WANT A TRUST? YOU WILL ALSO NEED A WILL.

I often get this question: Do I need a trust or a will? The answer is that if you have a trust, you also need a will.

I saw this article from the blog Fatherly and realized that even those holding themselves out as experts have no idea about the interplay between a trust and will. The headline reads: Estate Planning? Consider a Trust Instead of a Will. The article makes the reader think that it is an either-or proposition. Nothing can be further from the truth. It is almost always legal malpractice to create a trust and not also create a will.

The issue is trust "funding." Funding a trust means that you put assets into the name of the trust (e.g. your home is title in the name of "The John and Jane Doe Revocable Living Trust"). It is true that if all your assets are in trust, when you die your trust beneficiaries will likely never use your will. However, unless you have a full time attorney on staff, something ALWAYS gets left out of the trust (frequently everything gets left out). In other words, you have a trust, but it's empty of assets.

When assets are left out of your trust, you need a will to "pour over" assets into your trust. If you don't have a will, and something is left out of the trust, the asset pass to your intestate heirs, as directed by the state of Arizona. Why does this matter? You could end up giving your money to someone you do not wish to receive the money.

In other words, if you want a trust, get a will too.

TAX REFORM IS COMING—SHOULD I DELAY MY ESTATE PLAN?

I recently heard this question: “given that Congress is going to enact tax reform, should I delay establishing my estate plan?”  The questioner reasoned that once Congress acts he would need to change his estate plan anyways.  The short answer to this question is “no.”  Get your estate plan now. 

Firstly, the tax most individuals worry about—so called “death taxes”—are not likely to change to cause more tax. Congress is considering making the tax less onerous rather than more onerous.  https://www.huffingtonpost.com/entry/tax-reform-estate-tax_us_59f0b291e4b0d094a5b68c4c.   

Secondly, death taxes affect virtually no one.  Roughly .2% of deaths in 2017 will result in a federal estate tax.  It is estimated that of the 2.7 million people who will die in the United States in 2017, only 5,500 will pay any sort of death tax.  The reason is that your estate must be roughly $5.5 million before any federal estate tax kicks in.  http://www.taxpolicycenter.org/briefing-book/how-many-people-pay-estate-tax.  Moreover, even if you currently have over 5.5 million in assets, at the time of your death, after 20 years of retirement, you will not have those assets.  The money will be spent on your living expenses. 

Lastly, and most importantly, tax planning is only a small portion of your estate plan.  The most important part of the average estate plan involves the following:

1.     Determining who will care for your minor children.

2.     Avoiding confusion created when a person is a spouse in a blended family and/or has kids from a prior relationship.

3.     Avoiding the delay and costs associated with a probate.

4.     Determining who will represent your estate at your death.

5.     Determining how you will divide your assets at death.

6.     Determining who will care for your finances when you are incapacitated. 

7.     Avoiding confusion that can be created when you fail to create an estate plan.

8.     Determining how to pay your debts at death.

9.     Keeping the “family peace” by having a well ordered estate that clearly communicates how you want your estate divided and who you want to provide for at death. 

10. Creating that peace of mind that comes with good planning. 

Of course, I am writing about Arizona law, this general information may not be right for your specific matter, and is not legal advice. I’d be happy to talk to you, so give me a call at Davis Miles McGuire Gardner, 480-733-6800, or reach me at rsewell@davismiles.com.

CAN MY TEXT MESSAGES BE A WILL?

A recent case in Australia answered the question of whether a text message can create a will.  The Court ruled that a decedent’s text messages, some of which were unsent, could constitute a will.  http://www.telegraph.co.uk/news/2017/10/11/dead-mans-unsent-text-message-accepted-will/.   Think about how much confusion (not to mention fraud) this could create if this was the law in Arizona. 

Courts would be called upon to discern between fake text messages and real ones.  Experts would be called on to decipher whether the text messages were created before the death or after.   Courts would need to decide whether the text messages were supposed to revoke existing estate plans or just amend an existing estate plan.  Courts would need to decide whether the text was just a note for a possible future will or an actual will.  The list can go on and on.  Thankfully, this is not the law in Arizona.

