First Steps To Administer and Settle Any Arizona
Estate In or Out of Trust or Intestate
Last Update: 07/08/2016
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Are You Ready?
Once you have a concentrated effort to begin by getting the family together to review available legal documents and verify who is now in charge is the first procedure in the estate settlement process. Once it is established who is in authority (in charge), empowerment Steps will be required so others can recognize your power and authority to act as the estate manager or administrator.
It is important right now, to review the first 8 Steps normally involved in the estate settlement process and then identify any areas that you feel you may need professional help with. Our Steps process begins after the funeral and the waiting period that many require before they feel like tackling these important estate tasks. Just don't delay it too long, as certain tasks such as giving notice to trust beneficiaries has a short time period under state statutes. And if probate is required, there is a time limit to stay in good graces with applicable provisions of Arizona law.
We offer these first 8 Steps (of a total of 50) on a complimentary basis to all Arizona Valley resident estate managers (from here on we will call you an estate manager regardless if you are an Administrator, Executor, Executrix or Trustee) and a complimentary sit down (or electronic visual meeting if you are not in Arizona) for the sole purpose to help you get on track in your duties once you feel ready. Valued at $ 360.00 at our normal billing rate for a two hour session, it is a gift we give to any estate manager who requests it.
You may have already received a personal invitation for this meeting from us, and if so -- welcome to the most comprehensive estate settlement information website and service that exists online for Arizona estate managers! You will find plenty of resources and free information and settle to help you settle any estate in or out of trust or even intestate. You can start for free using our proprietary "Steps" process and then bring us in any time or starting with Step 9.
Even if the "Steps" process seems overwhelming, don't be dismayed as we are here to assist you along the way, at reasonable fees any time you need help starting out and of course during any working relationship we enter into as your estate accounting and estate settlement firm. For those who want a reasonable quote for us to do all the work for you, just ask. You will be surprised at our pricing levels, especially if you ask a local law firm for a similar quote.
Short phone calls with simple questions are always complimentary and will not be billed for. (5 minutes or less please) Since we provide uncontested informal probate administration services as well, along with living trust settlements, all your tasks you may now face can be turned over to us at any time to complete them for you. However, we make professional legal referrals to trusted lawyers here in Arizona for any case that requires formal probate, or is later discovered after starting administration that a formal probate proceeding is required.
These first 8 steps lay down the groundwork of getting started on the 50 step journey to settle an estate. They concentrate on estate accounting which is so important to know what the assets and liabilities are and to determine who is a "Giftee" or "Heir" of the estate. Since you are given these first 8 steps for free and may execute them without us, please note they are "suggestive" directives of what you have to do first, such as "order the death certificate" and other up front tasks to get started as the estate manager.
You will also read about future tasks awaiting you including creating legal documents for administration purposes in Steps 9-16. Also areas of estate money management, including handling risky stock market investments are all covered. Estate settlement including filing final tax returns, selling estate real estate, liquidating investment portfolios and properly distributing all estate assets is not an area our firm feels you should be doing completely on your own as an estate manager. Registration is required to obtain additional content on the more complicated aspects of settling an estate.
Retaining us as your estate accounting firm and documentation firm (and possibly Realtor to sell estate real estate) to help you finish your tasks is strongly recommended. Let these beginning Steps motivate you to organize and protect estate assets, study up on Arizona statutes, and start in an orderly fashion.
Then you commence these Steps with authority and basic knowledge and be confident on the work you do. I don't need to mention just how many estate management mistakes our firm has seen over the many years of estate settlement services. Sadly, the cost factors to fix a mistake are much, much higher than doing it right the first time.
Please note that all the Steps after Step 1 on this web page are time "filler" items while you wait for the death certificate to be issued.
Note: Anytime you don't feel confident, you should seek our professional help.
Once you are empowered as the estate manager (Successor Trustee, Executor -- Executrix, or Surviving spouse), your first step to settle an estate is to order the death certificates. Even if you haven't officially been empowered yet, please still order the the death certificates. Order at least a dozen (12) certified copies and be careful with the details so that they are accurate. Each copy is currently $ 20 each. Each change will cost as well and force a need to start over and reorder corrected certificates. Regardless, don't be afraid of the cost factor. It is usual and customary as well as a mandatory estate settlement expense.
As time goes on, you may need to provide a Death Certificate (DC) many times over in areas of finance and settlement that you may not even think of this early on. This is always the first step beyond taking immediate management control of any property, people or pets. It could take up to 3 weeks to get the DC's back, so be patient once you have ordered them.
Please use the handy link above to read more about this task and discover the option at a small additional cost to order them online, or you can physically go in and order them if you like. Either way, you have to provide information verifying your authority. We can help in that area in assisting you, if you desire it. Statewide information is provided in the link above, so please click on the link, then on your county. Don't forget to save your counties vital statistics page as a "favorite" in your browser so you can find it on subsequent online visits.
And, if you discover you do not possess a valid birth certificate, (if the deceased was born in Arizona), you can order that as well at the vital statistics site if the deceased was an Arizona native. Or, if you need another state, use this handy service U.S. Vital Stats, to order a birth certificate from states other than Arizona.
Note: Arizona records are available going back to July 1909 and some some abstracts of records filed before then. Applicants must submit a copy of picture identification or have their request notarized. The State Office of Vital Records does not accept personal checks. A money order or cashiers check should be made payable to Office of Vital Records. To verify current fees, the telephone number is (602) 364-1300. This will be a recorded message.
For written correspondence use:
Office of Vital Records
A Note About How To Pay: Early on, there is a good chance you will need to use your own debit/credit to order DC's if doing so online. As estate manager, you will be able to reimburse yourself quickly so just keep the receipts or good records of your estate expenses. DON'T USE A DEBIT OR CREDIT CARD OF A DECEASED PARTY! If the deceased owner had a funeral trust and you haven't made a claim, please note that these plans are life insurance payouts but mostly of just the deceased owner's prior premium payment. For that reason, the funds can be paid to you in as short as 24 hours with some firms offering them.
