a bond requirement in the original jurisdiction, a certified copy of the bond must be attached. On the other hand, if there is no bond requirement in the original jurisdiction, a certified copy of the appointment document (or other document) indicating that there is no bond requirement should also be attached to prove the absence of a bond requirement.
The filing fee for a Proof of Authority is the same as it is for a probate. There is also a fee to obtain a Certified copy of the Proof of Authority, one of which needs to be recorded in each Arizona county where the decedent owned property. The domiciliary foreign personal representative is then authorized to “exercise as to assets in this state all powers of a local personal representative” (ARS 14-4205). The domiciliary foreign personal representative may transfer the property by sale or Deed of Distribution, and may deal as needed with any mortgage holder.
An Ancillary Probate in Arizona
An ancillary probate proceeding is a local proceeding that mirrors the principal administration of the state in another jurisdiction, but covers only Arizona property. If a Proof of Authority filing is a possibility, it should be used rather than an ancillary probate proceeding. In the event such a filing isn't applicable, then an ancillary administration in Arizona can be used to transfer the applicable property. This proceeding is, in most respects, very similar to a principal administration, except that it is limited in certain respects (such as the notification of creditors) because it deals only with the Arizona estate. Venue is in an Arizona county where some of the decedent's property is located. The captions of the various pleadings need to indicate the ancillary nature of the proceeding, which will also be represented in the text of the pleadings, as applicable.
An Arizona Principal Administration
If there is no principal administration of the estate in the domiciliary jurisdiction, the principal administration of the estate can take place in Arizona. Venue is in an Arizona county where some of the decedent's property is located.
AvidLaw Probate is designed to help practitioners prepare documents for each type of proceeding described above. For more information about AvidLaw Probate, please call 480-361-1324 or visit our website www.avidlaw.com.
The first option needn't involve any probate of the estate in Arizona or elsewhere. If the entire estate of the decedent (the entire estate, not just the Arizona property) is small enough to allow for the use of small estate affidavits.
Secondly, if the principal administration of the estate is being handled in the state of domicile, then the Arizona property can be administered either through a local ancillary probate administration (formal or informal) (see ARS 14-4207) or without local administration through a proof of authority filing (see ARS 14-4201 through 4205).
Finally, if no principal administration of the estate is taking place in state of domicile, a principal administration of the estate could take place locally in Arizona (see ARS 14-4207).
Small Estate Affidavits
These affidavits (see ARS 14-3971 through 3974) can be used to transfer the decedent's Arizona property whether the decedent was domiciled in Arizona or elsewhere at the time of death. The details of the use of these assets is the topic of a separate article, but, in general, if there is no probate proceeding with respect to the decedent's property in any estate and if the net value of all real property in the estate is $75,000 or less, it is possible that any Arizona real property can be transferred through the use of an Affidavit for Transfer of Title to Real Property. Similarly, if there is no probate proceeding with respect to the decedent's property in any estate and if the net value of all the decedent's personal property (tangible and intangible) is $50,000 or less, it is possible that any Arizona personal property can be transferred through the use of an Affidavit for Collection of Personal Property.
A Proof of Authority Filing
If principal administration of the estate is taking place in the state of domicile, and no local administration has begun in Arizona, the decedent's personal representative (or executor) in that state (the domiciliary personal representative) can become authorized to transfer the decedent's Arizona property through proof of authority. A proof of authority is not a local administration of the Arizona estate. Rather, it is a filing in Arizona probate court that authorizes the transfer of Arizona property under the authority given in the domiciliary administration. In many cases, filing a proof of authority is a much simpler and less expensive process than a full blown ancillary proceeding.
A proof of authority filing is made by filing with the probate court in a county where the property is located an affidavit that recites the applicable facts, to which is attached a certified copy of the Letters in the domiciliary administration. If there is a bond requirement in the original jurisdiction, a certified copy of the bond must be attached. On the other hand, if there is no bond requirement in the original jurisdiction, a certified copy of the appointment document (or other document) indicating that there is no bond requirement should also be attached to prove the absence of a bond requirement.
The filing fee for a Proof of Authority is the same as it is for a probate. There is also a fee to obtain a Certified copy of the Proof of Authority, one of which needs to be recorded in each Arizona county where the decedent owned property. The domiciliary foreign personal representative is then authorized to “exercise as to assets in this state all powers of a local personal representative” (ARS 14-4205). The domiciliary foreign personal representative may transfer the property by sale or Deed of Distribution, and may deal as needed with any mortgage holder.
An Ancillary Probate in Arizona
An ancillary probate proceeding is a local proceeding that mirrors the principal administration of the state in another jurisdiction, but covers only Arizona property. If a Proof of Authority filing is a possibility, it should be used rather than an ancillary probate proceeding. In the event such a filing isn't applicable, then an ancillary administration in Arizona can be used to transfer the applicable property. This proceeding is, in most respects, very similar to a principal administration, except that it is limited in certain respects (such as the notification of creditors) because it deals only with the Arizona estate. Venue is in an Arizona county where some of the decedent's property is located. The captions of the various pleadings need to indicate the ancillary nature of the proceeding, which will also be represented in the text of the pleadings, as applicable.