To create a will in Arizona is simple.  It requires doing one of the two options below:  

Holographic Will:  A testator, over the age of 18, can create a holographic will so long as he/she writes the will, in his/her own hand, and it is signed by the testator.  There is no need for the will to be witnessed or notarized. 

Standard Will: A standard will is a bit more complicated.  These types of wills must have the following:

A.    It must be in writing;

B.    Signed by the testator or signed by someone else in his/her conscious presence for the testator; and

C.    Witnessed by two witnesses who witnessed the testator’s signature on the will.

If you have not complied with each requirement, you have not created a will in Arizona. You will die “intestate,” meaning without a will.  Please note that under the Standard Will, I recommend that a testator have his/her signature notarized. 

Despite the simplicity of creating a will in Arizona, I recommend that you hire an attorney to create your will or estate plan.  It is one thing to create a will that the courts will review and attempt to decipher.  It is yet another, and much harder, to create a will that actually conveys your property without confusion and without unnecessary litigation.  

PROTECT YOURSELF FROM THEFT: CHOOSE THE RIGHT PERSON AS POWER OF ATTORNEY

Bad estate planning decisions happen all the time, even when you have a great attorney. One common mistake: Choosing the wrong person to be your power of attorney. A recent case in the news was a great reminder. http://www.channel3000.com/news/crime/power-of-attorney-charged-with-taking-using-mans-money-for-personal-use/607446161. 

In that case, a Wisconsin woman became an elderly man’s power of attorney. After time, she began to spend his money on herself. Using his power of attorney and his money, she paid her mortgage and other bills. After she done, there was nothing to pay his bills. What she did is a crime in Wisconsin and in Arizona. She is now facing six felony counts.

What this woman did is not unique. It happens every day all over Arizona. However, it is preventable in many cases. My advice is the following: Choose a power of attorney when you don't need one—when you have a clear head—and when you are still competent to make good decisions.  Once you need a power of attorney you may not be in a position to make well-reasoned decisions. 

When choosing a power of attorney, be honest with yourself.  Does the person have good judgement? Is there anything in his/her character that would suggest he/she is not trustworthy? If you cannot answer these questions positively, choose a different power of attorney.  A person who has a history of dishonest acts or bad financial decisions should not be your power of attorney.

If you cannot find someone to trust, get a professional fiduciary to be a power of attorney for you. The professional will pay your household bills, manage your finances, and take care of any other issue in your life.  Most of all, a licensed and insured professional will keep you from being victimized.

Equifax--Be Careful of Accepting Help From Equifax

I was asked to comment on the Equifax credit dispute.  Be careful of accepting the free credit monitoring service.

I was asked to comment on arbitration on Channel 3.

FOUR ESTATE PLANNING TOOLS EVERYONE NEEDS

WARNING: At some point in your life the unexpected will happen.  If that “unexpected” is sickness, becoming mentally incompetent, or dying, you will need certain legal tools to get you through that period.  As you are guaranteed to either get sick, become mentally incompetent, or die, or all of them, my advice to you is obtain the following four documents:

          Will: A Will directs how you want your property distributed on death. It also may describe, among other things, who is to manage your Estate (e.g. personal representative or executor), who you want to take care of your children, and instructions about the payment of debts.  It does not avoid probate.  It is a “one way ticket” to probate.

            Durable and General Power of Attorney: A power of attorney gives someone the power to act on your behalf for legal matters.   A durable power of attorney springs to life if you are not medically competent to act for yourself. A general power of attorney gives someone broad authority to act on your behalf and should be carefully drafted to give authority in every legal area that you will need.

            Healthcare Power of Attorney: A healthcare power of attorney gives someone authority to make medical decisions on your behalf should you lack the ability. 

               Living Will:  A living will informs and gives direction about what medical treatment you want should you be unable to express you wishes.  In other words, if you are unconscious or mentally incompetent, this document will state whether you want life sustaining treatment, heroic lifesaving measures, or simply manage the pain while you pass.  

