Category Archives: Personal Representative

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Should you waive bond?

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If your loved one died either without a Will, or with a Will that fails to specify if bond is waived, the person nominated as Personal Representative (aka, Executor) will probably ask the other heirs to waive bond.  (Click here to see a sample Waiver of Bond form.)  Should you waive bond?

What is bond? Bond (in terms of a probate) is a type of fiduciary insurance policy that insures against the Personal Representative improperly administering the estate or stealing assets.  In order to qualify for bond, the Personal Rep needs to either have good credit and a net worth that equals the value of the estate, or find someone who meets those qualifications to co-sign as a guarantor.

The main reason that a nominated Personal Representative will ask other family members to waive bond is the PR can’t qualify because he or she has bad credit or does not have a sufficient net worth.  This is a bad sign.  Do you want someone who the credit reporting agencies recognize as a bad money manager being in charge of your loved one’s estate?  Probably not.

You don’t have to be nice.  It’s okay to protect yourself.  Require the PR to post bond.  It will protect yourself in case the PR acts improperly.  If you give in, and sign the Waiver of Bond form, it’s hard to unwind that.  If the PR gains control of the estate and steals money or makes bad decisions, you won’t find out for at least six months to a year. By then, the money could be gone.  Even if you then file a Petition to remove the Personal Representative and get a judgment against the PR for the missing money, do you really think you can collect against someone with few assets and poor credit?  Good luck!

If you have any questions about what to do, reach out for help.  Call a probate attorney at Magellan Law (at 602-443-4888) and ask for a free consultation.  You may need to pay an attorney for a little time to assist you.  But that will be money well spent.


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What is a De Facto Personal Representative?

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In Arizona, and perhaps in other states, a court can hold a person liable for managing a deceased person’s estate even prior to being appointed as personal representative. I refer to such a person as a “de facto personal representative.” Under Arizona law, such liability arises according to  a combination of A.R.S. § 14-3701 and  the court’s inherit equitable powers. Such a liability can arise, for example, when someone is nominated as personal representative in the deceased person’s Will, but that person decides it is more beneficial personally to take no action (sometimes failing to probate the Will for years) and simply hold onto estate assets for personal gain. Such a person can be held accountable as a “de facto personal representative” for failure to abide by the duties of a personal representative, even prior to the person being officially appointed by the court.

The Arizona Probate Code specifically authorizes certain actions by a person acting as Personal Representative prior to appointment, thus essentially creating the possibility of a “de facto Personal Representative.” A.R.S. § 14-3701 (“Time of accrual of duties and powers”) provides:

The duties and powers of a personal representative commence on appointment. The powers of a personal representative relate back in time to give acts by the person appointed which are beneficial to the estate occurring prior to appointment the same effect as those occurring thereafter. Prior to appointment, a person named personal representative in a will may carry out written instructions of the decedent relating to the decedent’s body, funeral and burial arrangements. A personal representative may ratify and accept acts on behalf of the estate done by others where the acts would have been proper for a personal representative.

(Emphasis added.)

Courts in other states have interpreted similar statutes as creating a “de facto Personal Representative,” and have found such a person liable for failing to live up to the fiduciary duties of a Personal Representative. See, e.g., Footnote 15 of In re Estate of Bryant v. Bryant, 793 A.2d 487, 493 (D.C. 2002), which states:

While Ms. Bryant had yet to be appointed formally to serve as personal representative, D.C. Code § 20-505 (1981 and 1989 Repl.) provided that “acts which by statute are authorized to be done without prior Court approval after the issuance of letters but which in fact were committed by the personal representative prior to issuance of letters, when done in good faith, shall have the same effect as acts occurring after the issuance of letters.” A personal representative is authorized to pay valid claims and distribute the estate without first obtaining court approval. See D.C. Code §§ 20-701 (a), 20-741 (r) (1981 and 1989 Repl.). The trial court found no genuine dispute (and we agree) that Ms. Bryant acted in good faith, and without obtaining any improper personal advantage, when she transferred the funds to Charles Bryant to enable him to pay partnership creditors. Thus we treat that act as that of a de facto personal representative, and evaluate it against a personal representative’s legal obligations.

(Emphasis added.)

However, the Arizona statute (A.R.S. § 14-3701) only discusses powers of a de facto Personal Representative, and not the person’s responsibilities. Section 14-3701 states, “[t]he powers of a personal representative relate back in time to give acts by the person appointed which are beneficial to the estate occurring prior to appointment the same effect as those occurring thereafter.” Does this mean, for example, that someone acting as personal representative following appointment is held to the fiduciary duties of acting in the best interest of the successor of the estate, but that same standard does not apply to someone who, prior to appointment takes control of estate assets (such as the deceased person’s house), treats those assets as her own, fails to tell the rest of the family that they have an interest in the estate, and/or fails to collect rent (and hold it for the rest of the family)?