If the deceased estate owner had a living trust, and you are the surviving spouse able to make financial decisions (and of course, deem yourself competent), nothing needs to be done for empowerment in most cases. However, some may require you to show your authority as the surviving Trustor/Trustee and we can help you create simple legal documents that do that. Or, you can scan the trust to a PDF file or fax it to us to help find the "empowerment" section that authorizes you to have the right to carry on trust business after the death of your spouse. From that clause, we can prepare the special empowerment form we give to our own trust portfolio clients.
If the deceased estate owner is not your spouse, but placed your name on a joint checking account (small account we hope for gift tax purposes), it probably was done so you could write checks after their death. YOU OWN THAT money by law, but because of the intentions most likely -- it would be a good place to tap for funeral bills and the miscellaneous costs and charges you will face as you begin the estate settlement Steps. And, that includes paying retainer fees to any estate advisor or advisors you engage to help you. (Including us)
So, there is a good chance you may not need to tap your own funds or credit. But if necessary and if you are financially able, it is O.K. to use them and to reimburse yourself later when estate funds become available to you.
The Key: Bills have to be paid for us, even when we die. It is a sad fact!
Prepare Inventory and Appraisals
National settlement sites may state that it is not important to prepare an inventory right away as they assume that the estate you are now in charge of is going through a full probate court proceeding. They will tell you to read the "Will" and send notices to all interested parties. And, for many states this is exactly right.
But here in Arizona, there is a good chance that our estate advisors influenced your deceased party to draft and sign a Living Trust, and to properly fund it prior to their death. Along with the trust (a full portfolio is assumed) the deceased also had a Pour-over Last Will & Testament that places any assets found out of trust into the trust now. Since this special type of Will is almost always signed with an affidavit to encourage self administration by you as the Executor/trix, you may have that authority as long as the asset count found out of trust is below the probate limits here in Arizona. And, there is no way you may know this for sure without doing an inventory just as soon as you can get started.
If you find no trust in force but are the surviving spouse, by luck more than by estate planning design you may find most or all of the assets in joint tenancy. Perhaps, you can now relax if that is the case. Not because it is the best estate plan, but because you SURVIVED and now become sole owner of any account or asset left in joint tenancy with rights of survivorship. (Commonly listed also as JTRWOS) As long as you are deemed "competent", and as long as these assets are free from any type of legal claim -- you can proceed on to re-title them into your own name as soon as you get your deceased spouse's DC's back. (or if the deceased is not your spouse, as soon as you get the DC back)
Be sure to contact our office for real property (deed) severance document work from joint tenancy due to the death of your spouse. (normally, our rates are much lower than Arizona lawyers to prepare legal documents for your estate needs) Beneficary deed conveyances need some legal clean up too.
You also could find "payable upon death" bank or brokerage accounts or a "Beneficiary Deed" for transferring real property such as the family home to a listed beneficiary or beneficiaries on the deed. You should review estate account paperwork or contact representatives at the banks and brokerage firms for a full understanding of how these accounts work and how to make the claim so that the new owner/beneficiary can retrieve their inherited interest without probate or any long delays, once the DC is back and available for claims filing purposes. You can review property deeds at the county assessor office in your Arizona county, usually online, to determine the last recorded deed pertaining to any real property of the deceased estate owner and how it is held. Most of the time, the last signed deed will be linked to the county assessor database.
You will want to check the last recorded deed and compare it with the probate limits published on this site. This general legal information will help you determine if you have to probate the home or other real property in the estate. Once you identify a property that is either titled in fee simple (sole/one owner) or is titled in tenants in common and is over the limit, probate may be imminent. sadly, this is more common in our research of Arizona deaths of property owners than we expected. If you have to enter into probate because the estate home is over the limit, please note that a living trust could have helped avoid the probate process. Learn more about our company trust information site at: Legacy Trust Portfolios. As estate manager, you should also review all other accounts and how they are titled to determine your need to probate any other account or asset found out of trust in fee simple or tenants in common titled accounts.
Assuming the estate home is secure and belongings are safe, and people or pets formerly in the care and control of the deceased are under management now, the second step is to begin the process of making the inventory we mentioned. Even if it is obvious that either informal or formal probate is going to be required in your situation, please understand that the best thing you can do while waiting for the DC's to come in is to start building the estate inventory.
The BEST way to start on your inventory creation is to order date of death (DOD) values from every institution and firm that the deceased party had money with. This is as simple as obtaining phone numbers from financial statements or from personal records providing you a list of important phone numbers and contacts. (Knowing the phone numbers may be old, but a place to start. Current information should also be on their internet sites.)
Or, just use the phone book (online is easier) WHITE PAGES to obtain contact information. Then, make the contacts by calling and requesting the values. Some firms may require your credentials, and that is fine to fax, mail, or transmit by E-mail any verification they may request. Others will agree to send out the information to you by just the phone call alone. The key is to get this step started on all money accounts at banks, brokerage firms, insurance companies, etc.
You should first plan to do a simple "yellow pad" date of death (DOD) inventory early on, then a second detailed and final DOD inventory as you progress through the Steps provided to you on this website. You may start with a Month of Death (MOD) valuation from statements you find in the home, while you wait for the actual DOD values to be mailed or transmitted to you. Embracing technology with a computerized spreadsheet that you can easily update and change and print copies for interested heirs is also a smart move in estate settlement procedures. You don't need to be fancy. Being accurate is most important because when it comes to estate division of assets and the eventual distribution to heirs, your "date of death" (DOD) inventory will need updating for estate splitting (assuming there is more than one heir) and will account for additional interest or other earnings that have come into estate accounts and of course, estate expenses that have come out of estate money accounts or from selling any estate assets.
An alternative to doing a paper or local computer spreadsheet inventory is to use an online service instead. A free service provided by the insurance institute can be found at:
We do know that for privacy reasons, using an online service may cause more risk of someone finding out more than they should about estate assets if the data was ever compromised. So, we give you the resource to review and decide if the free online services are something that you want to use to make your job easier.