The above documents are the essential estate planning tools.  If you do not have the documents above, there are laws in place to compensate for your lack of planning; however, your end of life could become more complicated and more expensive for you and your loved ones.  Here are the legal alternatives that take the place of the above estate planning tools: 

  

Missing  Estate Planning Tool	Explanation of Why You Do Not Want This Result
Will	If you die leaving no will, the State will decide how to divide your assets at death. Please know that the rules for distribution may cause you to enrich someone that you did not intend or wish to enrich.
Durable and General Power of Attorney	A conservator is someone appointed by a court that manages all your assets, if you are not competent to do so (e.g. you are addicted to drugs, suffer from dementia, etc.).  The conservatorship is frequently thousands to administer.  The system is ripe with mismanagement, is cumbersome to administer, and can take hours of your loved ones time to administer.
Healthcare Power of Attorney	A Guardian is someone appointed by a court that manages all your healthcare needs.  If you value privacy, you will no longer have it with the guardian process as your healthcare is the subject of the court.  Moreover, it can costs thousands to administer.
Living Will	If you have not planned for your end of life, someone will plan for you.  This may mean that you are placed on life support for a prolonged period. Moreover, it means that you may burden your loved ones with the decision to terminate or extend life support.

Death and Debt

This is a terrible and misleading article and I want to set the record straight regarding debts and death:

1. If your loved one dies (who is not your spouse) and the loved one leaves behind debt, the survivors are NOT responsible for that debt; rather, the estate of the deceased is responsible.  It is important to note that the deceased cannot avoid the debts by giving his assets to his heirs through beneficiary designation, joint tenancy, or similar device.  The deceased will not escape those debts and creditors may, under the right circumstance, reach into funds transferred in that manner.    

2.  If your spouse dies and leaves behind debt, the spouse is frequently, but not always, responsible for the debt.  For example, the spouse leaves a credit card in his name but not in the spouse's name, the surviving spouse may be found responsible for the debt. A spouse should seek counsel regarding the debt from a qualified attorney because the issues are seldom clear.  

FATAL ESTATE PLANNING MISTAKES: ACCOUNTS IN JOINT TENANCY

This is the third article in a series, Fatal Estate Planning Mistakes, which focuses on "war stories" regarding common estate planning mistakes, as seen by a probate and trust litigator.  These stories are meant to serve as lessons for the average reader.  If the reader sees the mistake below in his or her estate plan, please contact Robert Sewell, Esquire, to discuss how to remedy the problem.

THE FATAL FLAW:  Cindy is an elderly woman with a paid off home, $50,000.00 in a checking account, $100,000.00 in a savings account and $100,000.00 in a retirement account.    She feels herself "slipping" and is no longer able to manage the daily tasks of shopping, banking, and paying bills.  To aid Cindy in her daily tasks she puts her daughter, Shelly, on each account as a joint tenant.  Shelly is now able to transact business from those accounts on Cindy's behalf.  Cindy’s Will grants an equal share of her entire estate, including the accounts, to three children. Upon Cindy’s death, Shelly inherits all Cindy’s cash and all the children inherit an equal share of the house.  In other words, one daughter takes significantly more than the remaining children despite the fact that the will grants each child an equal interest.  The reason for this result is that joint tenant accounts pass to the joint tenant upon the death of one of the tenants. 

THE REMEDY:  Parents who wish their children to take over financial operations for them should not choose joint tenancy to aid them.  Parents should give the child a power of attorney to transact the business.  There are two problems with putting a child as a joint tenant on the account.  First, joint tenancy causes the survivor to inherit all after the death of the remaining joint tenant.  Accordingly, joint tenancy causes one child to inherit more than all the other children.  If the parent wishes for all his/her children to inherit equally, joint tenancy force the opposite result.  Second, joint tenancy exposes the parent to the risk that the joint accounts will be used for the creditors of that child.  While there are statutes to protect against the wrongful taking of an elderly person's joint account, this frequently requires court intervention.  

If you are using joint tenancy, rather than powers of attorney to aid you in your business affairs, please consult with an attorney regarding whether this is a good option for you. 

