Most, if not all of you have probably heard about probate. However, not many people truly understand what probate is, or why we even have probate. This article will highlight some basic information on the probate process.
What is Probate?
Probate is the legal process used to transfer assets that were owned by someone who is deceased. Many asse4ts, such as your home and car, have a title that needs to be transferred. If the owner is deceased they obviously can not sign the title. Probate is the court process used to appoint someone to sign title documents and transfer property on behalf of the deceased person.
What Occurs During Probate?
To open a probate, a person files an Application for Appointment as personal representative with the Court. That application requests that the Court: (i) accept the decedent’s original Will for probate (if there is a Will), and (ii) appoint a personal representative to administer the decedent’s estate. The prospective personal representative must also file other initial documents to start the probate process.
The Court will generally appoint the person named as personal representative in the Will as the decedent’s personal representative unless the person is not qualified, declines, is unable or is challenged by an interested party. The Court will usually appoint a personal representative without a formal hearing.
If the Probate Court is satisfied that all requirements have been met and all information has been supplied, it will open the probate and issue a document known as “Letters Testamentary” by which the Court appoints the personal representative of the estate. The personal representative may give copies of the Letters Testamentary to people and entities to show that a probate was opened and that the personal representative has the authority to act on behalf of the estate.
The executor then makes an inventory of the estate’s assets, locates creditors, pays bills, files tax returns, and manages the estate assets. When all of the duties of the executor are completed, but not earlier than four months after the probate is opened, another petition is filed with the Court asking that the estate be distributed to the devisees or heirs. If this petition is granted, the probate is completed by distributing the assets to the devisees or heirs and filing final tax returns.
What are Probate Assets?
Probate proceedings involve only assets commonly referred to as “probate assets.” Probate courts do not have jurisdiction over and cannot administer assets that are not probate assets. Probate assets include all real property and personal property, including intangible personal property:
- In which the decedent had an interest at the time of death, and
- That are not transferred by operation of law or by contract to a person or entity.
The decedent must have had an interest in the property at the time of death or the property is not a probate asset.
If I have a Small Estate is there a shorter Probate Process?
Yes. In Arizona probate may not be required to obtain property or change title to the decedent’s property. These circumstances are (i) the decedent’s employer owes wages, salary or other compensation to the decedent of less than $5,000 and the decedent’s spouse seeks the money, (ii) the value of the personal property of the estate less liens and encumbrances is less than $50,000, and (iii) the value of the real property of the estate located in Arizona less liens and encumbrances thereon is less than $75,000. This small estate probate exemption cannot be used until thirty days after the decedent’s death, except in the case of the spouse of a decent who seeks the deceased’s compensation.
What Happens to Creditors in Probate?
Under the normal probate process the personal representative will pay all of the decedent’s creditors from the assets of the estate. However, certain assets are exempt from creditor’s claims, that is you do not have to sell those assets to pay the creditors. In Arizona some of those exemptions are up to $18,000 in the decedent’s homestead; up to $70000 of Household furniture, Automobiles, Furnishings, Appliances, and Personal effects. The surviving spouse and children can also use a reasonable amount of the estate to support themselves during the administration of the estate for up to one year. The exemptions are provided by statute and prior to making any determinations on exemptions you should review the law or consult with an attorney.
Can I avoid Probate?
As the Probate court only has jurisdiction over probate assets, probate is not necessary if you do not own any probate assets at the time of your death. This can be partly accomplished by owning property jointly with rights of survivorship, or by using beneficiary designations on property. The most common way to avoid probate is to use a Living Trust to own your assets during your life. Contact our office to find out more.