What You Should Know About Small Estate Affidavits in Arizona

What You Should Know About Small Estate Affidavits in Arizona
by Tom Bouman

1.         What are Small Estate Affidavits?
Small Estate Affidavits are used in Arizona to transfer assets from a deceased person to the heirs when the total value of the assets is below the minimum value requiring a traditional probate.
Under Arizona law, the general rule is that if a deceased person owned more than $75,000 of equity in real estate, or more than $50,000 of personal property (including physical possessions and money), then a traditional probate is required to transfer the assets to the heirs.  A Small Estate Affidavit may only be used when a traditional probate is not required.
2.         How do you transfer real estate by Small Estate Affidavit?  
If the entire value of the deceased person’s equity interest in real estate is worth less than $75,000, then each property otherwise subject to traditional probate may be transferred using an Affidavit of Succession to Real Property.

When determining the value of real estate for this purpose, the amount of equity interest is calculated by using the current year’s assessed value for property tax purposes less any outstanding debt.  This amount is usually, but not always, substantially lower than the property’s fair market value.  For example, the fair market value may be $250,000, but the assessed value for property tax purposes only $195,000.

Filing the affidavit is a three step process.  First, the affidavit is filed in the probate court in the county where the property is located, along with a certified copy of the death certificate, and the original will if there is one.  Second, after the court returns a certified copy, the affidavit and a certified copy of the death certificate are published in a newspaper of general circulation in the same county.  Third, the as-filed affidavit is recorded in the county where the property is located.  The recording officially transfers the property to the person or persons identified in the affidavit.

3.         What if the property has an outstanding mortgage?

The typical mortgage document will state any transfer of the property will trigger a due-on-sale clause.  Thus, the beneficiary of property subject to a mortgage should contact the lender before making a transfer using the Affidavit of Succession to Real Property.  The mortgage lender does not have to agree to use of the affidavit procedure.  It may prefer a traditional probate action in order to refinance the mortgage.
 
4.         What are the problems with using a Small Estate Affidavit for Real Estate?

The main drawback of using an Affidavit of Succession to Real Property is the person using the affidavit must wait six months after the owner’s death before filing it.  Often the better approach – although more expensive – is to petition for informal probate anyway because it can be opened (and closed) before the six month waiting period would have ended.  Using an informal probate will permit a faster closing than using the Small Estate Affidavit.

When filing the affidavit, the signer must also verify that no estate taxes are due and that funeral expenses, expenses of last illness, and all unsecured debts of the owner have been paid.  In some cases – where the home is basically the only substantial asset – this last item may prohibit the use of the Small Estate Affidavit because sale proceeds are needed to pay these expenses first.
5.         How do you transfer cash accounts and cars by Small Estate Affidavit?
The counterpart to the Affidavit for Succession to Real Property is the Affidavit for Collection of Personal Property.  It is a highly useful tool for closing out small accounts and transferring car titles without much hassle; provided the total value of personal property subject to probate is less than $50,000.  Most financial institutions and the DMV will be eager to accept it.

Unlike the six month waiting period applicable to the Affidavit for Succession to Real Property, the waiting period to use the Affidavit for Collection of Personal Property is only 30 days after date of death.

The Affidavit for Collection of Personal Property is not filed anywhere, but instead is presented to the financial institution or DMV office.  By law, a financial institution is released from liability when it transfers an account to the person or persons identified in a Small Estate Affidavit.

6.         How much does a typical Small Estate Affidavit cost?

An estate attorney will usually agree to handle the process of filing an Affidavit for Succession to Real Property for about $750 to $1,000, plus expenses of several hundred dollars more.  The typical fee for preparation of an Affidavit for Collection of Personal Property is about $250 to $400, with no additional expenses.  Many financial institutions – and the Department of Motor Vehicles – will have pre-printed forms of the Affidavit for Collection of Personal Property available for ready use.

About the Author
Thomas J. Bouman provides legal counsel in the areas of estate planning, estate settlement, and asset protection.  He brings a highly systematic approach to the practice of law, which is critically important when wading through the complex, and often bizarre, legal requirements associated with estate and trust law.  Mr. Bouman is author of the Arizona Estate Administration Answer Book and a prominent member of Wealth Counsel, LLC, the nation’s premiere organization of estate planning attorneys.

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Thomas J. Bouman
Attorney - Author - Speaker

www.TomBoumanLaw.com
Book an Appointment online 24/7
or call during business hours

(520) 546-3558

What You Should Know About Ways to Title a Car or RV in Arizona

What You Should Know About Ways to Title a Car or RV in Arizona
by Tom Bouman

1.         How do I verify ownership of a motor vehicle?

The Motor Vehicle Division (“MVD”) of the Arizona Department of Transportation issues titles for automobiles, recreational vehicles, and mobile homes not affixed to the land.  These titles are evidence of ownership and are the basis for determining who will inherit the asset upon the death of its owner.  There is no public registry of title information, so it is important to keep the title in a safe place.

2.         What are the ways to title a motor vehicle?

Arizona law permits three types of joint ownership on motor vehicle titles.  Presumably they are intended to simplify the choices available, but they can be rather difficult to tell apart.  The types of joint ownership are as follows:

• “John Williams or Susan Williams” – This form of ownership – commonly used by auto dealerships when they sell a vehicle to a married couple – is better described as joint tenancy.  Upon the death of a joint owner, the surviving owner does not need to update the title because it is assumed that either owner has full authority to transfer the motor vehicle.  Upon the death of the remaining owner, the motor vehicle is subject to probate.
• “John Williams and Susan Williams” – This form of ownership is better described as tenancy-in-common.  Upon the death of either joint owner, the interest of the deceased owner is subject to probate.
• “John Williams and/or Susan Williams” – This form of ownership is better described as joint tenancy with right of survivorship.  Upon the death of a joint owner, the surviving owner does not need to update the title because it is assumed that either owner has full authority to transfer the motor vehicle.  Upon the death of the remaining owner, the motor vehicle is subject to probate.  The only substantive difference between the AND/OR and OR designations occurs when a surviving owner wants to transfer the title.  Under the AND/OR designation, the surviving owner must present a death certificate for the deceased owner.  This would not be required when the title uses the OR designation.  