If you would like a free paper inventory version you can fill out privately, please contact us for a free consumer friendly PDF file version (our spreadsheet version is only available to clients) we use when our firm is hired to do this task for you. If you would like our assistance or just a training session, please make inquiry by phone (480) 345-1616 or E-mail us.
Please understand that formal inventories are required for tax purposes and estate administration and eventual distribution to heirs. But, a simple and informal estate inventory should suffice early on to get a rough estimate of the estate size if you don't know for sure or if financial investments have had recent and drastic changes in value. (some have, such as stock accounts or real estate).
Now, we need to discuss the reason why you are preparing an estate inventory. When you become authorized to distribute assets, the main reason is to be able to divide "in kind" any estate assets allowed to be transferred without first needing to sell them. You will have the discretion to transfer allowed assets directly to the qualified estate heirs and there is no way to do that fairly without placing a "value" on them.
Of course, you have the
discretion to sell any asset to and convert the proceeds to
cash. Sometimes this is necessary when too much value is in the
family home or other real estate property. Large Qualified
funds IRA type accounts present problems when some heirs want an
and others want to "cash out" their share of retirement assets..
When you can't divide the item without the heirs being in
dis-agreement or when it becomes impossible to divide (a
funny commercial on television profiles this problem when they
saw the home in half!), selling it becomes the best
options unless there is a tax trap in doing so. Most tax
traps that restricted the deceased owner from selling an asset
while he or she was alive are eliminated on most estates because
of the IRS "stepped up" tax rules. These rules normally
give you a green light to sell estate assets without a tax bill
as long as you do so soon after the death and before
the estate asset can grow in value. (stepped down tax
rules apply when assets fall in value after the death)
Since the tax rules are extremely
complicated, it is recommended that you get tax opinions anytime
you are not sure.
(We do that too)
When you can't divide the item without the heirs being in dis-agreement or when it becomes impossible to divide (a funny commercial on television profiles this problem when they saw the home in half!), selling it becomes the best options unless there is a tax trap in doing so. Most tax traps that restricted the deceased owner from selling an asset while he or she was alive are eliminated on most estates because of the IRS "stepped up" tax rules. These rules normally give you a green light to sell estate assets without a tax bill as long as you do so soon after the death and before the estate asset can grow in value. (stepped down tax rules apply when assets fall in value after the death) Since the tax rules are extremely complicated, it is recommended that you get tax opinions anytime you are not sure. (We do that too)
But, the other reason is to determine if any tax reporting is necessary for the estate as well as to prepare the estate for a second tax return that very likely will become due if you do not move very quickly to distribute the majority of estate assets. (If you feel you will need to enter into any kind of probate, the odds for needing to file this second tax return are almost 100%) Learn more about required tax reporting in the next section.
Review Tax Reporting and Filing Requirements
We want to concentrate on the task of determining what reporting, accounting and tax return requirements exist for the estate. Every estate of any size will require filing of a final Federal personal tax return (Form 1040) and Arizona (Form 140). Unless there is a trust which can distribute assets very quickly, a Federal Trust and Estate Tax Return (Form 1041) will also need to be filed for the year of death and if delays or timing dictates the estate stays open another year, for all sub-sequent years the estate generates income. The Arizona version is also necessary to be filed (Form 141).
If the estate is going to punch out extremely high values in this year of death (2013), consideration must be made for the requirements of filing a Federal Estate Tax Return (Form 706). This return is almost never seen before someone takes over as the estate manager. With permanent 2013+ high limits ($5,000,000+ per spouse), fewer estate managers will need to file this form. The Arizona version formerly known as Arizona Form 76 is no longer required since Arizona no longer imposes a state inheritance tax on death estates.
The IRS Form 706 is triggered by "going over" the exclusion amount and as you will discover later, excess gifts given in the past will reduce the exclusion as well. If you are over on your inventory values, you are required to file. And, please note it is due in just 9 months from the date of death! To be prepared for any and all tax filing requirements, a proper inventory is required. The permanent law also contains a provision for the surviving spouse to use "portability", which requires professional help. .
Regarding your inventory -- itshould be a simple and informal listing of estate assets and as you were directed by the Inventory and Appraisal link page. You are going to want to have as accurate financial information that is reasonably possible. This does not mean you pay for endless appraisals for each and every item you "suspect" has value. E-bay former auction pricing can give you a pretty good idea on items you wonder about and is easily assessable on many items you may now have in inventory. In many cases, E-bay pricing will be accurate enough in your documentation of estate inventory for Arizona estate administration purposes.
Of course, if you discover an original 17th century Pistol, or a rare piece of art with a popular artist -- you will need to get a professional appraisal or opinion. But, remember that museums in our state such as Heard Museum and others will appraise items for you at a reasonable price. Some may do it for free hoping you will later donate it. Don't give away ANYTHING or distribute ANYTHING until such time that your powers are granted by legal instrument or by court declaration. And, once you are empowered, don't donate anything (junk may be allowed) without full written consent from all estate heirs.
The reason to get appraisals on the higher end items is two--fold. First, it may be necessary to determine probate limits or if you are settling a very large estate, it is necessary to determine if a federal Form 706 estate tax return will be required to be prepared and filed. Certain collectible and rare items could put you over!
The other reason to obtain proper valuations is learned by watching channel 8's Antiques Road Show. If you have ever watched the show, you will note that some go home finding out they paid too much for their treasured item that was found to be a fake or of quite low value. But, others go home after finding out that the vase they kept in the hallway by the front entryway was priceless! And, you know very well that when they get home, that same vase will be tucked away in a much safer place!
And, this concept applies as well to you as estate manager since you are a "fiduciary" held to high esteem and legal specifications. One of your responsibilities is to preserve and protect the estate and all of its belongings. Finding out what "stuff" is worth helps you do your job so you can concentrate on items that are of high value without wasting much time on items of low value.
