“Death is not the end.  There remains the litigation over the estate.” Ambrose Bierce, 19th century American wit.

Is an Executor (Personal Representative) Necessary?

We don’t have “executors” in Arizona.  We have “personal representatives.” They are two different names for the same job.  Whether the deceased dies without a Will (intestate) or has a validly executed Will (testate), someone must be appointed by the court to pay the debts, manage the assets and distribute the property left behind.

Whether probate is needed depends on the size of the estate.  If the “probate assets” total $75,000.00 or less, a probate is not required.  Joint bank accounts, POD accounts, real property or autos held jointly, and life insurance proceeds are examples of non-probate assets.  If the probate assets (property held solely in the deceased’s name) exceed $75,000.00, a probate will be required. (For more information see the article, “Transferring a Small Estate Without Probate.”) In many states, especially in the east, probate is an expensive process with onerous inheritance taxes levied by the state.  That sort of probate experience engendered the famous quote: “There’s hell, and then there’s probate.”

Arizona probates are much less painful. We do not have an estate or inheritance tax for most estates.   If bequests are straight-forward and the beneficiaries are on good terms, a family may be able to handle a probate on their own by using the forms on the Superior Court’s website.  They can go to www.azcourts.gov, select the proper county and find the forms in the probate section of the court’s self-help center.

What is a Personal Representative and Who Should Get the Job.

The personal representative or PR is the man or woman who manages the probate estate and does all the work needed to get the estate settled and closed.  If the estate is large and complex, the job can be very time consuming.  The PR is considered a fiduciary.  That means the PR has an ethical and legal responsibility to act for the benefit of all the heirs and beneficiaries.

The probate process is largely governed by Arizona Statutes, and the statutes tell us who has the right to be appointed personal representative.  Arizona Revised Statutes, Section 14-3203 sets out a list of who has priority for appointment.  First, is anyone appointed as PR by the deceased’s Will.  Next is the surviving spouse who is an heir under the Will; third, other beneficiaries listed in the Will.  Number four is the surviving spouse when there is no Will; then, other heirs.  After family and heirs, the list continues with the VA for veterans, creditors and the public fiduciary.  The statutes spell out how disputes over the job of PR are to be settled and the procedure for appointment.

An individual can’t simply act as the PR because he or she is nominated for the role in the Will.  The PR must be officially appointed by the Probate Court or by a statement of the Registrar of the County Court. A.R.S. § 14-3103.  Once appointed, the court or registrar issues “Letters of Administration” authorizing the PR to manage the estate and distribute the assets. 

We all know that dividing inherited property can bring out the best or the worst in people.  When things get ugly, people hire lawyers and fight it out.  But, for the remainder of this article, we will talk about an ordinary probate with minimal arguing and no foreign assets. 

What Are the Duties of a Personal Representative?

The first thing that comes up is the bond.  A.R.S. § 14-3603 states that the PR must be bonded to handle the estate unless one of the listed exceptions applies.  The first exception is when the Will waives the bond requirement.  Very often, the deceased will appoint a spouse or child as PR in his or her Will.  Because the deceased trusts the appointee to be honest and fair, the Will may waive the requirement for a bond.  The bond can also be waived if all the heirs agree it is not needed and they file bond waivers with the court.  The bond is also waived if a financial institution is listed as PR or if the estate is so small that a summary procedure is available.

Once the bond issue is resolved, the first real job for the PR is to give notice to all the heirs that a personal representative has been appointed.  Legally, people inheriting under a Will are referred to as devisees.  Those inheriting by intestate succession are called heirs.  For convenience sake, in this article, we will call both categories heirs. 

After the notice goes out, the next step is the inventory.  This is where many PRs begin to falter.  PRs who are friends or family members of the deceased may not recognize until this point how daunting and time consuming the job can be.  Within 90 days of appointment, the PR must complete an inventory of all the property owned by the deceased at the time of his death.  A.R.S. § 14-3706.  Each item must be described in detail.  As to each listed item, the inventory must state the fair market value on the date of the deceased’s death, the nature of the property (community or separate), and the amount of any debts on the property.  For example:  the deceased, Joe, had a 2010 Honda Accord.  His wife died 5 years ago, so there is no community property.  He also had a Merrill Lynch investment account, and a 40 acre parcel of land in Payson.  The inventory would state:

Once the inventory is completed, it must be mailed to all interested parties.  The term “interested parties” is defined by A.R.S.§ 14-1201 as anyone with a financial interest in the estate, such as a spouse, heir, creditor, child, trustee, etc.  If the probate is a formal proceeding, the inventory will also need to be filed with the Court. 

In addition to completing the inventory, the PR is expected to manage the estate.  The PR must pay bills, collect rents that are due, and pay taxes.  One of the PR’s duties is to provide a Notice to Creditors.  A.R.S. § 14-3801 requires the personal representative to publish a notice to creditors once a week for three successive weeks in a newspaper of general circulation in that county.  This notice announces the PR’s address and tells all the deceased’s creditors to present their claims within four months of the publication date. If the creditor fails to present its claim within the four month period, its claim against the estate is forever barred.  This notice requirement is intended to notify unknown creditors and to bar delayed claims against the estate.  However, if the PR is aware of an estate debt, he or she is obligated to send a letter to the creditor containing the information about the death, PR appointment and probate. 
 
It is the PR’s job to preserve the assets of the estate and to secure those assets for the heirs.  This can take time and energy.  The PR may need to evict delinquent tenants or file suit to recover property. A.R.S. §14-3709.  The PR is responsible for maintaining and repairing property owned by the estate.  If the deceased person was involved in a lawsuit, it will be the duty of the PR to continue to handle the lawsuit in his absence.  The personal representative is responsible to divide the assets according to the terms of the Will.  If there was no Will, the PR must divide the assets according to the laws of inheritance set out in the statute.  A.R.S. §§ 14-2102-14-2104.  The personal representative’s power over the estate is not absolute.  Heirs, creditors, and other interested parties can file a restraining order with the court to prevent the PR from acting. A.R.S. § 14-3607.  They can also sue the PR if they believe there is a breach of fiduciary duty.

Can the personal representative seek compensation for the job?  A.R.S. §14-3719 allows the PR to ask the court for compensation.  If the estate is large and the job is complex, the court may authorize the PR to be paid.  For the average family estate, there is no compensation.

Closing the Estate.

The final task the PR has is to close the estate.  That only happens after all bills and creditor’s claims are settled, all the property is distributed to the heirs, and the estate tax return is filed.  Yes, there is a tax return.  The estate is a legal entity, and, as such, it is required to file an annual income tax return just like a person does.  Like everything else in probate, the closing process is governed by statute, A.R.S. § 14-3933.  The PR cannot close the estate for at least four months after the estate is opened.  Many estates remain open for several years while the PR works to locate heirs, sell real estate and personal property, rein in squabbling families, and locate assets.  If the estate is a party to a lawsuit, either as a plaintiff or a defendant, the estate needs to remain open until the lawsuit is over.

Once everything is settled, the PR does a final accounting reflecting all transactions and showing that the estate has a balance of zero.  That accounting is mailed to all interested parties.  The PR then moves on to the closing statement.  The closing statement is filed with the court and is mailed to all heirs, all creditors and other possible claimants.  In the closing statement, the PR verifies that the estate has been administered, that taxes are paid, all property distributed, all debts paid, and that further creditor claims are barred.  The PR is finally finished.  One year after the estate closes, the appointment of the personal representative officially terminates.

It is easy to understand why many people are reluctant to take on the role of personal representative and why large estates are usually administered by lawyers or banks.  It is an intense, time consuming, and often thankless job.