Arizona probate law includes special rules, exemptions, allowing certain amounts to be distributed to a deceased person’s family without first being subject to the claims of creditors. The exemptions discussed in this article apply only to the estate of a decedent who dies while residing (domiciled) in Arizona. Rights to exemptions when a decedent who is not domiciled in this state at the time of death are governed by the law of the state where the decedent lived at the time of death.
These exemptions and allowances include: the homestead allowance, exemptions for certain property, and the family allowance. Without these exemptions a family could be decimated financially if much of the family’s property is owned by one family member and that person dies. Without the exemptions and allowance, creditors could take everything the person owned, to the exclusion of the dependent family members. Also, life insurance proceeds may be exempt from creditor’s claims.
The Homestead Allowance
The first of these allowances and exemptions is the Homestead Allowance. The Homestead Allowance allows a decedent’s surviving spouse to receive $18,000, to the exception of creditors of the estate. The only expenses or creditors of the estate with priority over the Homestead Allowance are expenses of administration of the estate. For instance, court costs and attorney fees associated with the administration of an estate have priority over the Homestead Allowance. But, preexisting debts, such as credit card bills and automobile loans, are secondary to this allowance.
If a person dies without a surviving spouse, but leaves minor and dependent children, the children are allowed the Homestead Exemption. Each minor or dependent child is given an allowance equal to $18,000 divided by the number of dependent and minor children of the decedent. For example, if a person dies with no surviving spouse but with four dependent children, each of the four children is entitled to an exemption of $4,500, meaning that $4,500 of cash or property may be transferred to each child without being subject to creditors’ claims.
The Homestead Allowance is reduced by amounts that pass to a surviving spouse or child outside of probate in many circumstances, unless the will or other documents specify otherwise. So if a surviving spouse received a $15,000 bank account from her deceased husband because the bank account was designated Transfer on Death to her, that $15,000 account is charged against her Homestead Allowance, leaving her with only a $3,000 allowance.
If spouses (or a parent and child) own a home or other property as joint tenants with a right of survivorship, meaning that the property will pass to the survivor outside probate, that value of the deceased person’s portion of the joint property is chargeable against the survivor’s Homestead Allowance.
A person’s will (or the document governing the non-probate transfer) may provide that the transfer is not chargeable against the Homestead Allowance.
On top of the Homestead Allowance described in the previous section, a surviving spouse is also entitled to a personal property allowance. The spouse is allowed to receive items of property with a total value of no more than $7,000, after deducting the amount of any liens against the property, from the estate without being subject to creditors’ claims. This exempt property includes:
- Household furniture.
- Personal effects.
Like with the Homestead Allowance described in the previous paragraph, if a deceased person doesn’t leave a surviving spouse, his or her minor and dependent children are entitled to the same exemptions.
For example, if a person dies owning a car worth $2,000 and personal effects and furniture worth $5,000, that property can pass to his or her surviving spouse or children without being sold to pay creditors’ claims.
If a surviving spouse or minor or dependent children are entitled to receive exempt property but there isn’t enough exempt property in the estate to reach that $7,000 limit, the spouse or minor/dependent children may receive other property from the estate worth enough to reach that limit.
When property has a loan on it, only the equity in the property is considered for purposes of this exemption statute. So if, for instance, a person dies owning a $15,000 car, but the car has a $10,000 loan against it, the deceased person’s surviving spouse may receive the car, subject to the loan, under the exemption statute, leaving $2,000 worth of the allowance to be satisfied from other property.
A person’s right to receive exempt property, or to receive other property to reach the $7,000 limit, has priority over claims of creditors, except expenses of administration. Also as with the Homestead Allowance, any amount received by a person outside the probate process is chargeable against the exemption limit, unless the decedent’s will or the document governing the out-of-probate transfer says otherwise.
The Family Allowance
In addition to the exemptions and allowances discussed above, Arizona law also gives dependents of a deceased person a right to receive an allowance for living expenses while the estate is being administered. Without this allowance, dependents could be left without resources for a significant period of time.
This allowance applies only to a surviving spouse and minor children of the deceased person that were actually supported by him or her at the time of death. So if a deceased person was obligated to support his or her children but didn’t actually provide that support, the children would not be entitled to the family allowance.
This allowance is time limited in situations where an estate won’t be sufficient to pay all of the claims against it. If claims against the estate exceed the amount in the estate, the Family Allowance is limited to one year.
The Family Allowance can be paid as a monthly stipend of not more than $1,000 or may be paid in a lump sum of not more than $12,000. If there’s a surviving spouse, the allowance is paid directly to the surviving spouse for his or her support and the support of the minor children. If there isn’t a surviving spouse, the Family Allowance will be paid to the guardian of the children (or any other person that has “care and custody” of the children).
Like the other allowances and exemptions, the Family Allowance has priority over all creditors’ claims except expenses of administration. It is also chargeable against nonprobate transfers, in addition to other shares passing to the surviving spouse (or children) under a will. If the person entitled to the allowance dies, the allowance terminates and the remaining balance is not due to that person’s heirs.
If you are not receiving amounts due to you from your loved ones’ estate, or your rights are otherwise being violated in a probate matter, or you are the personal representative and need help administering a probate estate in Arizona, call us to schedule an appointment with one of our experienced Scottsdale, Arizona probate litigation and administration attorneys.