AUGUST 26, 2013 VOLUME 20 NUMBER 32
The Arizona legislature meets every spring, and in most years adopts changes that affect elder law attorneys, estate planners, guardians, conservators and trustees. The changes become effective nine months after the end of the legislative session, which means that late summer is the time for annual review of new laws about to become effective.
For 2013 the effective date for most new legislation will be September 12. There are a handful of changes affecting our practice area, including:
Fingerprints. The legislature decided to make it a little bit harder for most people to get appointed as guardian or conservator for a family member or other person needing assistance. It has long been the law that unrelated guardians of minors had to submit to fingerprinting; now anyone seeking a guardianship or conservatorship over an adult (related or not) can be required to undergo fingerprinting. Not every person will be required to provide official fingerprints, and it is not yet clear how the courts will implement the new law.
If the courts require fingerprinting, the change will primarily affect family members, since professional fiduciaries already have to go through a fingerprint review to get licensed in the first place. The cost is modest; probably most important for petitioners will be the half-day it usually takes to get to the fingerprinting office, wait in line and get the card. Then it will be submitted for a criminal record check.
This change continues the trend of the past several years to make court proceedings more difficult, and to discourage concerned family members from initiating protective proceedings. While the effect will probably be small, there is a cumulative shift making it more expensive and difficult to seek legal help for a failing family member. It also increases the importance of advance planning to avoid having to turn to the courts for that help.
Simplified probate proceedings for small estates. It has long been possible to avoid probate in Arizona for smaller estates. If personal property in the decedent’s name does not total more than $50,000 (and that does not include joint tenancy property, property held in a trust or property with a valid beneficiary designation) then the person entitled to the property can collect it with a simple affidavit. Even real property can be subject to a simplified probate proceeding, up to $75,000 in value.
Now both of those figures are set to increase. The personal property limit will go from $50,000 to $75,000, and the real estate limit from $75,000 to $100,000. This one will affect a small number of estates, but can save significant costs for those who fit under the increased limits. More good news: the valuation figures are for estates as of the date of collection, not the date of death. In other words, for a decedent’s estate worth more than $50,000 but less than $75,000 the best strategy will likely to be to wait another month before taking action.
Trusts created by married couples. This change is a little bit arcane, but could have broader impact than was probably intended. Many married couples establish trusts that become irrevocable (or partly irrevocable) after the death of the first spouse. Typically, those trusts permit the surviving spouse to manage the assets and, in some circumstances, to even withdraw the principal for their own use. The new law will make it a little harder for surviving spouses to legitimately withdraw money from those trusts — though another family member acting as trustee will not face the same limitations.
With the significant increase in federal estate tax exemption levels (there is currently no tax until the estate is more than $5 million in most cases), many of our clients want to eliminate irrevocable trusts set up by a now-deceased spouse when the estate tax figures were very different. This new law will make that a little more challenging, but not impossible in most cases.
Section 529 plans. Most lawyers have long assumed that money set aside for education of children and grandchildren probably was protected in bankruptcy proceedings — but the law was not explicit. It is now, at least for Arizona. If the education account is a “Section 529 plan” account, then it is not an asset of the person who set it up if they later file for bankruptcy — provided that the bankruptcy filing is at least two years after the account was set up. Incidentally, the beneficiary of a 529 Plan account is also protected in the event of bankruptcy.
It was a slow year at the legislature for those of us involved in estate planning, trust administration and elder law. That’s OK with us.