Creditors and real estate in AZ for probate

[azref2627]

What is the name of your state (only U.S. law)? AZ

My uncle, survived by his wife with Alzheimer's, passed with the following assets:

Bank accounts that were POD to my mother totaling $60k
Primary house worth $260k owing $220k loan in his name only. House has a TOD deed on it for my sister.
Second house worth $140k owing $140k loan jointly with spouse
Life insurance payable to my sister for $75k

My sister is executor of his estate.

Estate has 60k worth of credit card debt of which 40k is in his name and 20k is joint with his wife.

Are we able to avoid formal probate?

We want to "dump" the second house but would like to transfer title of the primary to my sister and just keep paying on the current loan.

How do the creditors get paid if the 60k went to my mother?

 

[NIV]

Does the deed on the primary only have the deceased on title or does it include mother as well before transfer on death?

Mother should probably dump the second house, at least from a financial point of view.

The credit card debt is a far more difficult problem because AZ is a community property state. Just because the debt does not have mother's name on it does not mean she is not responsible for it. At the same time, if mom cannot make decisions and is under some type of protection for the Alzheimer's, that could change some of her duties to her spouse too.

 

[FlyingRon]

You're going to have probate here. You're going to have to speak to a lawyer about what exactly is in the deceased's estate for probate.

NIV asks some questions that help, but they're not complete either. As NIV says, Arizona is a community property state. Notwithstanding how the deeds actually read, if they were acquired by marriage, they likely can be considered community property which may invalidate the subsequent TOD deed. Similarly, the accounts may also be challengable as community property.

Most likely, the life insurance payout isn't part of the estate.

I suspect the house owned with the wife is deeded such that it passes outside of probate.

 

[adjusterjack]

What is the name of your state (only U.S. law)? AZ

My uncle, survived by his wife with Alzheimer's, passed with the following assets:

Bank accounts that were POD to my mother totaling $60k
Primary house worth $260k owing $220k loan in his name only. House has a TOD deed on it for my sister.
Second house worth $140k owing $140k loan jointly with spouse
Life insurance payable to my sister for $75k

My sister is executor of his estate.

Estate has 60k worth of credit card debt of which 40k is in his name and 20k is joint with his wife.

Are we able to avoid formal probate?

No. All probate is "formal" in that you have to fill out paperwork and go to court. However, AZ has a simplified process for small estates and it appears that this one qualifies.

See the AZ small estates packet at:

https://www.superiorcourt.maricopa.gov/sscDocs/packets/pbse1.pdf

would like to transfer title of the primary to my sister and just keep paying on the current loan.

No need to "transfer title." The Arizona "beneficiary deed" already did that.

See ARS 33-405 for an explanation of how that works:

http://law.justia.com/codes/arizona/2016/title-33/section-33-405/

How do the creditors get paid if the 60k went to my mother?

Your sister is going to have to check with a lawyer but if the all the debt is community debt that $60K may have to pay it all and, depending on how advanced the Alzheimers is, your sister may have to go to court and get conservatorship before she can touch that account.

 

[LdiJ]

The other two people who responded need to re-read the original post.

UNCLE died and his 60k bank account was POD to the OP's mother (his sister), not his wife. His wife has Alzheimer's.

I agree that an attorney will have to be consulted about anything that might have technically been community property. However it won't be mom who could have been entitled to some community property, it will be Uncle's wife.

 

[FlyingRon]

The other two people who responded need to re-read the original post.

UNCLE died and his 60k bank account was POD to the OP's mother (his sister), not his wife. His wife has Alzheimer's.

I agree that an attorney will have to be consulted about anything that might have technically been community property. However it won't be mom who could have been entitled to some community property, it will be Uncle's wife.

I read it and understand it just fine. However, if the accounts were community assets, again I'm not sure the TOD is completely valid.
Now the Alzheimer's aunt may not be in a position to protest, but presumably the credit card debt is also community debt and the creditors may indeed take interest.
Medicaid also may take interest cause I can almost bet the aunt is receiving nursing care under that.
\

 

[adjusterjack]

The other two people who responded need to re-read the original post.