FATAL ESTATE PLANNING MISTAKES

Wills Without Witnesses

This is the second article in the series, Fatal Estate Planning Mistakes, which focuses on "war stories" regarding common estate planning mistakes, as seen by a probate and trust litigator.  These stories are meant to serve as a lesson for the average reader.  If the reader sees this mistake below in his or her estate plan, please contact Robert Sewell, Esq., to discuss how to remedy the problem.

THE FATAL FLAW: Susie goes to the drug store and buys a will.  She fills in the blanks on the will.  The will calls for two witnesses for her signature and a notary.  Susie believes that two witnesses are optional and chooses only to have one witness and no notary.  In the will, she gives her entire estate to her daughter Janice and disinherits her son Victor (an addict that will use the money on drugs).  The result is that Susie dies intestate, meaning she has no will or estate plan, because the will was not witnessed by two witnesses.  Victor inherits equal to Janice. 

THE REMEDY:  Creating a will is a right given to you by the legislature.  This seems counter-intuitive; however, because so much fraud and deception has been involved with transferring wealth at death, the legislature insists that for a will to be valid it must meet certain requirements. Foremost among those requirements is that the will be signed by the testator whose signature is witnessed by two witnesses.  Attorneys have successfully argued that a will which has one witness signature and was notarized can be made to be valid in court.  However, there is little case law to support that argument and it will be left to a judge to evaluate the facts.  It is imperative to get two witnesses for every will.  Further it is best to have that will notarized. 

If your will lacks two witnesses, you should have the will reviewed by a qualified attorney to determine its validity. 

FATAL ESTATE PLANNING MISTAKES

Trusts Without Pour-Over Wills

            This is the first article in a new series, Fatal Estate Planning Mistakes, which will focus on “war stories” regarding common estate planning mistakes, as seen by a probate and trust litigator.  These stories are meant to serve as lessons for the average reader.  If the reader sees the mistake below in his/her estate plan, please contact Robert Sewell, Esq., to discuss how to remedy the problem. 

THE FATAL FLAW:  Frank creates a trust.  He titles no assets in the name of trust.  He fails to create a pour-over will believing the trust was enough.  Frank disinherits three of his six children from the trust because he supported these three disproportionately to the other children during his lifetime.  Frank dies believing all his property was in the trust.  The result is that the disinherited children inherit equally to the other children as Frank is “intestate,” meaning he has no estate plan.  This situation is not unique.

THE REMEDY: Individuals who wish to create a trust should also create a pour-over will.  A trust is a device that presently allocates property, as identified by the trust maker (“trustor”), to be placed into the trust.  If the trustor does not title his/her property in the name of the trust, the property is not in the trust.  Rather, upon the testator's death, the property is in the “estate.”  A pour-over will directs property left outside the trust on the trustor's death to be poured into the trust after death.    One might argue that another solution is to title everything in the name of the trust before death; however, whether intentionally or unintentionally, most individuals leave property out of the trust.  If you have a trust, but do not have a pour-over will, your estate plan is incomplete. 

(Please note:  I see this estate planning mistake often when individuals purchase trusts from the internet or from a certified document preparer.  If this is your situation, please have your estate plan reviewed.)

FIVE SIGNS YOU NEED A PROBATE AND TRUST ADMINISTRATION ATTORNEY

A self-represented successor trustee or personal representative (the “Estate Manager”) often ignores warning signs that problems are ahead.  There are a number of signs a Estate Manager is will experience problems and possibly litigation.  Here are five signs the Estate Manager is in trouble and an attorney should be hired:

1.   THE ESTATE MANAGER THINKS THE TRUST AND/OR WILL ARE A SECRET.  The Trust and Will are not a secret held only by the Estate Manager.   Beneficiaries requesting a copy of the Trust or Will, unless the document says otherwise, should receive the ENTIRE document.  If the Estate Manager makes the decision to withhold the document, it makes the Estate Manager appear furtive and beneficiaries lose trust.  When that happens, litigation may be forthcoming.     