But, sometimes, it is also your job to protect items that may have negligible money value, but very high personal importance to the deceased estate owner. It could be an old car in storage, a straw hat from their great grandfather, or maybe just a watch that might not even work. (Watch those old watches - some are worth a lot of money, running or not!)
Whatever it is, if it really meant something to the deceased estate owner, it probably was communicated to a spouse or to children and they most likely will pass it along to you. But, be sure to look for these kind of items on the estate owners' "Tangible Personal Property List" (next step) which serves as a holistic (and legal) Will for personal property items of reasonably low value.
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Review Tangible Personal Property Lists
Just be careful reviewing Tangible Personal Property Lists. You may find some very high end personal property item on these lists. Be sure to ask for them or search for them. They might contain the secret of what mattered most in "tangible" personal property of the deceased estate owner. It is your job to administer the list and find and give the property directed to the rightful owners when you are free to release estate property.
A Tangible Personal Property List (TPPL) may be in any form or format, so please be diligent to inquire first if any are known to exist. You may find some that look out of date, or that are not finished. You may find TPPL's that are not signed, dated or both. But, please understand that the rules of engagement for distribution of these items is quite flexible in federal and state statutes, as long as the items listed on these holographic lists are not high end fine art, valuable antiques or business's and money accounts. (Real and business property is not a tangible personal property item)
TPPL items listed are the deceased owners' "Stuff" and it was important to them, or they wouldn't have placed the item on the list, or named a recipient of the item. So, execute them as best as possible when it comes down to the distribution stage of our "Steps" process guidance. If you find something on a list that doesn't belong, such as "I give my $100,000 Wells Fargo bank CD to my trusted money advisor, Martin "Mo" Money..." you may need to get a legal opinion to the viability of such a request; an obvious error in how to leave money to someone special to the deceased estate owner. It belongs in the Last Will or Trust as a stated gift or estate heir beneficiary listing (Qualified Beneficiary* in an Arizona trust created on or after January 1st, 2009), not on a TPPL. * Under Arizona Trust Code
Estate Raiding of Tangible Personal Property or Cash in The Estate Home(s)
It can be quite embarrassing to a professional estate settlement advisor to have to talk about this subject, but we see it happen with our own clients. Just like Michael Jackson's sister is alleged to have gone in to grab things right after Mr. Jackson was hauled out of the home, (and how many more followed her?), many estate survivors sometimes leave their brain at home and go in to grab things such as the gifts they gave, cash they know of in a hiding place, guns,TV's, stereos, computers, etc.
Now, if you are the estate guardian appointed by Will, Trust or the court, and you witnessed a professional financial advisor, lawns keeper, distant relative or anyone else not related to the deceased -- ransacking the home, wouldn't you call the police?
Well, what if you happened to witness the deceased owner's sister taking valuable personal property items out of the home? Would you call the police? Would it depend on whether they are an heir? Are these questions getting too close to home?
You don't have to answer our questions. Not unless someone finds you grabbing stuff too! If you have maybe removed some items as estate manager, just take them back. As a fiduciary, you really need to perform at the same level as the bank would have to perform. Obviously, they would inventory valuable estate artifacts in the home. But, they wouldn't take them home!!!
If you are doing O.K. on this subject, but have knowledge of other situations that have already taken place, just ask for the items back. If they fail to "re-appear" in the home a short while later, then maybe you will need to make a formal demand on paper. At any point you can't get the item back, the very least you should do if an heir took the item is to place a fair and honest "value" to each item you are aware was taken. Then record a "debit" for that heir in your new set of estate books you will want to create once you are empowered. A separate Quicken file will do the job or an electronic or even an old fashioned paper spreadsheet.
If you can't get an estate artifact or other tangible personal property item back from a non heir, it is your fiduciary duty to demand it back and you will want to protect yourself by letting the person know you are prepared and authorized to use legal help in doing so. And, that this could include a formal police report if necessary. Most will sheepishly get the item back before you need to use any extreme measure. Tread lightly though, one tarnished candelabra isn't worth a major police incident..
Again, we hate to have to bring this up. But, the odds are extremely high you will face "theft" of items in estate homes and could even be tempted yourself. We end with a saying, if a person's name is not "on" the item with a personal note left by the deceased estate owner, keep your hands off that item until it can be fairly determined in the estate distribution process just who is going to get the item. However, if the person wanting to lift an item out of the estate home is YOU - then reconsider your actions until it can be fairly determined who is going to "fairly" get the item. (More on that in the distribution Steps page coming up later!) Resigning is the only option if you can't do this properly.
Hint: Once you are empowered as the estate manager, nothing stops you from rekeying all the locks and even installing a security system (or activating one not being used) in order to protect the home and it's contents.
On Larger Estates -- Inquiry on Past Estate Gifts
Once you have determined a "rough" estimate of estate values, you will also need to make inquiry into any past gift programs that may have been used to lower estate values for estate tax purposes. This is an important step and missing it means you could later be held negligent in your position if you don't do a little due diligence in the area of past family estate asset gifting programs.
You may have to dig some in old tax return records of the deceased, (you can order newer years filed from the IRS if you can't find electronic or paper versions), or just ask the children/heirs if they ever received any large gifts from their parents or other relatives over the years. Current gift limits are just $13,000 per person per year this year. Any gift higher than that requires an IRS Form 709 to be filed in a timely manner.
However, past limits were as low as $3,000 going way back in old tax law, so doing some work in this area is mandatory if the estate tax exemption limit is within site ($5,000,000 this year per spouse or single person). No, this informational site IS NOT designed to settle estates of that size, but time marches forward and here are the current IRS limits for avoiding the estate tax or more commonly penned "inheritance tax":
2010 -- Unlimited, no estate tax in most situations
2011 and 2012 $5,000,000 Individuals / Per spouse using Portability Provisions
2013+ -- $5,000,000+ inflation indexing -- Individuals / per spouse using Portability and/or A/B Trust Splitting
In 2016, indexing allows $5,450,000 for Individuals / per spouse!