UNCLE died and his 60k bank account was POD to the OP's mother (his sister), not his wife. His wife has Alzheimer's.

Must have had my eyes crossed.

OK, the $60K is not part of the estate and is untouchable by creditors.

The estate still looks like it qualifies for small estate affidavit but creditors should still be notified by the personal representative of the estate that there are no assets with which to pay the debts.

There is probably a form letter online somewhere that will accomplish that.

 

[azref2627]

Thanks for the responses.

So if my mother has already taken possession of the 60k POD bank account that was only in my uncles name, where are the assets to pay the 60k in credit card debt coming from? When she notifies the creditors per her executor duties and they claim it as debt how does that work?

My sister is executor and she thinks she's liable.

The property question seems answered.

The deceased uncles wife with Alzheimer's obviously isn't challenging anything and she is now in the care of us.

Thanks

 

[LdiJ]

Thanks for the responses.

So if my mother has already taken possession of the 60k POD bank account that was only in my uncles name, where are the assets to pay the 60k in credit card debt coming from? When she notifies the creditors per her executor duties and they claim it as debt how does that work?

My sister is executor and she thinks she's liable.

The property question seems answered.

The deceased uncles wife with Alzheimer's obviously isn't challenging anything and she is now in the care of us.

Thanks

It appears that everything passed outside of your Uncle's estate. His bank account went to your mother, and the property with equity and the life insurance went to your sister, and the house he owned jointly with his wife went to his wife.

Therefore, there does not appear to be anything to probate, therefore your sister could legitimately decline to be the executor and to open probate.

She actually does not have the right to sell the house that he owned jointly with his wife as its not part of the estate, unless she is also POA or guardian for his wife.

Your sister is NOT responsible to pay the debts of the estate out of her own pocket...and the house and the life insurance are her property.

 

[azref2627]

One last question on this.

Looking through other threads I'm not sure why the 60k in bank accounts wouldn't be part of his estate to pay off his bills (understand that it wouldn't go through probate though). It did have a POD to another person not his wife but is this a special clause? Seems the creditors could argue it was the estates money a lot more than the POD recipients money.

Is it like life insurance in that it designates a specific beneficiary?

Thanks.

 

[adjusterjack]

The POD bank account is just like the life insurance benefit. It goes right to the beneficiary at the moment of death. It is not part of the estate and does not go to pay estate debts.

 

[azref2627]

Thanks for your replies - wasn't trying to be difficult. I found this from a legal website:

4. If the estate is insolvent, can a creditor make a claim against other assets transferred outside probate?

Yes, a determined creditor can request payment from persons who inherited an asset outside the probate process. For example, if Child inherited an account from Dad through a pay-on-death designation at a bank, a creditor of Dad could demand payment from Child. In order to do so, the creditor would have to deliver a written demand to the personal representative. The personal representative may then request Child to give back up to the entire amount received from the bank account to the estate. If Child refuses, the personal representative (or the creditor itself) can initiate a court proceeding to obtain a judgment against Child. This process is subject to the two year statute of limitations against creditor claims.

Wouldn't this apply in our case?

Thanks

 

[azref2627]

Then I found this one from a different legal website that contradicts the other one.

Will You Have to Pay Any of the Account Owner's Outstanding Bills?
A common question that comes up when the owner of a POD account dies owing a significant amount of credit card or other debt such as medical bills or a mortgage is whether the POD beneficiaries will be required to use any of the POD money to pay off the outstanding debt. In general, the answer to this question will depend on whether the beneficiary is a guarantor of the debt (such as a co-signor on a credit card or mortgage) as well as applicable state law. In some states if the POD beneficiaries are not guarantors or co-signors of the debt, then the beneficiary will be able to have immediate access to the POD account, while in other states each POD beneficiary may have to sign an affidavit confirming that the POD account owner did not have any debt prior to collecting the money remaining in the POD account.

Does anyone know which is correct by AZ laws?