2.  THE ESTATE MANAGER IS ACCUSED OF WRONGDOING. A sign of possible litigation ahead is a beneficiary accusing an Estate Manager of wrong doing. This can happen even when the Estate Manager has committed no technical wrong (e.g. he has not stolen the money).  At key moments in the administration of a probate or trust certain things must happen.  An Estate Manager who meets deadlines, provides notice of key events, and provides proper accounting of the estate/trust, engenders trust, can quiet distractors, and in many cases, can stop litigation before it happens.   

3.  THE ESTATE MANAGER THINKS TAXES ARE A PROBLEM ONLY FOR THOSE “RICH GUYS.”  Every estate and trust, large or small, must consider tax issues.  For estates and trusts over 5 million dollars, estate taxes (aka “death taxes”) may be owed.  However, there are other taxable events.  For example, negotiating debts lower than the face amount owed may cause a taxable event.  Significant gifting before the death may cause a taxable event or, at minimum, reporting of the gifts.  The estate/trust making money after the death may cause a taxable event. The decedent’s last income tax return may need to be filed.  As the saying goes, the only thing certain is “death and taxes.”       

4. THE ESTATE MANAGER PAYS BENEFICIARIES BEFORE PAYING ALL THE DEBTS. Debts are paid before beneficiaries.  This sounds simple, but frequently it happens in reverse. An Estate Manager must keep enough money to pay debts and taxes or a lawsuit against the Estate Manager may be forthcoming. 

5.  THE ESTATE MANAGER GUESSES AT THE MEANING OF THE ESTATE DOCUMENTS.  Frequently, an Estate Manager does not understand the estate documents so he/she guesses at the meaning.  If the documents are unclear, an Estate Manager cannot guess at the meaning.  He/She must ask the court for instructions. 

These are just 5 warnings signs that the probate or trust administration is heading for trouble.  If you see any of these signs, either as a beneficiary or Estate Manager, you should immediately contact an attorney.  

TEAR UP THE WILL—A LESSON REGARDING OLD WILLS

Stephen was brilliant.  He graduated top of his class—he married the prettiest girl in town—his children were all above average—and his business ventures always succeeded.  While Stephen truly lived well, he died leaving a complicated estate. 

When Stephen died, his children gathered for his funeral.  Afterwards, they entered his study, where Stephen kept his important papers, and searched for his will.  His will was not found.  Instead, they found a photocopy of a will that was executed ten years previous.  The will gave everything to a charity. 

His children were aghast.  Did he really forget them and refuse to leave them a legacy?  After all, he had spoken to each child about the money he was leaving for education of his grandchildren.    

            Luckily for the children, they consulted a trusted attorney.  The children were informed that courts are reluctant to probate a copy of a will.  Where only a copy of a will is found, the will is presumed to be revoked unless proven otherwise.  The reason for this rule is simple: people frequently change their mind about how to divide their estates on death.  Therefore, they will often revoke the will by tearing it up.

According to A.R.S. § 14-2507, a person may revoke a will, in whole or in part, by performing “a revocatory act.”  This means, among other things, that the person who creates the will can revoke the will by “burning, tearing, cancelling, obliterating or destroying the will or any part of it.”  In Stephen’s case, the children will rest easy because the original will was never found.  If the charity tries to probate the copy of the will, it will need to prove that Stephen did not revoke the old will, which is a difficult burden.  

It is quite possible that Stephen's Estate will be what's called "intestate."  Accordingly, the children will likely inherit under Arizona law.  

HOW TO PROBATE AN ESTATE AND ADMINISTER A TRUST

(SEVEN MUST-DO STEPS)

            Probating an estate or trust is like working on an engine.  Each individual process is not complicated; however, the entire machine must work together for success.  Here are seven must-do steps for a personal representative/trustee to successfully complete the process. 

            1.         INVENTORY:  Make a detailed list of the assets in the estate and/or trust.  Remember, your family and friends, the other beneficiaries and heirs, will carefully scrutinize this list.  Moreover, a court might also be scrutinizing this list.  Take care that the list is accurate and complete.