Why is this important to me as estate manager?
Instead of guessing the future, this information is presented in a simplified format for you to understand that gifts could affect your larger estate because any estate over the limit this year requires the filing of federal estate tax return 706. And, that return will require a total review of all estate gifts over the years and will deduct any gifts that exceeded the annual per person limit in ANY past year they were given whether reported or not!
So, if a rich father transferred his farm or business (or anything else of high value) over to his son worth $1,000,000 way back in 1980 (assumed given all in one year) when the gift tax limit was only $3,000, he now has a reduced estate credit, not the full $5,450,000 (2016 death year) you might surmise he may have now.
Hopefully this shows why a past gifting review is important on larger estates and part of your due diligence procedures if you are working with a large estate situation. Just remember there is a trail. Past income tax returns report rental income on property, farm income, etc. Deed history is also easy to trace back and see when potential "gifts" were given in real property. The only exception is to the deceased estate owner's spouse in past gift giving. Or, at least that applies since the tax act from 1981 that allowed unlimited gifting between spouses, thereafter.
Main Point: When in doubt in this area, get a professional opinion to protect yourself, the estate and the heirs.
Only when you have ordered DC's, finished your rough estimate of estate values, looked for Tangible Personal Property Lists, researched any past gifting records (on larger estates), can you determine the two important areas that dictate and control what you must do next. But, first, please use the handy link above to resource on Arizona law so that you gain a full appreciation of your duties and determine if you really want to proceed on without help. Or, to hire a paralegal firm such as ours to help you. Or, a law firm in cases where your discovery work so far has turned up a pending legal challenge, probable full probate filing need, etc.
As you study up on the law, be sure to save Title 14 statutes in your browser so you can find your way back easily. You most likely will become very familiar with these Arizona statutes if you are proceeding on your own. Just remember as you proceed, you can call it quits any time you feel you have hit your limit in what you should or shouldn't be doing on your own. Though our limit as an accounting and paralegal firm is most likely much higher, we do the same thing in the estate settlement process when something comes up that needs a specialist whether it a legal matter, a tax matter, or even a civil or criminal matter. KNOWING YOUR LIMIT is the important message here. If you hire us, we won't exceed ours. If you do proceed to do this on your own, don't exceed yours! It could come back to haunt you...
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Research All Estate Debts and Liabilities
This Includes Both Owed "To" or Owed "By" The Estate
We wouldn't be good estate accountants if we didn't remind you that the estate books need to be brought up to date early on so that you, as estate manager, can discover ALL assets and ALL liabilities the estate may have at the time of death of the estate owner's death. So, date of death (DOD) balances of liabilities is also important in your inventory you started previously. If you didn't make a category on your paper or electronic spreadsheet, you should do it now.
Well, we are going to address one of the most difficult and surprising areas of estate settlement. We're talking about finding out now about debts and liabilities the estate may have that you may not have counted on, or if you did, the possibility that you may discover the estate is worth less than the sum total of the visible assets. For most Arizona estates, there is no surprise in this area of the settlement process. Or, you may discover money is owed to the estate and then, will have to determine how to collect it!
Regardless of what you find out in this step of discovery for the most part, please heed our accounting advice, Estate Assets - (minus) Estate Liabilities = Estate Net Value. Yes, we realize that most likely you are aware of this already. But, we also know that many estate managers are not sure what to do in discovery of estate liabilities owed from or to the estate at this time. So, we have provided this task as a separate "step" in your process to have general legal and tax information to guide you. Perhaps it will help you become more wise and diligent in the matters of collecting for the estate as well as finding and paying all estate liabilities.
Money Owed To The Estate
These are estate assets too...
A Little Too Close To The Fire - Personal or Business Loans: Right up front, we have to warn you that if you are a child of the deceased and the manager of the estate (or one of them), and if you had some loans from "Mom or Dad" that are still unpaid at this time, you will need to be extra careful if there are other heirs besides you. (If you are sole heir...well, you should still do the accounting for tax purposes and estate settlement documentation purposes, but the repayment factor won't matter in your case.)
For those that are doing estate settlement administration and have a loan with the estate that has a balance, you will need to establish the balance as of the DOD at this time. The same applies to any other siblings that may have a loan, or any other heir and even a non-heir loan you may discover exists. If you feel your loan could be deemed a conflict of interest, you should review the procedures to resign and let the next appointed manager take over.
At least discuss the matter in an open meeting with the other heirs. Most likely they will graciously allow you to reduce your percentage of the estate by the loan balance or loan payoff amount brought current to DOD. And, most times they will allow you to continue to serve without prejudice.
And of course, forgiveness documentation or wording in an estate instrument of the deceased estate owner's Last Will or Living Trust may address the issue, as we do that quite often in our senior trust portfolios we create for our own firm clientele.
But, if you can not be gracious, if you do not believe you should pay any past loans that may exist, or feel your loan was forgiven verbally, though you can't prove it, then it is a general legal tip to tell you what you should do. RESIGN!!! You are too close to the fire and someone is going to get burned because of your own conflict of interest! Let your next successor named after you, sort things out for you in a fair and honest way without the bias you would place upon the estate by remaining in charge. And, do so quickly as new statutes in trust law in Arizona provide a quicker court path to your removal in non probate cases under the Arizona Trust Code (ATC).
If you are facing simplified probate of a Last Will, or because you have now discovered a failed trust (failed because assets exceeding the limits exempt from probate were not found in trust at the death), then you also could face heirs petitioning the court to intervene or remove you and perhaps, force a full and much more expensive and time consuming Formal Probate (Judge assists the probate of the estate). (And, a good lawyer in this state might identify your failure to resign because of a conflict of interest as a basis for a claim against you if an heir decided to recover the extra expenses your failure to resign might have caused.)