Such a result would make no sense. That is essentially what the Estate of Bryant case holds. And it seems ludicrous to think that an Arizona court would decide this case any differently.

If you know of someone who has failed to act responsibly regarding a deceased person’s estate (prior to that person being appointed as a Personal Representative), you should contact a probate litigation attorney right away. You may be able to have a court hold that person to the same standard as an appointed Personal Representative, including the duties to serve the “best interests” of the successors to the estate, and to act with fairness and impartiality to the other heirs and devisees (beneficiaries of a Will).


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When One Party to a Contract Dies

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If one party to a contract dies, the deceased person’s estate can usually simply enforce the agreement the same as if the original party to the contract were still alive. However, things can get even more complicated when dealing with family. For example, let’s say that one person loans money to another, such as when a parent loans money to a child. Is the contract still enforceable even when one party to a contract dies? Being a lawyer, my answer is, “It depends.”

For purposes of this post, I’m going to assume that there once was a valid contract. In other words, I’m not going to analyze the requirements to form a valid contract (such as offer, acceptance, lack of valid defenses, etc.). And I’m not going to analyze whether it was required to have been in writing (such as for a contract to transfer real property). However, I will discus some of the trickier issues that can arise when a person who is part of a contract (in other words, a “party to the contract”) dies.

Statute of Limitations Issues. A statute of limitations is a statute that limits the amount of time within which you can bring a legal action to enforce a contract. In Arizona, for example, a legal action to enforce a written contract signed in Arizona must be brought within six years of the breach. See A.R.S. 12-548. But what happens when we are dealing with family members?

Imagine this example: A parent loaned money to a child 10 years ago, and the parties signed a written loan agreement. The loan agreement stated the amount that was due and the interest rate. However, it did not provide a due date. The parent just died. Is the contract enforceable by the parent’s estate? Probably yes, unless some other defense applied, such as laches.

How about if the contract required periodic payments, plus an optional acceleration clause on the due date of each matured but unpaid installment? In that event, the six-year period would begin to run on the due date of each matured but unpaid installment. As to unmatured future installments, the period commences on the date the creditor exercises the optional acceleration clause. Navy Fed. Credit Union v. Jones, 187 Ariz. 493, 930 P.2d 1007, 233 Ariz. Adv. Rep. 47, 1996 Ariz. App. LEXIS 281 (Ariz. Ct. App. 1996).

Discovery Rule. This is the rule that a claim accrues when the plaintiff knew or should have known by exercise of reasonable diligence that the plaintiff had been injured. Gust, Rosenfeld & Henderson v. Prudential Ins. Co. of Am., 182 Ariz. 586, 898 P.2d 964, 193 Ariz. Adv. Rep. 3, 1995 Ariz. LEXIS 55 (Ariz. 1995). The important inquiry in applying the discovery rule is whether the plaintiff’s injury or the conduct causing the injury is difficult for the plaintiff to detect. Gust, Rosenfeld & Henderson v. Prudential Ins. Co. of Am., 182 Ariz. 586, 898 P.2d 964, 193 Ariz. Adv. Rep. 3, 1995 Ariz. LEXIS 55 (Ariz. 1995).

Dead Man’s Statute. Arizona’s “Dead Man’s Statute” provides that “neither party shall be allowed to testify against the other as to any transaction with or statement by the testator…unless called to testify thereto by the opposite party, or required to testify thereto by the court.” A.R.S. § 12–2251. While most other states have eliminated their Dead Man’s Statutes, Arizona still has such a statute. However, it is discretionary. Personally, I have raised the Arizona Dead Man’s Statute multiple times over the years. In the context of a dispute over a written promissory note, the issue might be whether the debtor made payments that he claims should have reduced the debt. Verbal discussions with the deceased person over whether there was an agreement that payments or services (such as repairing the deceased person’s roof) were to be applied to the amount owing on the debt would usually fall within the Dead Man’s Statute. However, I have yet to witness a probate judge or commissioner actually keep evidence out based on the statute. Similarly, such discussions also typically fall within the definition of hearsay, but such hearsay statements are usually allowed in as freely as the shirttail relatives that often attend probate hearings.

This is by no means an exhaustive discussion. If you are trying to enforcement a contract against a deceased person’s estate (or if you are in charge of an estate involving such a situation), you really need an attorney.