            2.         APPRAISE:  After you create the inventory of assets, you must appraise the assets.  You likely will need to hire appraisal experts to appraise the assets.  Practically speaking, appraising personal property with little value can be done in the same manner as appraising items given to Goodwill.  However, things of greater value should be appraised by professionals.  For real property an appraisal professional for real estate should be retained.  For cars you may use Kelley Blue Book.  If it is a collection, an expert in that collection should be retained.

            3.         DEBTS:  Identify all the creditors to the estate and/or trust.  Make a list of creditor names, addresses, account numbers, and how much is owed.  Identify statements that prove what was owed.  Keep all this information in a file by itself as you will need it for the accounting. 

            4.         GET ADVICE:  Advice from professionals is will help to successfully complete the process.  I recommend working with an attorney who has a trusted network of advisers including a CPA, real estate sales professionals, appraisal professionals, and investment advisers.  You must determine with your attorney how you will change the various titles to the assets, how you will handle taxes and debts, and the legal process by which you will administer the estate or trust.  Sometimes, estates are so small that a shortened procedure for administration can be undertaken.  Other times, estates and trusts are so large and complex that a lengthy court process is necessary to fully administer.

            5.         PREPARE AN ACCOUNTING:  Preparing an accurate and complete accounting is an important step in administering the estate or trust.  The beneficiaries and heirs want to see where the money has been spent.  They want to make certain that you have accurately and completely done your job. 

            6.         PROPOSED DISTRIBUTION:  Along with the accounting you should send out a proposed distribution schedule.  Under Arizona law, a person must object to a proposed distribution in 30 days; otherwise, the devisee/beneficiary will lose the right to contest the distribution.  Again, you should work with your attorney to make a proposed distribution that will foreclose objections. 

            7.         DISTRIBUTE AND PAY:  The final steps are distributing the estate/trust to devisees/beneficiaries and pay the debts.  In this process, I recommend obtaining receipts and releases wherein the devisees/beneficiaries release you of liability associated with the estate and trust. 

            This is not an all-inclusive to-do list; however, every trust and/or estate will need to complete the process above.

NEW CHANGES TO SMALL ESTATES

I first published the article below on February 4, 2012.  Since that time there have been major changes to the law on small estate affidavits.  The threshold for real property small estates is now less than $100,000.00 and personal property small estates are now less than $75,000.00.  This is good news as more families can now qualify for the shortened procedures. Accordingly, I decided to republish the article below with the highlighted updates: 

TOO SMALL FOR PROBATE

I frequently have people ask me this question: Do I need to probate the estate when my loved one had nearly nothing?

The answer is—like in nearly all legal questions—it depends. When an estate is small, Arizona will allow for mini-probates accomplished by affidavit called a “Small Estate Affidavit.” To qualify for probate by Small Estate Affidavit the estate and the person signing the affidavit (“affiant”) must meet certain qualifications. There are two types of small estate affidavits: (1) Real property, and (2) Personal property.

Real Property Small Estate Affidavit

To transfer real property by Small Estate Affidavit the estate and affiant must meet these qualifications:

1. The affiant must be legally entitled to the property.

2. The value of all real property, less liens and encumbrances, cannot exceed $100,000.00.

3. There must be no probate application pending, or it must be over one year from the closing of an estate or discharge of the personal representative, or no personal representative has been appointed in the past year.

4. Six months must have passed from the decedent’s death.

5. All funeral expenses, unsecured debt, and taxes must be paid.

Personal Property Small Estate Affidavit

To transfer personal property by Small Estate Affidavit the estate and affiant must meet these qualifications:

1. The affiant must be legally entitled to the property.

2. The value of all personal property, less liens and encumbrances, cannot exceed $75,000.00.

3. There must be no probate application pending, or it must be over one year from the closing of an estate or discharge of the personal representative, or that no personal representative has been appointed in the past year.

4. Thirty days must have passed from the decedent’s death.

If you meet the above requirements, a full probate may not be necessary. The best way to determine whether you qualify to avoid probate is to discuss the estate with a qualified attorney.