3.         What is the best way to hold title?

From an estate planning perspective, most people – when given a choice – prefer the AND/OR designation to prevent unauthorized transfers during lifetime.  However, auto dealerships regularly suggest the OR designation because it provides the most flexibility, especially useful when a married couple assigns a used car back to the dealership in exchange for a new car. 
 

4.         Is it possible to name a “pay-on-death” beneficiary with the MVD?

Although rarely used, the MVD does offer a form to designate a beneficiary of a motor vehicle.  The form only works if the total net value of the owner’s personal property does not exceed $50,000 at death.  If the form is on-file, the MVD will reissue title in the name of the beneficiary upon presentation of a certified copy of the death certificate.  The form and its instructions are bare-bones simple, which diminishes the usefulness of the form as a flexible planning tool.

For example, the MVD does not permit use of a beneficiary designation when the title is held by more than one person.

5.         What about titling a car in the name of a living trust?

Many people who establish living trusts want to know whether they should transfer their cars into trust.  As a general rule, the answer is no.   It is relatively simple to transfer a car after a death, provided the total equity in all of the deceased’s personal property is less than $50,000.  A rule of thumb is to title a newly acquired car in trust if it is expensive and paid for with cash.

6.         What about leased cars?

A leased car is a liability, not an asset.  The car is titled in the leasing company’s name throughout the duration of the contract.  In the event the lessee (the driver) dies, the lessee’s estate still has an obligation to pay the balance of the contract whether anyone drives the car or not.  There are a few options.  The person responsible for administering the estate could ask if the leasing company will assign the balance of the lease to someone else, or could negotiate a lump sum payment to end the lease.  The amount of the lump sum is usually determined according to a formula in the fine print of the lease contract.  The latter option could be rather expensive, and feel unfair, but it generally is the best option.  As for assigning the lease, there is a small but growing market for lease assignments.

If the deceased person has no assets subject to creditor claims, another option is to just bring the car back to the leasing company and refuse to pay the remaining obligation.  Although the leasing company could sue the estate, there would be nothing for them to get.  But this only works when the deceased person was unmarried and left no assets subject to the claims of creditors.


About the Author
Thomas J. Bouman provides legal counsel in the areas of estate planning, estate settlement, and asset protection.  He brings a highly systematic approach to the practice of law, which is critically important when wading through the complex, and often bizarre, legal requirements associated with estate and trust law.  Mr. Bouman is author of the Arizona Estate Administration Answer Book and a prominent member of Wealth Counsel, LLC, the nation’s premiere organization of estate planning attorneys.

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Thomas J. Bouman
Attorney - Author - Speaker

www.TomBoumanLaw.com
Book an Appointment online 24/7
or call during business hours

(520) 546-3558

Trade Secret Misappropriation Remedies

Considerations In Determining Whether To Grant To A Prevailing Trade Secret Misappropriation Plaintiff A Permanent Injunction In Addition To Substantial Damages

By Paul E. Freehling on August 7th, 2012 Posted in Trade Secrets

When a plaintiff alleging trade secret misappropriation obtains a judgment for substantial damages, the award may serve solely to compensate for past wrongs, or it may redress both past and future injuries.

The plaintiff filing a post-trial motion for the entry of a permanent injunction presumably is claiming that the defendant’s continued use of the misappropriated trade secrets will cause damages that were not included in the judgment. Under what circumstances should this post-trial motion be granted?
There are prerequisites that apply to every motion for an injunction. These include a showing of irreparable harm in the absence of an injunction, inadequate remedy at law, balance of the hardships favoring the moving party, and little or no injury to the public interest. Further, the injunction must be tailored to the specific case and no broader than necessary to provide complete relief. Some jurisdictions require proof by clear and convincing evidence that each of the foregoing requirements is satisfied.

Having just been tagged with an award of money damages, the party opposing the motion for a permanent injunction is likely to argue that any alleged future grievance — just like past harm — can be remedied by suing at law. An additional argument could be that the damages award constituted adequate relief for both past and future injuries. For example, if the trade secret involved in the case is a compilation of customer and market data that becomes stale over time, and if a period of years has elapsed between the misappropriation and the judgment, there may be no future injury for which compensation will be owed. On the other hand, highly technical and sensitive data may have a longer useful life that continues for an extended period.
A requested injunction, following a substantial damages award, that prevents a former employee — even one who misappropriated trade secrets — from pursuing the occupation for which she or he is trained may be scrutinized more closely than an injunction ordering that confidential information be returned or not used. Similarly, a request for an injunction that would prevent the defendant from doing business with a customer whose relationship with the defendant pre-dates the misappropriation may be suspect.

In a few recent decisions, courts have indicated more reluctance to enter an injunction with respect to a trade secret developed not by the party seeking the injunction but by an entity that merged with or was acquired by the movant. Some courts presented with a motion for entry of a permanent injunction after a large damages judgment in a misappropriated trade secrets case also have expressed skepticism about the need for the requested injunctive relief if there was no earlier attempt to obtain a preliminary injunction.
In short, there can be obstacles to obtaining both a lot of money and a permanent injunction as a result of a trade secret misappropriation. However, in an appropriate case, those obstacles may be overcome.