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2018 Probate and Trust Legislation Update

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The process of transferring property from a deceased person to his or her beneficiaries is governed by Arizona statutes.  Although the general procedures in Arizona are similar to those in most other states because of the adoption of the Uniform Probate Code and the Uniform Trust Code, most states make their own tweaks and changes.

Senate Bill 1204 was introduced to the 2018 Arizona 53rd Legislature, 2nd Regular Session, to address several issues affecting probate and trust administration and to make some changes to Arizona’s version of the uniform laws.  The Bill was passed by both houses of the legislature and signed by the Governor, meaning the changes will become law effective August 3, 2018.  Here are some of the key revisions affecting the Arizona Probate and Trust Codes.

Arizona Probate Code Changes

Arizona Revised Statute (“A.R.S.”) § 14-2517 has dealt with the enforceability of penalty clauses in wills, commonly called “no contest” clauses and less commonly called “in terrorem” clauses.  This statute states that such clauses are not enforceable if the beneficiary bringing the challenge had “probable cause” to bring the challenge.  The Bill clarifies the challenge can come as a “contest, proceeding or action.”

The Bill also clarifies which rules are applicable to probate proceedings.  Over the past several years, the Arizona Supreme Court has established and amended the various rules that had been created by various county Superior Courts into a statewide Arizona Rules of Probate Procedure.  Accordingly, the amended A.R.S. § 14-1304 states that the Arizona Rules of Probate Procedure now apply to all probate matters.

Arizona has three methods to implement the terms of a decedent’s will.  The first is a summary administration for certain enumerated small estates.  The second is known as informal probate and, if certain requirements are satisfied, allows a matter to proceed without the involvement of a judicial officer.  Finally, there is the formal probate proceeding which involves a judge because of special circumstances or contests.  Because no hearing is mandated in informal proceedings, A.R.S. § 14-3306 does not require notice prior to beginning the process.  However, after the application has been accepted by the court, notice of the proceeding must be given to heirs or devisees.  The Bill clarifies the timing and to whom notice is given in informal probates.  If you want to learn more about the different types of probate in Arizona, watch our video.

The Bill made one major change to A.R.S. § 14-3403 which applies to a notice of hearing on the petition for a formal proceeding.  Previously, the statute required the publication of the notice one time at least fourteen days prior to the hearing.  This requirement was to notify “unknown” persons of the court proceedings. [Read more…]

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Lessons from Robin Williams’ Trust Dispute

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Robin WilliamsAfter the passing of a loved one, family members and friends normally gather to find solace or to celebrate the person’s life. Or at least that is the order and manner in which most people would wish to be remembered. To this end of allowing space to grieve, creating estate planning documents should assist the bereaved in efficiently handling their loved one’s worldly affairs. However, conflict can still occur between family members. And, conflict is more likely when the estate planning documents have gaps or are subject to differing interpretations.

Sadly, this appears to be the situation with the trust of Robin Williams, the late comic actor. As his family works through a trust dispute in court, the public may learn some valuable lessons on how to better prepare for (or ways to avoid) similar situations.

Beloved comedian and actor Robin Williams passed away suddenly in the summer of 2014, leaving fans and family in shock over the loss. Now, as the trust’s administration and distribution gets underway, Mr. Williams’ family has become embroiled in a trust dispute over the allocation of specific personal memorabilia and other property. The problems allegedly stem from a lack of specificity in the trust that was prepared presumably by an attorney and relatively recently executed by Mr. Williams on June 24, 2010 and amended and fully restated on January 31, 2012.

[Read more…]

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Beneficiaries Disinherited for Filing Trust Contest in Violation of Forfeiture Clause

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25095774_sBeneficiaries beware!  The Arizona Court of Appeals has concluded that someone who challenges a trust may be disinherited for violating a “no-contest” clause.

A no-contest or forfeiture clause is a provision included in a will or trust to discourage litigation and disputes.  Such provisions have obvious benefits of avoiding litigation and allowing the prompt distribution of trust or estate assets.

But, there are conflicting public policies when it comes to enforcing such clauses.  Courts have a strong public policy of enforcing the maker’s intent, including his direction to disinherit someone who challenges the document.  Such challenges sometimes waste time and money.  A contestant may also use such a challenge to coerce a more favorable disposition in settlement from other beneficiaries than what the maker intended.

On the other hand, forfeiture is generally disfavored.  And public policy typically ensures access to the courts to pursue legitimate challenges.  Such challenges may include, among other things, that the maker lacked mental capacity, was unduly influenced or defrauded into making the will or trust.  In those cases, the document does not reflect the maker’s true intent.  If a challenge were not permitted, it would allow the enforcement of a document that does not genuinely set forth the person’s true intent for the disposition of his assets. [Read more…]

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Scottsdale Trust Litigation

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Elderly woman with daughterTrusts are often sold to seniors as a device allowing them to pass their property to their children and other loved ones with the least possible expense, time and hassle. That may be true where there are no complications and everyone in the family gets along.

