Presented to National Business Institute’s
“The Probate Process From Start to Finish”
March 6, 2014
By Thomas J. Murphy
Murphy Law Firm, Inc.
The laws of intestacy are governed by ARS 14-2101 et seq.
ARS 14-2102 provides that the surviving spouse will take the entire intestate estate if there is no surviving issue or if there are surviving issue of the decedent all of whom are issue of the surviving. If there are surviving issue one or more of whom are not issue of the surviving spouse, then the surviving spouse will take one-half of the intestate separate property and no interest in the one-half of the community property that belonged to the decedent.
ARS 14-2103 governs the share of the intestate share not passing to the surviving spouse. That share passes:
- to the decedent’s descendants by representation.
- If there is no surviving descendant, to the decedent’s parents equally if both survive or to the surviving parent.
- If there is no surviving descendant or parent, to the descendants of the decedent’s parents or either of them by representation.
- If there is no surviving descendant, parent or descendant of a parent, but the decedent is survived by one or more grandparents or descendants of grandparents, half of the estate passes to the decedent’s paternal grandparents equally and the other half to the decedent’s maternal grandparents.
ARS 14-2106 requires a distribution by right of representation for any predeceased descendants. This means that all descendants of predeceased descendants take equally.
Child A Child B Child C
1/3 predeceased w/4 children predeceased w/ 2 children
1/3 1/9 each 1/9 each
Children of the half-blood, adopted children and children of an unmarried parent are treated as the same as natural children. ARS 14-2107 & -2114.
ARS 14-2104 states that a person must survive the decedent by 120 hours in order to be an interstate taker.
ARS 14-2402 provides that the decedent’s surviving spouse is entitled to a homestead allowance of eighteen thousand dollars. This share is exempt from creditors and is chargeable against nonprobate transfers.
ARS14-2403 provides that, in addition to the homestead allowance, the decedent’s surviving spouse is entitled from the estate to a value that is not more than seven thousand dollars This share is also exempt from creditors and is chargeable against nonprobate transfers.
ARS 14-2404 & -2405(c). Decedent’s surviving spouse is entitled to a “reasonable allowance” not to exceed $12,000.00. Note that this is a discretionary distributions and not mandatory as the first two allowances.
Note that many financial instruments will pass outside of any intestate proceeding or any other probate proceeding. ARS 14-6101 exempts out a great many items: any insurance policy, contract of employment, bond, mortgage, promissory note, certificated or uncertificated security, account agreement, custodial agreement, deposit agreement, compensation plan, pension plan, individual retirement plan, employee benefit plan, trust, conveyance, deed of gift, marital property agreement or other written instrument of a similar nature.
ARS 14-6202 et seq. also exempts out jointly titled accounts and accounts with payable-on-death (“POD”) designations.
However, always warn against transfers being made prior to the expiration of the four-month creditor claims period since ARS 14-6102 states that “a transferee of a nonprobate transfer is subject to liability to the decedent’s probate estate for allowed claims against the decedent’s probate estate and statutory allowances to the decedent’s spouse and children to the extent the decedent’s probate estate is insufficient to satisfy those claims and allowances”.
Note that the death benefit from a life insurance policy or annuity and all proceeds in retirement accounts (401k’s, IRA’s, etc) are creditor-protected, ARS 20-1136 & 33-1126, so do not use these assets to pay creditors of the decedent.
ERISA provisions will pre-empt any state law so that the protections afforded surviving spouses will prevail over any controverting state law. Egelhoff v. Egelhoff, 532 US 141 (2001) and Kennedy v. Plan Administrator for DuPont Savings & Investment Plan, 555 U.S. 285 (2009) . This means that the balance in any 401k or any group term life insurance purchased thorough the decedent’s employer will pass to the surviving spouse, regardless of any will, staute or beneficiary designation unless there has been a written
Also note that, notwithstanding ARS 14-6212, simply determining who is the surviving joint tenant does not always end the determination of who has title. Arizona courts have long recognized that account owners may add names to an account for convenience purposes without the intent to convey ownership up on death. In O’Hair v. O’Hair, 109 Ariz 236, 238 (1973), the court ruled that “It is settled in Arizona that where a person deposits money ina bank to the credit of himself and another, payable to the orderof either, or the survivor of them, such deposit vests in theother a joint interest with the depositor in the fund. Anyquestion as to the extent of the other’s interest is determinedfrom the intention of the depositor — whether a gift was intendedor whether the joint tenancy transaction was entered into forother purposes…..the mere form of the bank account is notregarded as sufficient to establish the intent of the depositorto give another a joint interest in or ownership of the deposit”. See also, Grant v. Grant, 119 Ariz 470 (CA1, 1978)There are also a number of other legal theories to attack the validity of the joint titling of the account. These will be discussed in more detail in the next session of this conference but will be briefly addressed here. First, there may an issue of whether the decedent lacked sufficient capacity to validly execute these documents creating the joint account. Hendricks v. Simper, 24 Ariz App 415, 418 (1975). Second, the self-dealing nature of these transactions by a person in a fiduciary relationship to the decedent renders them invalid. Estate of Shumway, 198 Ariz 323 (2000); In Re Guardianship of Chandos, 18 Ariz App 583, 585 (1972). Third, there is an issue of undue influence or vulnerability that raises the issue of financial exploitation. Davis v. Zlatos, 211 Ariz 519 (CA1, 2005). Fourth, there is an issue of the imposition of a constructive trust in that the decedent may have intended that the surviving joint tenant to hold the funds for the benefit of the other children or family members and do the “right thing” with those funds. In Re Purton, 7 Ariz App 526, 533 (1968); Eagerton v. Fleming, 145 Ariz 289, 292 (CA2, 1985).
Community Property Issues
Determining the character of property is critical since a decedent’s probate estate is limited to the decedent’s separate property and his share of the community property. ARS 14-3101(a). The rules of intestacy, or any probate proceeding for that matter, do not apply to the surviving spouse’s share of the probate estate, ESTATES OF SPEAR, 173 Ariz. 565, 567 (CA1, 1992), except if the estate has community debts, the surviving spouse’s share of the community property is subject to administration until the time for presentation of claims has expired and thereafter only to the extent necessary to pay community claims. SAMARITAN HEALTH SYSTEM v. CALDWELL, 191 Ariz. 479, 483 (CA1, 1998)
Property acquired during marriage is community property unless acquired by gift, devise, descent or after service of a family court petition that results in a decree of dissolution, legal separation and annulment. ARS 25-211. Separate property is property acquired prior to marriage, any income derived from that separate property or the exception set forth above. ARS 25-213. Property acquired during marriage is presumed to be community property unless the presumption is rebutted by clear and convincing evidence. Marriage of Ramsay, 224 Ariz. 467, 472 (CA1, 2010)
These rules apply to property acquired while residing in Arizona. Note that there is no quasi-community property concept in Title 14, unlike family court proceedings and ARS 25-318(a). This means that property acquired while residing outside of Arizona retains its character in the state where it was acquired.