Navigating the Probate Process in Arizona & California: A Complete Guide

Hi, welcome everyone. I’m Rilus Dana. Today, we’re going to be talking about how to administer an estate. This is an important topic for a few reasons. One, we’re all going to die; we’re not getting out of here alive, so this is good information to plan your own estate. This is also relevant if you’re helping your parents or family with their estate. Additionally, if you’re a real estate investor targeting probate leads and looking to buy inherited properties, this will be useful information.

I want to talk about some basic estate planning terms, and then we’ll get into how you should administer an estate. Let me share my screen here. This is where I practice law: Dana and Associates, an Arizona and California law firm. Up here is Maat Legal. This is also my company, which runs the law firm. I’ve developed some estate planning software and specific systems for attorneys under Maat Legal. Dana and Associates is where I practice law in Arizona and California.

Defining the Key Players in Estate Planning
First, let’s start by defining the players.  What is a decedent? Another word for a dead person is a decedent.

Fiduciary: That’s who is in charge. It’s commonly called the executor, but the person in charge is the fiduciary. A fiduciary is a person to whom property or power is entrusted for the benefit of another. I like to use a little bookkeeper hat to signal the fiduciary because they have different names in different documents. In a trust, it’s a trustee; in a power of attorney, they are the principal. When a person wears that fiduciary hat, they have a legal obligation to act in the best interest of another.

Beneficiary: Who gets the stuff? Who is entitled to receive it? There can be multiple beneficiaries.

Estate: People often call a large house an estate, which is why this can be confusing. The way we use it in estate planning means everything that a person owns, whether alive or dead. Estate planning is the process of planning where your estate—where everything—goes.

Last Will and Testament: This is a legal document. The person that makes it is called a testator, which is why it’s a last will and testament. It defines who the beneficiaries of the estate are. If there are minor children, that’s where you define who the guardians and the personal representative will be.

Understanding Probate and Intestacy
After a person passes away, it takes court or government action to actually appoint the personal representative and guardian. The will says who you want to be in charge, but they have to go through the court to get their authority. Probate is that process where they get their authority. For example, if someone passes away and a person is named as a beneficiary for life insurance, they can collect that. If their name is on the title for the house, they can collect that. But how do they collect a bank account just in the deceased’s name? Even if there’s a will listing them as the beneficiary and personal representative, they still have to go through court to be formally appointed. Only then can that account be transferred. There are lots of steps to probate, it takes a lot of time, and there are many filing requirements, which is why people usually want to avoid it.

When someone dies without a will, it’s called dying intestate. Default state laws control which family members receive the assets. If there are no family members, it passes entirely to the state. That’s pretty rare, though. They look all the way for second cousins, and if there are none, it goes to the state.

How to Administer the Estate
How do you administer an estate?  Here is what you do. Number one: define the players. Two: figure out what assets are in the estate. This includes retirement accounts like an IRA, life insurance, bank accounts, and real estate. Next, determine what controls the assets. Things like IRAs and life insurance usually have a named beneficiary. If that beneficiary contract is filled out, that controls the asset, and it does not go through probate. An asset like a house might still be titled in the name of the deceased, so we say it’s owned by their estate. Things could also be owned by a trust. A bank account might list a person or a trust as the beneficiary, or the trust could be the owner of the bank account. Figure out what the assets are and what controls them. The bank account in the trust is controlled by the trust, and the house in the estate will be controlled by the estate.

If there is a last will and testament, that document controls the estate. If there is no will, we look at the laws of intestacy in the state where the person lived or passed away. Assets in the name of the estate could be controlled by the will, which names the beneficiaries and the personal representative, or by the laws of intestacy, which determine the beneficiaries and who has priority to serve as personal representative. A trust will name a trustee to manage it and will also name beneficiaries.

The Duties and Risks of Being a Fiduciary
If you are the fiduciary—listed in the trust as a trustee or in the will as a personal representative—you need to protect the assets. Figure out what is out there, safeguard it, and start an accounting. Get appointed. For a will, you must go through probate court. For a trust, you must prove you are the trustee using a document called an acceptance of trustee, where you sign and accept that duty. The trust also has to get a tax ID number at that time. There is reporting to federal and state governments to get appointed, whether in a trust or a probate.

A common misconception is that if you have a trust, no work needs to be done after you pass away. It avoids probate court and that associated time, but there is still work to do to get appointed. After appointment, you follow the instructions in the trust, the will, or the intestacy laws. Sometimes instructions aren’t super clear. They can be vague or contradict another section, which can be challenging. Overall, you have a fiduciary duty to act in the best interest of all beneficiaries.

I highly recommend legal counsel for this job. I am biased as an attorney, but you don’t know what you don’t know. A lot of people come to me after they have made mistakes and gotten into trouble. They often say, ‘I didn’t know how to do this, but I did my best.’ The court doesn’t really care about that. If you violate that fiduciary duty and cause the assets to lose value, you are personally liable as the fiduciary. That is why I recommend legal counsel to make sure you are doing things fairly and won’t get sued by your siblings.

Managing Sub-Trusts and Debts
You may need to create sub-trusts. A trust might create trusts for the children after the parents pass away. Examples include an age trust (if children are underage, someone holds the assets until they reach a certain age, at least 18), a Special Needs Trust or Supplemental Needs Trust (for a beneficiary receiving government benefits like disability, making sure their inheritance won’t disqualify them), and a Dynasty Trust (to protect the inheritance so it’s not subject to future estate taxes and is protected from potential creditors, a divorcing spouse, or lawsuits). For sub-trusts, you also have to get a tax ID number, report to the government, collect the assets, and create these trusts.

There are a lot of claims made after someone passes away, and they are not all valid. Some things don’t necessarily have to be paid. Legal counsel can help avoid unnecessary debts or negotiate unsecured debts. After paying all debts, it is time to divide the assets.

Advice for Beneficiaries
If you are not the fiduciary but a beneficiary, here is what you should do. Ask for a copy of the legal documents, like the trust or will, so you can understand what should be happening. They should also provide you with an accounting. That is part of the job when administering a trust or a will through probate. They need to let all beneficiaries know what assets exist and what is going on.

If they don’t provide that, ask in writing so you have proof. Be patient. If they give you an accounting and copies of the documents, the process does take time. You can always consult a lawyer to advise you of your rights. If they aren’t giving you an accounting or documents, or if you’ve been patient and things still aren’t happening, it’s time to get a lawyer. They can see if there is any funny business and if they need to get involved to help the fiduciaries do their job properly.

If you have to litigate, try to do it nicely. This can be tough because trust administration usually involves family members. It can be awkward when a sibling or uncle might be a bad actor. My recommendation is to be open and honest. Ask for an accounting, give them time limits, and if they don’t respond, get counsel. Hire legal counsel, set deadlines, and plan for what happens after those deadlines. How long are you going to wait for answers, and what will you do if you don’t get them? Legal counsel can help determine exactly what to do.

Getting Help with Your Estate
Here is my contact information for where I practice law in Arizona and California. If you’d like help with your plan, I’d be happy to help. We are meeting clients back in the office as well as virtually through Zoom. If you need help updating your estate plan, or if you are helping a family member administer their estate or trust, we can help you with that as well. I hope everyone has a great day. Let me know what you thought about this video and what topics you’d like to hear about in the future. Thank you.