The New Mandatory Fee Guidelines

Fee Guidelines. The new provisions of Rule 33 of the Arizona Rules of Probate Procedure, which are effective on September 1, 2012, require the Superior Court to follow the new statewide fee guidelines set forth in the Arizona Code of Judicial Administration. In most cases, these guidelines will come into play when the court is considering a petition for approval of fees. Attorneys representing personal representatives don’t generally need to file such petitions (see Rule 33(G)), but these guidelines also apply whenever the court is determining “reasonable compensation” under the probate code (Rule 33(F)). Since such a determination can occur in informal probate cases, personal representatives and their counsel should be aware of and comply with these guidelines. These new mandatory guidelines can now be seen at: http://www.azcourts.gov/Portals/0/admcode/pdfcurrentcode/3-303_New_2012.pdf

A Few Important Points. While each probate practitioner should review and understand every aspect of these guidelines, the following are some major points of particular interest.

• The fee guidelines don’t apply if compensation is set forth in the will.
• Reasonable compensation is best determined on a case-by-case basis in light of consistent compensation guidelines
• The judicial officer has discretion to assign more or less weight to each of the compensation factors as deemed just and reasonable
• While travel and waiting time can be billed at regular rates, they may be deemed unnecessary if written or electronic correspondence or telephonic hearings would have served the need without unnecessary cost
•  if services could have been performed by someone with a lower billable rate, that rate should apply to these services
• clerical and secretarial services are not billable on an hourly basis, but are to be factored into the hourly rates of the professionals who use those services
•  reimbursable costs incurred in the best interests of the estate are to be reimbursed at actual cost, with no markup
•  only one attorney may bill for attendance at hearings, depositions, etc. (absent good cause)
•  flat fee compensation (for all or part of an engagement) is permissible if (a) the flat fee enhances the predictability of the amount of compensation, (b) the flat fee helps to align the interest of the professional with that of the estate (e.g., the professional is thereby more motivated to seek the interests of the estate), (c) the flat fee is disclosed in advance, in writing, in detail, with reference to the hourly fees that would otherwise be charged, and (d) the professional documents the actual efforts covered by the flat fee

Many other specific points are included with the guidelines. Be sure to become well acquainted with them and to modify your billing practices as needed to ensure conformity with the guidelines and to continue to receive reasonable compensation for your services.

Mandatory Training for Non-licensed Fiduciaries

The Training Requirement. Rule 27.1 of the Arizona Rules of Probate Procedure, which is effective on September 1, 2012, requires individuals who are not licensed fiduciaries to “complete a training program approved by the Supreme Court before letters to serve as guardian, conservator, or personal representative are issued.” This requirement applies unless otherwise ordered by the court. It also doesn’t immediately apply in the case of temporary appointment of guardians and conservators in emergency situations under A.R.S. § 14-5310(A), A.R.S. § 14-5401.01(A) or A.R.S. § 14-5207(C). In these situations, the training program must be completed “within thirty days of appointment or before the permanent appointment of the fiduciary, whichever is earlier.”

The Nature of the Training. The Internet web site for the Arizona Judicial Branch, http://www.azcourts.gov/probate/Training.aspx, has now been updated to include the required training program. Training for unlicensed personal representatives includes two online videos. The first is a general overview, entitled Introduction to Serving as a Fiduciary, that is applicable to guardians, conservators, and personal representatives. This helpful video can be viewed in fewer than fifteen minutes. The second online video that must be watched by unlicensed personal representatives is entitled Welcome to Personal Representatives Training Module. This second online video can also be viewed in fewer than fifteen minutes. At the end of each online video is a page that can be printed, signed and dated, and submitted to the Court as proof of training.

Where to Find the Training Programs. The Internet web site for the Arizona Judicial Branch also explains that these programs “will be delivered online and available in alternate formats through county superior courts.” We didn’t check all county web sites, but we did locate the training videos on the Maricopa site at http://www.azcourts.gov/probate/Training.aspx.

Document Changes. The AvidLaw templates for the Statement of Informal [Probate and] Appointment of Personal Representative have been updated to contain the appropriate language to implement this new requirement. We have also updated the applicable AvidLaw checklists to remind you that this training must be completed and reported to the Court prior to the issuance of Letters and to include the applicable Certificates of Authenticity with the documents to be filed.

How to Update AvidLaw Probate

First you will need to determine which version you are running.
1. Open AvidLaw Probate
2. Find the version number

The version number can be found at the top left hand corner of the left pane.

Once you have determined the version you are running you will need to do one of the following.
A. If you are running AvidLaw Probate Version 2012.2.0 or later

Click the Tools tab
Select Update Template Sets…
Click Ok

Click Continue
This will begin the install process. If asked to overwrite existing files select Overwrite All

B. If you are not running AvidLaw Probate Version 2012.2.0 or later

Go to www.avidlaw.com/download/ and click the button to download AvidLaw Probate 2012

If you need assistance or are having trouble with the steps above please call us (480) 361-1324 or email us support@avidlaw.com

What’s new in this update?