If you have had any experience involving the enforcement of a contract when one of the parties has died, please share below.

 


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Business Owners Need Estate Plans

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Business owners need estate plans in order to ensure their businesses survive once they pass away. Here is why. Let’s say you own a successful business. It has lots of employees and ongoing business. There are contracts that need to be completed, and staff that needs to be paid. Then you die. You have a Will that names your spouse as the Personal Representative (executor). However, Wills need to be probated, and normally the soonest that can happen is one week from the date of death. Assuming there aren’t any hangups (such as the Will failing to waive bond), the surviving spouse can be appointed as Personal Representative right away.

But a week can be an eternity in the business world. Employment laws dictate that payroll needs to be paid within a certain time after the pay period ends. And what if there are employees in the field who need expenses covered?

Also, who is going to manage the business until it gets sold? Selling a business can’t be done in a matter of days. It takes time. Can your business last the months is normally takes to find a buyer and arrange a sale?

Here is the best way to plan ahead of time. The best way to plan ahead is to have a revocable trust that names a responsible (and business savvy) trustee to take over if you can no longer manage your business. Then make sure that your trust owns the business. If your business is an LLC, the member of the business needs to be the trust. (In other words, you will file Articles of Amendment for your LLC that replaces you as the member with, for example, “John Doe, Trustee of the ABC Trust, dated January 1, 2014.”) Make sure the trust language permits the trustee to manage an ongoing business, and that it permits the trustee to delegate the responsibility of managing the business to a replacement business manager.

NOTE: The word “manager” is used in two different ways here, and it can be confusing. The “manager” of an LLC is the person listed with the Secretary of State as the person in charge of the LLC. However, in terms of managing a business, that may be completely different people. I normally assist clients in this regard by having the LLC Manager (the person named as the official manager on the Articles of Organization) sign a Resolution naming one or more assistant managers. These assistant managers are the people who are actually on the ground running the business: making sure that paychecks get signed, continuing marketing efforts, meeting with clients, etc.

You can read more on this topic at an enterprise.com article here.

Have you heard of situations in which the business owner died and the business struggled as a result? Do you have any insights? Please share below.


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Removing a Personal Representative: How to Appoint a Successor

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Removing a Personal Representative How to Appoint a SuccessorIn the last few posts, we’ve looked at the first two steps in removing an ineffective personal representativegathering evidence and petitioning the court. Once these steps are completed, you will need to appoint a successor. You’ll want to be particularly careful in choosing a qualified replacement after going through the effort to remove an ineffective personal representative.

If you think you can do a better job yourself than the person who had been personal representative, think twice. Before nominating yourself for the position, you should understand the responsibilities and duties of a personal representative. While you may be qualified to fulfill the role, it may be more than you really want to deal with.

Serving as a personal representative in an estate is time-consuming and requires great attention to detail. You will need to work closely with both your probate attorney and a CPA to make sure that everything is done properly. This includes the inventory of the estate, detailed recordkeeping, annual accountings of the estate, and other details that you might not have considered.

Here are a few criteria to consider when deciding whom to appoint as personal representative:

A personal representative must be bondable. This means the person can be insured against fraudulent acts. Most states require this measure to protect the beneficiaries of the estate. The size of the personal representative bond must equal the amount of the estate’s estimated value. (For instance, you would need to have a net worth of $5 million in order to be bondable to administer a $5 million estate.)

A personal representative must have good business sense. Managing an estate requires a lot of the same skills needed to run a business. It’s a big responsibility. Personal representatives are held to higher standards in managing the estate than they would be in their own personal affairs. The courts take this responsibility very seriously.

A personal representative must be reliable and of good character. Choosing a personal representative who suffers from drug or alcohol addiction is an obvious bad move. And of course choose someone who does not have a criminal record.

The replacement personal representative is often appointed in the same petition that removed the original personal representative. You will work closely with your probate litigation attorney throughout the petition process.

A hearing will be scheduled after the petition is filed with the court. Depending on the case, the petition process can require several hearings that will eventually lead to the trial. (Actually, in probate court, the trial is called an evidentiary hearing.)

Unfortunately, the process of appointing a new representative is rarely quick. In uncontested cases with ample evidence, the case can be resolved within a few weeks. However, it usually takes several months to resolve the issue in contested cases.

Petitioning to replace a personal representative can be an emotional and overwhelming task. The guidance and assistance of a lawyer familiar with probate litigation can help make the process less challenging (and less lengthy). Look for a skilled litigation attorney to be your advocate in protecting your inheritance, and to make a difficult time easier for you and your family.