FOUR PROBATE MISTAKES THAT LEAD TO LITIGATION

When someone dies, administering the person's estate can be a frustrating and an aggravating process.  Everyone seems to want or need something—beneficiaries—government—courts—creditors—etc.  The pressure causes people to make mistakes.  In my practice, I have noticed four common mistakes that increase heartache, administrative time, and cause unnecessary litigation.  The mistakes are as follows:

1.                   Keeping Secrets.  Sometimes personal representatives resent providing information to beneficiaries. Instead, the personal representatives want to keep estate business secret and frequently refuse to provide information.  This is a mistake.  Testamentary documents, the status of the administration, as well as the expenses of the administration are not secrets.  To the extent reasonable, information regarding the estate should be made available to the beneficiaries in a timely manner.  Providing the information assures the beneficiaries that the assets are properly managed.  Moreover, secrets create suspicion while disclosure creates trust.

2.         Comingling Funds.  Too often personal representatives put the deceased’s money in the same account as their own accounts.  Moreover, personal representatives sometimes pay personal expenses from the estate.  This is a breach of fiduciary duty and creates problems for administration.  Commingling creates an accounting nightmare as the money must be tracked.  It gives the appearance that the personal representative has stolen the money.  Lastly, even if the personal representative had no mal-intent, the appearance of impropriety may invite a lawsuit from the beneficiaries. 

3.         Avoiding the Estate Business.  Avoidance of the estate business is common place and creates problems down the road.  Prompt attention to financial and legal issues of the estate is imperative as deadlines to perform the work frequently loom.  Failing to adhere to the deadlines often increases the cost and complexity of the administration.   

4.         Following the Deceased’s Oral Instructions.  A personal representative cannot guess at what the deceased wanted to happen with the property.  I often hear clients say that "Mom told me before she died that she wanted me to have the house."  While I understand that mom may have said that, it has absolutely no bearing on who receives the property at death.  If the testator wants to control assets after death, he/she must make a valid written testamentary document.  Without such, the state intestacy statutes will determine who receives the property.  Absent agreement from all the heirs/beneficiaries, a personal representative cannot use oral instructions from a parent to decide who receives the estate property.     

If you recognize any of the actions above in yourself or others, you should contact an attorney to discuss the matter.  Probate of an estate is hard work, but does not need to cause heartache. 

PUBLIC CORRUPTION, REALLY?

            Socrates was famously charged, convicted, and sentenced to death for the crime of “public corruption.” Specifically, he was charged with corrupting the youth of Athens.  It was believed by the jury that Socrates had encouraged students to follow his chosen path, which was in conflict with the Athenian form of democracy and the powers at be.  In other words, Socrates ruffled the wrong people’s feathers. 

             Attorneys can also ruffle people’s feathers in the aggressive pursuit of a client’s cause and will often pay a personal price doing so.  Years ago I represented a small business owner that was wrongfully sued by an individual.  I pursued the matter with my usual attention to detail and aggressive-style litigation.  After  a few months of litigation with David Derringer, the plaintiff, it became clear that he was so caught up in his self-righteousness that he would never give up on the cause. 

After winning the action for the business owner, the disgruntled Derringer sued me, my client, my client’s employees and a number of other individuals.  In fact, he sued me not less than three times — two federal court actions and one state court action.  He took his matter all the way to the Ninth Circuit Court of Appeals and the Arizona Court of Appeals.  In fact, he even made a writ of certiorari to the United States Supreme Court.  Obviously, the actions were defeated because they were baseless.  

            So, how does this relate to Socrates?  I was accused of, among other things, public corruption.  Derringer has created a website dedicated to the bogus claims of public corruption allegedly committed by me, Robert Sewell.    

             David Derringer, wherever you are, I view your relentless pursuit of me as a badge of honor.  I may not be Socrates, but I certainly pursued a cause in which I believed and successfully defended against your claims.  Moreover, I will continue to aggressively pursue my clients’ causes, even if it results in more ridiculous defamation against my character.

OFFERS OF SETTLEMENT – AN IMPROVED LITIGATION WEAPON

I once represented a client who was sued for over $400,000.  My objective analysis showed that my client actually owed somewhere between zero and $100,000.  So, my client offered in writing $100,000 to settle the case.  That offer, which was rejected, put the opposing side “on the ropes,” as case became more about beating the $100,000 offer than winning $400,000.  A settlement offer can act as a weapon in litigation and turn a losing case into a winning case.  As you see, rather than being a sign of weakness, an early settlement offer can actually turn the tide for a defendant in a difficult spot. 