Other Possible Ways The Estate Could Have Money Due To It: This is not going to apply for most estates. But, since it could apply, we address a few more areas you should do your due diligence check to be sure you don't leave money under the table, thus forcing the state of Arizona to have to put these dollars on their annual list of assets discovered with no claimants until they publish their own list of closed accounts, refunds, deed of trust payoffs, etc.
Possible other sources of monies that could be due the estate that you should research before closing it: Federal, state or local tax refunds, prize money won but not yet paid, lottery payments, annuity payments, pension benefits with survivorship elections, life insurance death benefit claims, final social security benefits (and recovery if they overpay), dividends and interest earned but not yet paid, payouts from real property deed of trust instruments, private loans including secured and unsecured, deferred benefits or payments of any kind or description, legal settlements including divorce, liability judgments for the deceased owner, etc.
This list is in no ways inclusive of everything that is possible, but it should give you a good start in making inquiries if any of these items apply to the estate you are now in charge of. If you can add to this list, please do so.
Money Owed By The Estate
Debit/Credit Cards or loans: An initial Debit/Credit card sweep will uncover most estate liabilities. If you haven't already cancelled the bank cards, do so now. You are not an authorized signer of the account unless you applied for the debit/credit card with the deceased estate owner as a joint applicant! If you used it by mistake (signing a deceased estate owner's signature is normally deemed as fraud in the card agreement), don't use it any more! And, until you are authorized to use an estate debit card belonging to the checking account you have decided to peg as your estate checking account, don't use it until the bank gives you a green light. . Use your own funds and reimburse yourself as soon as you are authorized.
What Not to Do: We had a recent estate owner pass away who was our firm's trust client. There was a cash crunch to get the large amount of family members to the hospital before the death and then later to the funeral. Instead of using their own debit and credit cards, the children relied on the Successor Trustee to pay the bills for these events, including plane tickets, etc. First of all, the expenses were not authorized in the trust we wrote, so those expenses had to be deducted later at estate settlement from each child's share. (If you want the estate to pay for these types of expenses, just draft it in your controlling estate instruments)
The bad part was that some of the family members, including the Successor Trustee, were signing the deceased estate owners name on both debit and credit cards, though not authorized. Obviously, I can't say more since it is an actual client case that went astray because they were acting without proper authorization after the death. But, after deciding that mistakes had been made, an attorney was retained to try to correct prior wrongs, and at a large starting retainer! So, if you do it on your own, please take every measure to do it right. You might think your distant relative who may also be an heir won't sue you for malpractice or mi-representation in estate settlement procedures. But, sadly, people sue over things much less serious than making a few minor estate settlement mistakes...
Reverse Mortgages: Most estates don't have mortgages if the estate owner died in old age, but nowadays, anything can be discovered. Over anxious reverse mortgage salesman have saddled a lot of seniors with these devices that help them stay in their home and not have to make mortgage payments. But, if the "folks" or Mom or Dad didn't tell you about them when they took a reverse mortgage out, you are going to find out now!
And, the clock is ticking. You only have so much time to either list and sell the home to pay this mortgage loan debt off for the estate, or you will face a foreclosure just like everyone else who doesn't pay their mortgage loans as agreed, or at all. You may have up to a year -- but a year can go by quickly. (Provisions apply in jointly owned homes for continued occupancy rules in these contracts -- we are addressing the general conditions of sole survivors in reverse mortgaged homes typically holding title in fee simple.)
Medicaid Liens: Another potential liability in smaller valued estates and homes is the possibility that the government may have a direct claim on the home if family member applied for Medicaid type coverage's while they were still alive, but with failing health. Though this information site address's the steps right after the funeral you should take, we kindly remind any and all reading the content that Medicaid planning is best done with a Senior Estate Lawyer. We wouldn't begin to try to tell you the specifics of how to apply for coverage without later risking sacrificing estate assets, including the estate home that parents intend to leave to their child or children, or grandchildren, even great grandchildren -- but not the United States government.
Suffice it to warn you for the future, that applying for Medicaid coverage when you are the power of attorney agent (or Successor Trustee) when the estate owner is still alive but ill, causes two general risks that you may not be fully aware of.
1. You risk losing the estate home or other assets. Especially if a lien is placed because of the coverage and benefits you apply for and receive for the ill estate owner. Most times that is the case. Getting a legal opinion on such a matter is very important, BEFORE you sign those forms as POA agent or as Successor Trustee. Planning techniques exist to save the home in some cases. Seeking out a qualified attorney who specializes in this area is always the BEST advice we can give if this applies to you in past work you have already done in Medicare planning or if you feel you should review this area now.
2. You risk losing your own home or other assets! No, it's not a typo. Signing the forms without understanding the consequences, that are too often placed in front of you when the estate owner is still alive -- can risk the chance that you could lose your home! If they can not recover any benefits wrongly applied for and granted for your loved one while they were ill and unable to perform financial decisions -- the government has the right by law to come after you for the difference, damages, fines, penalties, interest, etc. If you think you may have a situation such as this, contact our firm for a qualified referral to a local lawyer that can give you council on the matter.
So, be very careful to determine if any documents exist that pledged the estate home or other assets in return for receiving Medicare type benefits or payments for the deceased estate owner.
Possible other sources of monies that could be due (liabilities) by the estate, that you should research before closing it: Federal, state or local tax payments due, tax assessments levied but not yet paid, social security benefit recovery for benefits overpaid*, legal settlements including divorce, liability judgments against the deceased owner, court orders of financial remuneration, and of course, don't forget to save back money to pay your advisors at estate closings!
This list is in no way inclusive of everything that is possible, but it should give you a good start in making inquiries if any of these items apply to the estate you are now in charge of. If you can add to this list, please do so.
* Be sure to keep the bank account open that social security payments are deposited into until benefits stop and you are sure there is no overpayment that will require a recovery. When overpayments are made by the administration, they normally will reverse the payment in the bank account automatically if you keep the account open for a few months after filing the claim.
Apply Arizona Law to Determine Your Required Work
Estate Administration is Like Playing Plinko!