Personal Representative Priority and Renouncing the Right to Serve

An objection to the appointment of a personal representative can’t be resolved in an informal proceeding—it “can be made only in formal proceedings” (A.R.S. § 14-3203(B)). This means that everyone involved in an informal probate proceeding must be in accord about the proposed personal representative. If anyone objects to an appointment or if the court determines that there is an unresolved issue of priority, a formal proceeding is needed to resolve this issue. Consequently, it is important for practitioners to understand the order of priority among those who may serve as personal representatives. It is also important that the pleadings clearly state that those whose appointment is sought have priority and that anyone who might otherwise have priority has appropriately renounced the right to serve and has consented to the appointment of  those whose appointment is sought.

Qualified to Serve. The order of priority for personal representative is set forth in  A.R.S. § 14-3203. Even a person who has priority to serve cannot serve if that person is “disqualified” (see A.R.S. § 14-3203(A)) or in other words, is “not qualified to serve” (see A.R.S. § 14-3203(F)). Neither minors (persons under the age of 18 years) nor foreign corporations can qualify to serve as personal representatives in Arizona (see A.R.S. § 14-3203(F)(1) and (3)). In addition, others can be deemed “not qualified to serve” if, in formal proceedings, the court finds them “unsuitable” (see A.R.S. § 14-3203(F)(2)).

Priority under the Will. If a valid will is being probated, the highest priority goes to a person named as personal representative in the will (or to a person named pursuant to a power that was conferred in the will) (see A.R.S. § 14-3203(A)(1)). If the will names multiple parties to serve together, they may do so by jointly applying for appointment (see A.R.S. § 14-3203(C)). A person named in a will (or in a power conferred in the will) may serve or renounce the right to serve, but cannot nominate another to act in his or her place (see A.R.S. § 14-3203(C)).

Priority of the Surviving Spouse. If a valid will is being probated and no personal representative is named in the will (or in a power conferred in the will), or if all who are named in the will are renouncing, and the surviving spouse is a devisee under the will, then the surviving spouse has priority to serve as personal representative (see A.R.S. § 14-3203(A)(2)). If, however, the surviving spouse is not a devisee under such a will, the other devisees have priority to serve (see A.R.S. § 14-3203(A)(3)).

If, on the other hand, no valid will is being probated, or if all qualified devisees under the will renounce the right to serve, the surviving spouse has priority to serve (see A.R.S. § 14-3203(A)(4)).

Priority of other Devisees and Heirs. As mentioned above, if a valid will is being probated and no personal representative is named in the will (or named in a power conferred in the will), or if all who are named in the will are renouncing, and there is no surviving spouse or if the surviving spouse either is not a devisee under the will or the surviving spouse renounces the right to serve, then the other devisees have equal priority to serve (see A.R.S. § 14-3203(A)(2)).

If, on the other hand, no valid will is being probated, and there is no surviving spouse or if the surviving spouse renounces the right to serve, then the other heirs of the estate have equal priority to serve  (see A.R.S. § 14-3203(A)(5)).

Nominating Another to Serve. A surviving spouse, a devisee, or an heir with priority to serve may serve, may renounce the right to serve, or may nominate another to serve as personal representative in his or her place  (see A.R.S. § 14-3203(C)).

Multiple Qualified Devisees or Heirs with Priority. If multiple qualified devisees or heirs have priority, any of them for whom appointment is not sought must renounce the right to serve and consent to the appointment of those for whom appointment is sought (see A.R.S. § 14-3203(C)).

Foreign Domiciliary Personal Representative. In the case of the probate of the Arizona estate of a decedent who was domiciled in another state, the personal representative appointed by the court in the domiciliary state has priority unless the will appoints another person to be the personal representative of the Arizona estate (see A.R.S. § 14-3203(G)). Note, however, that foreign corporations can’t qualify to serve as personal representatives in Arizona (see A.R.S. § 14-3203(F)(3)). If the foreign domiciliary personal representative is a foreign corporation, or otherwise chooses not to serve, it can nominate another party to serve in Arizona (see A.R.S. § 14-3203(G)) and the nominated party will have the same priority as the domiciliary personal representative.

Others with Priority. After devisees and heirs, the department of veterans’ services is next in line for priority if the decedent was a veteran, the spouse of a veteran, or the child of a veteran (see A.R.S. § 14-3203(A)(6)). Forty days after the decedent’s death, any creditor is next in line for priority (see A.R.S. § 14-3203(A)(7)). Final priority lies in the public fiduciary (see A.R.S. § 14-3203(A)(6)).

Minors and Protected Persons. While minors are unqualified to serve as personal representative, a conservator for a minor, or for a protected person, or if there is no conservator, a guardian, can represent the interests of the minor or protected person by objecting to a nomination, nominating, or otherwise participating in the process of appointment (see A.R.S. § 14-3203(D)). A minor who is at least 14 years old who would have priority except for his or her minority may nominate a personal representative to serve (see A.R.S. § 14-3203(C)).

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)).

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.

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!