What Asset Is Most Likely to Cause a Probate?

What Asset Is Most Likely to Cause a Probate?

Most of my clients understand that avoiding a probate is good thing.  In general, a probate case is more public because it requires certain court filings.  In addition, probate proceedings generally take more time and are more costly in terms of legal fees and costs.  This blog discusses which assets are most likely to cause an estate to go through a probate.

Small Estate Affidavits

First, it is important to understand how small estate affidavits work in Arizona.  Arizona does not have a separate probate proceeding for small estates. Instead, Arizona law allows the collection of small amounts of probate assets by affidavit without the need for any probate proceeding. There are three types of affidavits available: (a) collection of wages; (b) collection of personal property; and (c) collection of real property.

  • Collection of Wages. A surviving spouse (or agent for such spouse) may collect compensation for personal services due a decedent by affidavit. Collection is limited to wages not in excess of $5,000. This amount can be collected any time after death. The affidavit is given to the employer.
  • Collection of Personal Property. A person who is legally entitled to receive it may collect by affidavit a debt owed the decedent (i.e., deceased person) or any tangible personal property (except of real estate) or other assets belonging to the decedent in possession of another. The affidavit must state certain things (including that more than 30 days have elapsed since the decedent died) and must be delivered to the debtor or person having possession of the property.  (Limit – $75,000).
  • Collection of Real Property. A person who is legally entitled to receive it may collect by affidavit the decedent’s interest in real property, or a debt secured by real property. The affidavit is filed in the court of the county of the decedent’s residence (or if a non-resident of Arizona, in the court of the county where the property is located).  A certified copy of the affidavit without attachments is then obtained from the court registrar and is recorded in the county recorder of the county where the property is located. The affidavit must state certain things, including the fact that more than 6 months have elapsed since the decedent died as shown by a certified copy of the death certificate attached to the affidavit.  Under Arizona law, persons are entitled to rely on the affidavits and are protected from liability in doing so.  (Limit – $100,000 in equity).

Thus, in general, if an asset fits within one of these three categories, a person’s estate will most likely be able to avoid a probate by using a small estate affidavit. 

“Regular” Probate

On the other hand, a “regular” probate is an estate that has probate assets that do not fit within the limitations of the small estate affidavit statutes. If the estate fits into this situation, then there are several different types of probate that you can open to administer the estate.

In general, the procedure is as follows: First, determine whether there is a Will. If a Will is found, then the probate proceeding consists of having the Will admitted to probate and appointing a personal representative (these are usually combined into a single proceeding).

If no Will is found, then the proceeding is one for the determination of heirs and the appointment of a personal representative. An heir is a person who would be entitled to receive a share of the deceased person’s estate as determined by Arizona law. The proceeding is brought in the county in which the decedent was domiciled at death.

Which Assets Most Commonly Cause Estates to Go Through a “Regular” Probate?

Although there are many assets that could cause your estate to have to go through a “regular” probate, here are the top four assets based on my experience over the last 20+ years:

  1. Real Estate (Typically Your House). With a good economy, everyone’s house values have been going up over the last few years, so it is not difficult these days for someone’s house to have equity of greater than $100,000.  Most of the time, this is the asset that causes someone’s estate to have to go through a “regular” probate.
  1. Your Business. For business owners, unless other planning has been done to have the business entity owned by a trust or covered by a buy-sell agreement, many estates end up in probate because their business is valued at more than $75,000.
  1. Large Bank Accounts or Investment Accounts. Many times, one large bank account or investment account can cause an estate to go through a “regular” probate.  If an account titled in someone’s name is valued at over $75,000 (and there is no payable-on-death or transfer-on-death beneficiary designation), then this will likely cause the estate to have to go through a “regular” probate, regardless of whether the account is a bank account or an investment account.
  1. Retirement Account or Life Insurance Policy Without a Beneficiary Designation. Finally, if you or your loved one has a retirement account (such as an IRA, 401(k), etc.) that does not have a beneficiary on it, or a life insurance policy that does not have a beneficiary on it, then the estate often becomes the designated beneficiary according to the terms of the account or policy.  In these instances, if the account or policy is valued at over $75,000, then the estate will have to go through “regular” probate.  Please note that this also happens when the primary beneficiary has died and there is no contingent beneficiary listed.  Finally, please make sure that the 401(k) company or life insurance company has a copy of the beneficiary form on file, as I have had to probate more than one estate where the family thought that the beneficiary form had been submitted, but the 401(k) custodian or life insurance company could not find the beneficiary form.

How Do I Avoid a Probate?

With proper planning, you can avoid probate for all of these assets.  Although there are other options, a properly funded revocable living trust is generally the best way to avoid a probate in most cases. As compared to a probate, the administration of a trust is private and generally does not require court filings or court hearings. In addition, the administration of a trust is generally quicker and less costly in terms of legal fees and costs.

Need help? Please call me today – 602.277.7000

John EvenOur firm has helped hundreds of families just like yours handle a wide variety of estate planning, business planning, probate, trust, and elder law issues. When families or business owners are not getting along, we can also handle any disputes and litigation related to their businesses, wills, trusts, guardianships, or conservatorships. Please give me a call, so that I can help you work through these difficult issues with confidence.

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