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Petitioning to Remove a Personal Representative

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Petitioning to Remove a Personal RepresentativeIn the previous post we covered how to gather evidence to remove a personal representative. Once you have the necessary documentation as evidence, you can petition the court to remove the personal representative and appoint a successor.

The first step in petitioning the courts is to work with your probate litigation attorney to put together a formal Petition for Removal of Personal Representative and Appointment of Successor Personal Representative.

The Petition needs to include specific details that will be used as evidence to justify the removal of the personal representative. The more evidence and documentation that you can provide to the judge, the better your case. (Documentation should clearly show mismanagement of the estate, such as copies of checks drawn on the estate written to the personal representative, indicating that the representative is using estate money for personal gain.)

Once you have compiled the initial paperwork, the next step is to discuss with your attorney how quickly you should act to remove the representative. Discuss with your attorney if you can petition the court for emergency relief, if you feel this is necessary. The courts will work with you if you can prove that there’s an urgent need to replace an ineffective (or dishonest) personal representative. Probate judges and commissioners are both extremely busy and also extremely reluctant to take immediate action to remove a personal representative. The process of removing a personal representative normally takes months.

However, there are things you can do in the meanwhile. You can get a Temporary Restraining Order preventing the personal representative (or others) from taking action detrimental to the estate. You can request an Expedited Order for Formal Administration, meaning that the Personal Representative will need to get the court’s approval before taking any future action.

If the court approves the emergency status here, the court will take action quicker than it would otherwise. In most cases, there will still need to be at least one hearing. In any event, your lawyer can help you in arranging this.

If your case is not urgent, it will likely take the court anywhere from a few weeks to a couple of months before it intervenes. Everyone involved in the estate will need to be notified of this process. (Again, remember that there are often steps that can be taken to protect the estate in the meanwhile.)

There is normally more than one hearing. The first one, known as a “return hearing,” determines whether anyone objects to your petition. If that happens, then the court will require an additional hearing, or hearings, to sort out the situation.

Because each case is different, there’s no set standard for the amount of time or number of hearings a case will take to be settled. On average, you can expect the process of getting a court order to remove a personal representative to take between three to six months. In certain situations, such as where you are able to provide evidence that the personal representative is stealing assets or jeopardizing the value of the estate, the court might take more immediate action.

It’s important to keep an eye on the progress of the case, especially if you’re expecting an inheritance.

Be proactive. Seek the help of an experienced probate attorney if you suspect things related to the estate aren’t being handled correctly. Waiting to take action can jeopardize the estate and your loved one’s legacy. (Once money is spent or things have been stolen, it’s usually pretty hard to get it back.)

If you need help petitioning to remove an ineffective personal representative or trustee, please contact our office.

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What are the Duties of a Personal Representative?

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What are the Duties of a Personal RepresentativeA good estate plan covers key life decisions such as what happens to your home and other assets if you die. It also addresses who will care for your children and financial assets if you pass away. Your personal representative will be the one to make the necessary decisions to carry out your wishes.

The role of personal representative is a big responsibility. Settling the estate of a deceased person requires attention to detail. It’s important to select someone who is qualified for this position regardless of your net worth.

Specific duties and responsibilities can vary slightly from state to state. I practice in Arizona, but in this two-part overview, you’ll be able to get a sense of the duties of a personal representative, regardless of where you live in the United States.

  1. Act as personal representative. Perform fiduciary duty of fairness and impartiality to the beneficiaries and to the creditors, to be cautious and prudent in dealing with the state assets.
  2. Gather, control and manage estate assets. This is not moving into the deceased parent’s house and taking over assets for personal use. The personal representative oversees the execution of the will and makes sure that the assets are distributed according to the will.
  3. Provide notice of the appointment. You will need to notify your state’s revenue department and all of the heirs and devisees that you have been appointed. These heirs and devisees have four months to contest the probate.
  4. Provide notice of the admission of the will to probate. This is a form that gets filed with the court and delivered to those involved in the estate. It explains the duties and responsibilities of a personal representative.
  5. Mail copies of the order to the personal representative. You must mail copies of the order to the personal representative to the heirs and devisees.
  6. File proof of compliance. A notarized statement must be filed with the court affirming that the order to the personal representative was sent out.
  7. Publish notice to creditors with the court. You will need to notify creditors that they have a certain period of time to file a claim and give them instructions on how to file and pursue being paid.
  8. Protect assets. It is your responsibility to secure and keep valuables safe.
  9. Determine whether there are any statutory allowances. Statutory allowances can include a homestead allowance, exempt property allowance and a family allowance.

We will continue with this list in our next post. This is an important part of estate-planning. It doesn’t have to be complicated, but it does help if you have a sense of what the roles and responsibilities of a personal representative are.