There is one sure thing all estate managers will agree on when the process is over. In the words of Forrest Gump: "You never know what you're going to get!" You could open an old trunk in the attic and find diamonds, or perhaps negative family history documentation that changes everything you thought you knew! Having done this work for over 25 years, we have a lot of stories...but of course, we can't tell them. Suffice it to say being manager is like playing Plinko. Be prepared for anything!!!
Just before we work on the steps to empower you to act, you must first determine if a probate proceeding is required under Arizona law. This is not up to the family or heirs to tell you. You must determine the requirements or exemptions from probate for the sake of the heirs at this point. It is YOUR job. It really is quite simple.
If your inventory of "net" estate assets "out of trust" (or if not trust -- estate assets) do not exceed $100,000 in real property, or $75,000 in personal property (all other property owned by the decedent), you can be reasonably assured that you do not need to enter into probate on your Arizona based estate. If you are over, it is time to download the sample forms provided by Arizona government websites. Or call a lawyer to represent you at this point, if any heir plans to contest any provisions of the controlling legal document.
And, if real or personal property or money accounts are found in other states or even in foreign or offshore accounts, you most likely are going to need professional advisory to assist you. We will help where we can and then point you in the right direction for any services we can not provide in this area, referring you to those that can.
There is a high likelihood that you are administering a Last Will & Testament at this point, even if you are Surviving Trustee or Successor Trustee of a Living Trust instrument. If your final valuation on non trust assets is under the limits in the statute we just mentioned, relax, your job is going to be a lot easier than you may have thought. Fix another cup of coffee or refill that cool glass of water (don't forget to squeeze the lemon) or sun tea, and count your blessings. You most likely are going to be able to do this without a lot of professional help!
Arizona law dictates clearly, if you are appointed to administer a Last Will with "Pour Over" provisions into a valid and in-force living trust, you probably are free to "pour" the assets out of trust as Executor/trix and receive those funds if you are also the appointed Successor Trustee. Yes, this is a physical exercise. You may need a deed (assuming for a small lot, or low value property) to transfer real estate valued under the probate limit. Most other institutions holding estate assets will require a certified death certificate only to allow transfers of accounts in both of these situations.
Before you get going in any pour over Last Will, there is one more step in this first test to determine what needs to be done after your inventory is completed with final values. In the inventory section, we mentioned that you must determine ownership percentages and what is considered "includable" in an estate inventory. Be sure before you make any transfers, that you have properly done the math based on the ownership values of the decedent only, especially if a surviving spouse (or you are that surviving spouse) remains an owner of the property.
Lastly, you will need to determine with your inventory and other data available to you, whether or not any assets left out of trust, or if there is no trust, if the estate size exceeds the non-probate limits. If so, then you will need to enter into either an "informal" or "formal" probate depending on asset count and other circumstances. Most can just file for informal probate (about 80%). More steps await you if you feel an informal probate is going to be necessary. And the next step is to tell you how to "empower" yourself with the probate court so you can act.
Important Note: Perhaps you may wonder what procedure allows being authorized in small estates to proceed without probate court. The answer is an "Affidavit" system which allows such procedures so that the court is not unduly tied down with the estate matters when there are no conflicts. If there is a Last Will & Testament, all document preparers in this state properly trained will include this "Affidavit" at the end of the signed Will. This only pertains to property that has not passed by a by-pass instrument such as a beneficial election in an IRA or life insurance policy, joint tenancy with right of survivorship deed or account registration and a few more we mention elsewhere on this site. This only pertains to estate assets out of trust and in the estate with no legal forwarding method.
SMALL ESTATES: Even if there is no Will, the Affidavit can be created by the beneficiaries (who are all in agreement under intestate law who they are) but they will also need to state all estate expenses and/or claims are satisfied in such an instrument that can be used to distribute assets both in personal effects, money accounts as well as real estate valued under the probate limit. All of these are still considered as "probate" assets, but no probate is required if they come to full agreement without anyone contesting the transfers. A time period (waiting period) may also be required in some instances before a transfer of these type of non probate assets can be performed.
Estate Tip # 1: ORGANIZE! If you haven't already done so, please buy a very large pocket traveler at an office supply store that has at least 20 separate pockets for you to separate and file important paperwork you are already generating. Based on the size of the estate and how many accounts or properties, you can judge just how big of a traveling file you will need. And yes, if you are authorized to administer the estate, your inherent responsibility (amongst many), is to secure and protect the estate paperwork. Items such as original CD certificates, original deeds to the homes or other estate property, titles to motor vehicles and other licensed vehicles, original copies of the tax returns filed the past 2 or 3 years, recent tax papers and documents, recent investment or bank statements, etc. are all on your targeted "find and protect" list. This list is not inclusive, but a start of what documents you should search, find and place in your traveling file inventory. Yes, you can take it home with you. Just protect it well while traveling and place it in a safe place when you get home or to your office. And boot it up! You may need some of the information you find on it.
Important -- If There is a Computer
Along with the estate tip, we must inject a modern approach if you have discovered or are aware of a computer (or other computers including laptops, PDA's, phones, etc.) and no one left to run it. Even if you are a surviving spouse or child and also the manager, please understand that many important items may exist on the hard drive of this computer and maybe even on websites the estate owner used for storage or for backup purposes. (Electronic off site location)
The first thing you may need in order to be able to access important estate asset, liabilities or investment records -- is a password. There normally is a way around a lost password if you discover you don't have one, but it involves getting professional technical help. Our accounting division also provides technical computer help, so don't be afraid to ask for assistance.
Since the estate owners' home (or office) computer may have plenty of important information, money records such as Quicken, etc., you will also need to remove all computers and external hard drives from the premises as soon as possible after you are authorized to act, and store them in a safe place for access. It is also a good idea to perform a complete backup and keep the backup in a separate location from the main computer. You can easily do this with an affordable USB connected portable hard drive device that sell for less than $100 now for up to 2 Gigabyte storage space and yes, you are authorized to go buy it with your estate checking account!
