With our mobile society, it is not unusual for someone to pass away and have assets across state lines. This is more common post Covid and among middle income families. This can be confusing for the family members and person entrusted with managing a person’s estate, but thankfully the different states’ legal systems have considered these circumstances and have largely similar solutions across the different states. It may just involve lawyers in different states collaborating.
Let’s create an example – Grandma passes away in Texas (“TX”), where she moved from her residence in Arizona to live with a family member during Covid. She became a resident in TX. She did this so that the family members could help her in her declining health. Grandma now passes, and she has real property still in AZ, along with a car, some household contents and a bank account. She changed her address to her new address in TX for her main bank accounts, her pension/IRA, and her investment accounts. These assets are now domiciled in TX.
If Grandma has no Will, an Application for Probate and Letters Testamentary would be filed in TX where she died. A bond will need to be obtained, unless all the beneficiaries sign a Waiver of Bond in front of a Notary. (Sometimes the Waiver is more hassle and costly than the bond.) If the Application is approved by the court, the Personal Representative (“PR”) would receive Letters Testamentary in TX, which would be the legal proof that the person has authority to collect Grandma’s assets and administer her estate in TX. The financial institutions would then distribute those assets to the PR. (This can sometimes be a laborious process, but that is what is supposed to happen.) The intestacy laws of TX would govern what happens to those assets in TX.
If Grandma had a Will, she could have done it before she moved to TX or after. Therefore, it could be governed by TX Law or AZ law, but probate of the Will would still occur in TX where she died and was resident. The PR would still file an Application for Probate and Letters Testamentary in TX. If approved, the PR would receive Letters Testamentary in TX. Typically, a Will waives bond, and that cost would be avoided. The PR would collect the assets in TX, as stated above.
But what about the assets in AZ (house, car, household contents and bank account)? The courts in TX do not have authority over assets domiciled in AZ, especially real property. A state has jurisdiction over real property located within its borders. Here is what sometimes happens, the PR brings their Letters Testamentary from TX and thinks everything will work the same as it did in Tx. But the people in AZ don’t recognize the Letters Testamentary from TX, as these are different than AZ’s documents and they have no authority in AZ. A better outcome is when the PR has already been advised that they will need to go to court in AZ and their TX attorney facilitated an introduction to an AZ probate attorney.
The Personal Representative from Texas has three options available to collect the assets in Arizona. They are listed in order of formality.
1) Collection by Affidavit – Under certain circumstances prescribed by AZ Revised Statutes, (“A.R.S.”) §14-4201 and 14-4203, the PR from TX can collect debts and personal property by supplying an affidavit compliant with the statute, if the possessor of the personal property wishes to comply. This is permissive and provides protection to the person (ex. bank teller) who handed it over in good faith based on the properly executed affidavit, but it is not mandatory.
2) Proof of Authority- This is done when there are assets to collect and the estate is solvent. The PR files a certified copy of their appointment letters from the TX court and the bond, if one was taken out in TX, in accordance with A.R.S.§14-4204 and 14-4205 with the probate court in AZ. If approved by the court, the PR then receives a conformed copy of their Proof of Authority or possibly Letters of Personal Representative from the court, which are valid in Arizona. The PR is authorized to liquidate the AZ assets and transfer them to TX or execute an instrument of distribution of AZ assets to the heirs and devisees directly.
It is possible that a title company will not ensure the transfer of real property in AZ under a Proof of Authority, if they are not comfortable with the circumstances or the value of the real estate is significant. The Proof of Authority can also be terminated if a creditor or other interested person petitions the AZ court for a local probate case to be opened. But if the title company will provide title insurance, the real property can be sold, the car can be transferred or sold with the Motor Vehicle Department (“MVD”), the household contents can be sold, and the bank holding the funds should recognize the Proof of Authority, enabling the PR can liquidate the assets in AZ with minimal formality and quickly.
3) Ancillary Probate case – This is the most formal method and appropriate when there are significant assets, debts or issues to resolve. The PR petitions the AZ probate court for an Ancillary Probate to be opened, which in simple terms means that a probate case is opened in AZ governing the assets and debts of Grandma in AZ pursuant to A.R.S.§14-4207. The AZ probate court will recognize the TX’ court’s documents of authority and issue its own Letters of Appointment, giving the PR authority to operate in AZ. There are different formalities on the administration procedures depending on whether there is a Will, who’s laws govern the Will and whether the original probate case was opened in a state that implemented the Uniform Probate Code or not, which is beyond the scope of this article. The AZ Probate court would issue Letters of Personal Representative which would be recognized by the title companies, banks, etc. to collect the assets located in AZ and the PR would follow the administration rules of a normal Arizona probate case. Letters of Personal Representativewhich would be recognized by the title companies, banks, etc. to collect the assets located in AZ and the PR would follow the administration rules of a normal Arizona probate case.
The three methods above are substantially similar across state lines. We have used Texas as our example, but the process in Arizona would be substantially similar regardless of the state where the original probate case was opened.
It does not fit with our fact pattern, but it is possible to have the principal place of administration of the decedent’s estate be in AZ, even if the decedent was domiciled in another state, if all of their assets were located in AZ. In our example, this could have been possible if Grandma had not changed her address on her main bank accounts, pension/IRA, and investment accounts. It is also possible to avoid probate (in most states) if a person dies with a trust and has titled each of their assets into their trust, regardless of the number of states involved.
In Conclusion, while it is often confusing to a lay person, especially when s/he is already dealing with the death of someone they care about; the different states and courts have recognized processes to allow the collection of assets across state lines in a manner similar to Arizona’s outlined above. The states also have rules on how to determine which state’s laws govern the various aspects of the administration of a decedent’s estate.
Our office helps clients with circumstances similar to the above, regardless of whether the client is an individual Personal Representative, Trustee, beneficiary or co-counsel in a different state. If we can be of service to you, please do not hesitate to give our office a call.