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Wills and Estate Planning: Appointing a Personal Representative

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Wills and Estate Planning Appointing a Personal RepresentativePart of creating a will is naming a personal representative. A personal representative is responsible for managing the estate of another, including the probate assets.

To name a personal representative, you must first have a valid will in place. The will should specifically name who you want to manage your estate. Most people choose a representative they already know and can trust. Acting as a personal representative is a big responsibility. It’s best to choose a personal representative who has enough time as well as the financial stability to fulfill the demands of the role.

It’s also important to choose a personal representative who is good with details and record-keeping. A personal representative is held to the very highest standard and must act in the estate’s best interest. If the representative fails to pay taxes, distributes assets to the wrong person or in the wrong proportions, fails to pay creditors before distributing assets (among other things) he or she can be held personally responsible. And your intended beneficiaries can end up getting less than they should have.

If the person named in the will is unqualified to manage the estate for whatever reason – whether this person is a drug addict, gambler, spendthrift or otherwise unavailable – you can request a hearing in probate court to seek to have the second person listed on the will appointed as representative.

In high-conflict situations where family tension is running high, it’s often best to enlist the services of a licensed fiduciary or a trust company. In Arizona, a professional private fiduciary is licensed by the Arizona Supreme Court and will know how to get the job done. While there is a fee to hire a third party fiduciary, having a licensed fiduciary will often save you money by avoiding drawn-out court battles.

The position of a personal representative can be burdensome. It’s important to select someone who is not only willing, but qualified to fill the position. If you don’t have family or friends qualified, enlist the help of a licensed fiduciary.

We offer a multi‑page list that details all the tasks a personal representative must tend to when manage an estate. Do you have any questions about appointing a personal representative? Please comment and let me know.

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Appearing Pro Per: Why You Shouldn’t Represent Yourself (even if you’re a lawyer)

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There is a trend for people to represent themselves more and more in legal matters. This is called appearing “in propria persona” or “pro per.” But unless it is an extremely simple legal matter (such as a speeding ticket or small claims court dispute), you are always going to be better served by having an experienced legal advocate on your side. Here are the top 4 reasons why you shouldn’t represent yourself (even if you’re a lawyer) in probate court.
Reason #1: Even if there is no dispute now, there could be if you do something wrong. If you are the person in charge, such as the personal representative or trustee, then you are held to a very high standard. You have a fiduciary duty to act in the best interest of the estate, to act fairly, and to administer the estate or trust expeditiously. But the applicable probate statutes, plus case law, are complicated even for lawyers who practice exclusively in this area. And if you make a wrong move (such as distributing money to the wrong people), you can be held personally liable. Is it really worth saving a few thousand dollars to risk this much personal liability?
Reason #2: You don’t know the applicable law and rules of procedure. Unless you are an experienced probate and estate planning attorney, you are at a severe disadvantage. You are expected to know all of the applicable probate statutes, plus the probate rules, plus the civil rules (to the extent that they do not conflict with the probate rules). Then there are the softer issues, such as knowing when the hearsay rule or the Dead Man’s Statute apply. (Hint: Even if you can recite these rules by heart, that has very little to do with their application in real life during a real evidentiary hearing.)
Reason #3: You are taken more seriously by the opposing parties (and the court) if you have a lawyer. In grade school, did you ever have an older sibling, or a friend, who could help you stand up to a bully or show you the ropes of how to deal with social situations? I had an older sister who would give me straight-forward advice about how to handle various social situations. Or have you ever gone to a party in which you didn’t know anyone? That is a lot easier with a “buddy” as well. Having a lawyer is somewhat like this. You don’t need to always worry that you might forget something or do something wrong, because your lawyer has your back and is helping you navigate the system.
Reason #4: You can’t see outside your own bottle. We all imagine that we are the stars of our own movies. Yet we don’t know how others perceive us. Are we being taken seriously? Do our legal arguments make sense to other people? Is our line of thinking persuasive? There is a saying among attorneys that “An attorney who chooses to represent himself in court has a fool for a client.” Even lawyers who routinely handle legal matters know better than to handle their own cases. The reason is this: We (as lawyers) would be too emotionally involved in our own situation to be able to make rational decisions. This hurts us when it comes to making sound, logical decisions. It also hinders our ability to see the big picture, possible flaws in our thinking, and possible solutions.
If this applies to lawyers who routinely handle legal matters, then it applies even more to non-lawyers. There is definitely an advantage to hiring an experienced advocate to handle your legal drama for you. It will get done quicker and have a higher likelihood of success.

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