A new law supports early settlement offers even more strongly. As of January 1, 2013, the Arizona Legislature changed A.R.S. 12‑341.01, regarding attorneys’ fees in a contract action, to allow the court to consider written offers of settlement in determining the reasonableness of attorneys’ fees for the party who is granted judgment.  Under this statute, if a party that makes an offer of settlement that is equal to or more favorable than the ultimate award, then the offeror may be deemed the successful party and, therefore, may be awarded attorneys’ fees.   The exact language of the statute reads like this:

In any contested action arising out of a contract, express or implied, the court may award the successful party reasonable attorney fees. If a written settlement offer is rejected and the judgment finally obtained is equal to or more favorable to the offeror than an offer made in writing to settle any contested action arising out of a contract, the offeror is deemed to be the successful party from the date of the offer and the court may award the successful party reasonable attorney fees. This section shall not be construed as altering, prohibiting or restricting present or future contracts or statutes that may provide for attorney fees. 

In other words, settlement offers can make a losing party the successful party. 

Therefore, as a strategy, a defendant with a difficult case should honestly analyze the case early in the action and determine what the defendant may owe.  Thereafter, the defendant should make a settlement offer to reflect what the plaintiff may win at the end of the litigation. If the defendant’s guess is ultimately correct, but the plaintiff rejected the offer, the defendant can lose the case but still collect attorney’s fees.  At the end, the defendant’s award of attorneys’ fees could potentially be used to offset the final award.

A recent case styled Hall v. Reed Development, Inc., analyzes this very strategy.  In that matter, the defendant made numerous settlement offers.  However, each time the defendant offered settlement, the settlement offer was significantly less than the attorneys’ fees plaintiff had incurred at that stage in the litigation.  The court of appeals reasoned that “we conclude that comparing the ‘judgment finally obtained’ under Section 12‑341.01(A) to a settlement offer should involve only those reasonable fees and costs incurred as of the date the offer was made.” The takeaway from this case is that a defendant should make a reasonable offer of settlement early and include the current attorneys’ fees and cost to that point.     

 
Therefore, in a difficult fight, make realistic offers, make them early, and fight hard if those offers are rejected – even if you “lose” you can still win!

TOO SMALL FOR PROBATE

I frequently have people ask me this question:  Do I need to probate the estate when my loved one had nearly nothing? 

The answer is—like in nearly all legal questions—it depends.  When an estate is small, Arizona will allow for mini-probates accomplished by affidavit called a “Small Estate Affidavit.”   To qualify for probate by Small Estate Affidavit the estate and the person signing the affidavit (“affiant”) must meet certain qualifications. There are two types of small estate affidavits:  (1) Real property, and (2) Personal property. 

Real Property Small Estate Affidavit

 To transfer real property by Small Estate Affidavit the estate and affiant must meet these qualifications:

 

1.      The affiant must be legally entitled to the property.

2.      The value of all real property, less liens and encumbrances, cannot exceed $75,000.00.

3.      There must be no probate application pending, or it must be over one year from the closing of an estate or discharge of the personal representative, or no personal representative has been appointed in the past year.

4.      Six months must have passed from the decedent’s death.

5.      All funeral expenses, unsecured debt, and taxes must be paid.    

 

Personal Property Small Estate Affidavit 

To transfer personal property by Small Estate Affidavit the estate and affiant must meet these qualifications:  

1.      The affiant must be legally entitled to the property. 

2.      The value of all personal property, less liens and encumbrances, cannot exceed $50,000.00.

3.      There must be no probate application pending, or it must be over one year from the closing of an estate or discharge of the personal representative, or that no personal representative has been appointed in the past year.

4.      Thirty days must have passed from the decedent’s death.   

If you meet the above requirements, a full probate may not be necessary.  The best way to determine whether you qualify to avoid probate is to discuss the estate with a qualified attorney.