Trusts, at least theoretically, reduce the expense, time and inconvenience of settling your affairs after you’ve passed away because they typically avoid probate.

Probate” refers to the process to administer a deceased person’s property. Probate starts with (A) the acceptance of a will as the governing instrument for how the assets should be distributed or a declaration that the person died without a will (called an intestate estate); and (B) the appointment of a personal representative. There are very specific and sometimes complex rules that apply in probate cases, so many people want to avoid probate like a disease and take elaborate steps to keep their property out of court. [Read more…]

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Lou Reed Leaves $30 million—and Only a Will

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Berk Law Group, P.C. Announcement

Lou ReedLou Reed, famous for 70’s hits like “Walk on the Wild Side,” died on October 27, 2013, leaving behind an estate worth at least $30 million that generated around $20 million in income since he died. Wealth like that is often secured by a complex estate plan, designed to reduce the possibility of disputes and avoid probate and litigation.

Many celebrities spark massive probate litigation after they pass away by either planning too little for someone of their wealth or cutting someone out of the plan who thought they should be included. These cases often end up in trust litigation, since the wealthy often use revocable living trusts and irrevocable trusts as their preferred planning devices.

The strange thing about Lou Reed’s estate plan is that it was solely comprised of a will. According to news reports, Mr. Reed didn’t have even a revocable living trust.

So what’s the result for Mr. Reed’s surviving family members and loved ones? First, the process in probate court (called Surrogacy Court in New York, where Mr. Reed’s estate is being administered) is entirely public. Reporters, jealous members of his extended family, and unscrupulous people all have access to the particulars of Mr. Reed’s estate. [Read more…]

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Trust Disputes – Trustee Duties to Remote Beneficiaries

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Estate Planning Attorneys | Trust Disputes | Berk & Moskowitz, PCA revocable living trust may be a flexible yet durable estate planning tool.

Despite its convenience and popularity, families should also be aware that its creation invokes a special relationship between the trustor and the person named to represent the trust, that is, the “trustee.”

Commonly, a trustor names him or herself as the initial trustee with a successor trustee, such as a spouse or close relative, to represent the trust afterward.

Any person named as a trustee owes a fiduciary duty to the trust itself and to its beneficiaries. This means that the trustee must act in the sole and best interest of the trust, including during the lifetime of the trustor.  The duties include those of honesty, impartiality, inform and report and others.

[Read more…]

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Non-probate Assets and Designated Beneficiaries

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Berk Law Group, P.C. Announcement

AStock certificate | Non-probate assets | Scottsdale, AZ | Berk & Moskowitz, PC recent unpublished probate case, In re Maynard, deals with the issue of failing to identify beneficiaries when using non-probate assets.

A non-probate asset is defined as a financial or legal instrument that designates a beneficiary as part of its legal function. By doing so, the instrument passes outside of probate. Some common examples of potential non-probate assets are:

  • Retirement accounts, such as IRA’s and 401K’s;
  • Insurance policies;
  • Beneficiary deeds for real property;
  • Real estate deeds that are held joint tenants with right of survivorship; and
  • Stock options.

[Read more…]

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Can a Remainder Beneficiary Sue a Trustee?

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Gavel | Civil Litigation AttorneysA revocable living trust may have certain advantages over a last will and testament.  Namely, a trust may help avoid probate, which can often be time consuming and costly.

The trustee of the trust is responsible for carrying out the instructions of the trust, established by the trust’s creator, or settlor.  The trustee has a fiduciary duty toward the settlor, meaning that he or she is obliged, among other things, to manage the trust as directed by the settlor in the trust document.  Failing to do so can open the trustee to liability for his or her actions.  Read our article to learn more about trustee’s duties and trust disputes. [Read more…]

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CUT OUT OF A WILL OR TRUST?

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If you believe that you have been wrongfully cut out of a will or a trust, there are things you can do.  Here is a sample of some of the claims you can investigate and pursue:

  • Authenticity of the Will, Trust or amendment:  If the Will, Trust or amendment eliminating you was not actually signed by the person, you may be able to pursue a challenge. [Read more…]
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LIFE INSURANCE PROCEEDS PAYABLE TO TRUST ARE EXPEMT FROM CREDITOR CLAIMS

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In Estate of King, the Arizona Court of Appeals ruled that Arizona Revised Statute 20-1131(A)* (protecting life insurance proceeds from creditor claims) still applied even though the life insurance proceeds were payable to a trust and the trust agreement generically directed the trustee to pay the deceased’s expenses.

Kathryn King had created a trust.  Her minor son was the sole beneficiary of the trust.  She purchased a $2 million life insurance policy and named the trust as the sole beneficiary.  She died in November 2008.  When she died, her debts exceeded the value of her estate.  She had various real estate and other loans which the estate could not afford to pay without the life insurance proceeds. So, the creditors claimed that the estate was obligated to use the life insurance proceeds to pay their claims. [Read more…]

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