An Arizona Principal Administration
If there is no principal administration of the estate in the domiciliary jurisdiction, the principal administration of the estate can take place in Arizona. Venue is in an Arizona county where some of the decedent's property is located.
AvidLaw Probate is designed to help practitioners prepare documents for each type of proceeding described above. For more information about AvidLaw Probate, please call 480-361-1324 or visit our website www.avidlaw.com.
Notice to Creditors
ARS 14-3801 requires that two kinds of notice be given to the creditors of a decedent's estate. In the first place, the personal representative must publish notice to creditors once a week for three consecutive weeks. Secondly, the personal representative must notify all “known creditors” either by mail or by other delivery. These notices inform creditors of the need to file a claim with the estate before the deadline for filing such claims passes. Most distributions from the estate can only take place after this deadline has passed.
Notice by publication
Notice by publication must be given at the time of appointment. The notice must be published in a “a newspaper of general circulation in the county.” A good list of such newspapers can be found at http://www.azcc.gov/divisions/corporations/filings/forms/newspubs.pdf. This list was compiled with respect to a different statute with the same standard. Various factors including cost, convenience, cooperation, etc. set publishers apart from each other. Select a publisher that meets the needs of your client.
Notice by mail
All known creditors must receive notice by mail or other delivery. The term “known creditors” isn't defined, but counsel for personal representatives should consider a broad definition and err on the side of sending such notice. If, during the course of estate administration, the court were to determine that a given creditor that didn't receive notice by mail or delivery is a “known creditor,” the deadline for this creditor to file a claim against the estate would be extended. The reality of this risk increases the incentive to send notice by mail to any potential creditor for whom an address is reasonably available.
Deadline for filing a claim
In general, creditors may file a claim against the estate for 120 days (basically four months) after the first publication date. In most cases, this deadline applies to “known creditors” as well as creditors for whom notice is given by publication. However, if notice by mail or delivery is given more than 60 days after the first date of publication, the known creditor may continue to file a claim against the estate until 60 days have passed after the mailing or delivery of the notice.
The filing of a claim
ARS 14-3804 provides that, to file a claim, a creditor merely needs to mail or deliver to the personal representative a written statement of the claim, which is a written document that indicates the basis of the claim, the name and address of the claimant and the amount claimed. The claim is deemed presented on receipt of the written statement of claim by the personal representative. It is not necessary that this information be provided in particular form. For instance, an invoice or other correspondence that is received by the personal representative (or counsel for the personal representative) and that contains this information will, in most cases, constitute the filing of a claim against the estate.
The statutes relating to claims against the estate contain many provisions that are not considered in this short article. Consider reviewing these statutes, primarily ARS 14-3801 through 14-3816.
Notice by publication
Notice by publication must be given at the time of appointment. The notice must be published in a “a newspaper of general circulation in the county.” A good list of such newspapers can be found at http://www.azcc.gov/divisions/corporations/filings/forms/newspubs.pdf. This list was compiled with respect to a different statute with the same standard. Various factors including cost, convenience, cooperation, etc. set publishers apart from each other. Select a publisher that meets the needs of your client.
Notice by mail
All known creditors must receive notice by mail or other delivery. The term “known creditors” isn't defined, but counsel for personal representatives should consider a broad definition and err on the side of sending such notice. If, during the course of estate administration, the court were to determine that a given creditor that didn't receive notice by mail or delivery is a “known creditor,” the deadline for this creditor to file a claim against the estate would be extended. The reality of this risk increases the incentive to send notice by mail to any potential creditor for whom an address is reasonably available.
Deadline for filing a claim
In general, creditors may file a claim against the estate for 120 days (basically four months) after the first publication date. In most cases, this deadline applies to “known creditors” as well as creditors for whom notice is given by publication. However, if notice by mail or delivery is given more than 60 days after the first date of publication, the known creditor may continue to file a claim against the estate until 60 days have passed after the mailing or delivery of the notice.
The filing of a claim
ARS 14-3804 provides that, to file a claim, a creditor merely needs to mail or deliver to the personal representative a written statement of the claim, which is a written document that indicates the basis of the claim, the name and address of the claimant and the amount claimed. The claim is deemed presented on receipt of the written statement of claim by the personal representative. It is not necessary that this information be provided in particular form. For instance, an invoice or other correspondence that is received by the personal representative (or counsel for the personal representative) and that contains this information will, in most cases, constitute the filing of a claim against the estate.
The statutes relating to claims against the estate contain many provisions that are not considered in this short article. Consider reviewing these statutes, primarily ARS 14-3801 through 14-3816.
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