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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,...

Do You Trust Your Trust?

Do You Trust Your Trust? Another way of saying this is: How often do you need to have your revocable living trust reviewed after you set it up? Alternatively, what are some triggering events that might cause you to have your trust reviewed? In general, the answer varies depending on the complexity of your estate and other factors in your family. However, I generally tell my clients that it is a good idea to have your estate plan reviewed every three to five years. For larger estates, this time frame gets shortened up to every one to two years, and, for smaller estates, it may be possible to do the reviews at longer intervals. Of course, I also tell my clients that this assumes that there are no changes in your family situation “on your end” and no significant legal changes “on my end”. What Are Changes That Might Occur on “Your” End? There are several changes that might occur in your family that would prompt you to make changes to your trust. First, one of the key people in your documents (maybe the person you named as your trustee or your agent under your durable general power of attorney) passes away or becomes incapacitated. Obviously, if the person that you were expecting to be in charge of your estate can no longer serve in this position, you will need to make some changes to your documents. Second, when someone gets divorced or remarries, they usually want to make changes to these documents. Third, sometimes over time, people develop different ideas about their distribution provisions. These changes are prompted by the birth of a grandchild, the behavior (or lack thereof) of some of their children, the death or incapacity of a child, their recent involvement in their church or a favorite charity. Finally, there are endless other reasons too, which are all specific to changes in your family situation. What Are Legal Changes That Might Occur on “My” End? On my “end”, various legal changes also occur over time. For instance, there may be a significant tax law change that impacts the planning that I do for my clients. In December 2017, there was a huge tax law change that affected almost everyone in America. For estate taxes, the estate tax exemption is now $11.18 million per person in the United States, meaning that, generally speaking, you can pass away with up to $11.18 million in your estate without having to pay any estate tax. This amount doubles to...

Does My Business Go Through Probate if I Die?

Does My Business Go Through Probate if I Die? For many of my clients who own businesses, their business is the largest asset in their estate. As a result, it is critical that this asset is properly transferred after their death. Several clients have asked me if their business or their interest in a business passes through probate if they die. The short answer is, “yes”, in general, your business or business interest will also have to go through a probate if you pass away if it is valued at $75,000 or more and there is not additional planning done to avoid a probate. This blog discusses this issue in more detail. Your Business Has to Go Through a Probate Just Like Any Other Asset in Your Estate. Under Arizona law, if you pass away with assets in your estate that are valued at $75,000 or more, then your estate will have to go through a probate process instead of completing a small estate affidavit. This $75,000 threshold applies to businesses and business interests too. Thus, unless you take some additional planning steps, your business or business interest will probably have to go through the normal probate process in Arizona. This can add additional time to the administration of your estate, additional cost to the administration, and the requirement of filing certain paperwork with the Arizona courts in order to administer your estate after you are gone. However, as is discussed below, with proper planning, you can avoid probate for your business  or your business interest by using two relatively straight-forward strategies. For businesses that have two or more owners, a buy-sell agreement can efficiently set forth the way the transfer will occur, and this is typically handled outside of a will or a trust. If the business is owned by one owner or by a married couple, a buy-sell agreement will not work and the transfer is typically set forth in a will or a trust or in certain business formation documents. How Does a Buy-Sell Agreement Work for Businesses That Are Owned by Two or More Owners? A buy-sell agreement is a written agreement that provides a mechanism for the orderly transfer of an owner’s interest to the other co-owners on the occurrence of certain triggering events. Without an exit plan, the owners of an Arizona LLC or corporation are essentially stuck with each other indefinitely even if one of the other owners dies, becomes incapacitated, gets arrested, or files for bankruptcy. A buy-sell agreement defines what...

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