Or, engage an offsite backup services such as Dropbox to do a proper backup of all information on the hard drive(s). If you want to do us a favor for the tip, let us refer you. It gives our company a little more free space and Dropbox is free for most users.
It protects YOU as manager, so don't forget to scan or print to PDF any estate documents, emails, etc. that you create in your process and save them to a CD, or transfer through your intranet to the deceased owner's computer for backup purposes. Do not let them backup on your own systems, as your books and documents should remain separate for many many reasons. If you don't know how to do these procedures, or need consulting, please contact us for details on our costs (they are much less than our financial advisory billing rate) and we do believe, lower than those "Geek" folks at your local Best Buy store.
Estate Tip # 2: PROTECT! Leaving important documents in an empty home, if there is no surviving spouse or other residents of the home, is a huge mistake in our current economic downturn. Empty homes are being ransacked for whatever thieves can pull or take out of them. So, go in when first authorized and "clean" the home of all paperwork you can find initially and take it with you.
Though you shouldn't throw anything away early on, you can sort the paperwork in your own home or office where it is much more secure and place the important documents in your traveling file and the rest in large paper envelopes (we have purchased them and most of our corporate paper supplies at discount prices at Paper Plus in Mesa, Arizona since 1990!) Then, just tag them with a nice red marker with a title of what you place inside these secondary envelopes and find a safe place for them too in case you need to go back and research the contents.
A tertiary level of importance for filing of estate papers would be anything suspiciously old and outdated looking. (But not antique level!) Many items in this lowest level of importance for keeping could, indeed, be of low value for your purposes. But, rather than tossing them out (shredding them first of course), why not just give them to the heirs? One bag can be given to one heir and the next bag to another, and so on. You remove the responsibility from your duties and shelter yourself from someone accusing you later for destroying something that may be deemed "important" or "valuable". Maybe you could instruct recipients to keep them for at least one year, just in case.
Now on some estates, you will be overwhelmed with the paper. We have had it happen to our firm on more than one occasion. In these cases, it is true that a lot of the paper in a home is garbage and of no value for any purpose. But, when it comes to financial paperwork, you will be best to "tag and bag" it and give to the heirs for safe keeping, or hire a firm like ours that can have a cleaning session with you. We can help you determine what goes, what stays. If the estate doesn't have a shredder, buy one. Especially if all heirs vote to convert all paperwork to an electronic format other than a few items they may want to keep actual paper copies of.
Estate Tip # 3: BANKING! Identify one (1) bank account to use to administer estate business. Rarely will you need to open a new account as most estate owners have more than one checking account and you might want to use an account that is with the bank you bank with if possible for convenience purposes. But, what you don't want to do is remove and deposit estate assets into an account with your name on it. Nothing authorizes you to do this in statutes, documents, common law and nothing will protect you should you be challenged for doing so. Even the IRS could tag the assets and income as yours if you do this!
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Disclaimer: Financial Strategies, Inc. and Michael D. Anderson are each AZCLDP licensed in the state of Arizona as certified legal document preparers. The firm and Mr. Anderson can give general legal information under his licensing but can not give legal advice. If you need legal advice, please contact your current lawyer or request a referral from Mr. Anderson. AZCLDP's practicing in the state of Arizona are licensed and governed by a supervisory board of the Arizona Supreme Court. Information you give to AZCLDP's is confidential but is not protected in a "privileged" way as it is with a practicing and licensed Arizona lawyer. AZCLDP fees vary between firms and price is no guarantee of actual performance, quality of services or accuracy of legal documents created. But this is also true with practicing lawyers as well. An AZCLDP can prepare any legal document required for filing in any Arizona court, including probate court but they can not represent you in formal probate or any other court hearing or event. State provided "do it yourself" (self service) forms and procedures exist for simplified estate administration online should you desire to settle an estate without outside help or assistance. Whether you use an AZCLDP to prepare custom probate or other estate administration forms or do it yourself -- YOU will be required to file and pay all court filing fees when necessary, if not represented by legal counsel. Financial Strategies, Inc. and Michael D. Anderson are also licensed insurance agents and the firm serves as a broker for numerous life and health insurance carriers for Arizona residents as well as other state residents from time to time. Review of all insurance, annuity, health, or other contracts affecting the estate or estate heirs is allowed in the estate settlement process and advisory and claim filing advice as well because of this licensing. Additionally, Mr. Anderson is a licensed Realtor® with Realty One Group in Tempe, Arizona. Reference to this employing real estate broker is a distinctly separate service offered by Mr. Anderson as an individual employed by said broker and not by his own firm, Financial Strategies, Inc. Said broker is not associated in any way with the services being offered on this website and by the firm Financial Strategies, Inc. other than assisting in selling your residential and commercial estate properties. Any link on this website to said broker or profiling Mr. Anderson's Probate/Trust/Estate Real estate services are and remain separate from all other services profiled herein. Mr. Anderson is also a registered tax preparation firm with the Internal Revenue Service and practices as an IRS corporate tax preparation firm under Financial Strategies, Inc. Further, Mr. Anderson is an associate of a long term international law firm whose principle is a licensed D.C. lawyer. Said firm serves as legal advisor to Mr. Anderson and Financial Strategies, Inc. If any conflict of interest should arise in a client relationship regarding this relationship, it will be disclosed when a referral is made to a local outside law firm to carry on the required estate settlement process for retained clients. Client testimonials are produced based on actual letters or emails received by Financial Strategies, Inc. Lastly, Mr. Anderson is a former mortgage loan officer and a former securities registered representative/Investment Advisor Representative and this information is being disclosed to show the full circle of his experience and learned knowledge in his career. Note: To date, Mr. Anderson and his 26+ year old Arizona corporation (firm) have never had a regulatory complaint in ANY of the areas he has practiced in or been licensed in to date. (Statement made as of "Last update" date shown below) Website theme, graphics, content, strategy and service packages & forms are
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