Friday, January 29, 2010

Does Arizona Impose a State Estate Tax?

The quick answer to this question is no, the State of Arizona does not impose a state estate tax.

Before the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA), every state in the United States imposed a state estate tax that, at a minimum, collected the amount of tax allowed as a credit for state death taxes by the federal government. EGTRRA radically changed the state estate tax regimes by eliminating the credit for estates of decedents dying after January 1, 2005.

The federal credit for state death taxes was a revenue-sharing arrangement between the federal government and the states. Because the amount of the credit was paid in tax (it was paid to the state to the extent the state imposed a state death tax equal to or in excess of the credit, or it was paid to the federal government as a part of the federal tax to the extent it was not paid to the state), the states enacted what is called a “pick-up” or “sponge” tax to pick up the portion of the estate tax that could be imposed on the state’s resident decedents without increasing the estate tax burden. The overall estate tax bill was neither increased nor decreased due to the pick-up tax; the tax bill was apportioned between the Internal Revenue Service and the state taxing authority. This was a popular approach as it required only a few sentences in the statute books, permitted the state revenue officials to rely on the federal audits of returns, and meant that the state death taxes were being taken out of monies that would have otherwise gone to the federal government.

In response to the changes in federal law (EGTRRA) that repealed the federal state death tax credit, some states have enacted laws that allow the state to continue to collect a state estate tax. Arizona, however, no longer imposes a state estate tax for decedents dying after January 1, 2005.

From Publication 900 - “Since the federal state death tax credit was the basis of the Arizona estate tax, Arizona effectively no longer had an estate tax after the federal repeal. Following the federal repeal, the Arizona legislature repealed the Arizona estate tax provisions (Laws 2006, Ch. 262, Section 3). Additionally, Arizona does not impose an inheritance or gift tax.”

Publication 900

Senate Bill 1170


Tuesday, January 26, 2010

Fingerprinting Procedure for Non-Relative Seeking Appointment as Guardian of a Minor

In my previous post, I wrote about the requirement of a background check for non-relatives seeking appointment of guardianship of a minor, which includes fingerprinting. In this entry, I offer practical advice on the fingerprinting procedure.

1. The proposed guardian is to report to one of the following offices to be fingerprinted.

Maricopa County Sheriff's Department in Phoenix at 101 W. Jefferson Avenue. (Enter the East Court Building. The Sheriff's Office is directly across from the cafeteria.) Fingerprinting at this location is done on Mondays, Tuesdays, and Thursdays, from 9:00 a.m. to 2:00 p.m. The fee is $8.00 per card, and the card is provided for guardianship's only.

Phoneix Police Department, 620 W. Washington. Fingerprinting at this location is done on Monday - Friday, from 7:30 a.m. to 4:30 p.m. The fee is $6.00 per card, and the card is provided.

Preferred Info Services, 54 S. Center Street, Mesa. Fingerprinting at this location is done on Monday - Friday, from 8:30 a.m. to 4:30 p.m. The fee is $10.00 per card, and the card is provided.

NOTE: Your fingerprints must be submitted on a BLUE fingerprinted card.

2. Tell the clerk taking your prints that you need to be fingerprinted to be appointed guardian of a minor.

3. The cost of processing each fingerprint card is $24.00 payable by certified check, money order, attorney's check, cash (exact amount required), or personal check with return address and picture identification. Make your check/money order payable to the Maricopa County Treasurer. After the prints are taken, deliver the fingerprint card, your $24.00 check /money order for each fingerprint card, and a copy of your Petition for Appointment and Affidavit to Probate Court Administration, located on the first floor of the Old Courthouse, 125 W. Washington, Phoenix, where you will be assisted in completing the necessary information on the card.

4. A calendar clerk will schedule a hearing date at least eight weeks away, due to the length of time needed for both the Arizona Department of Public Safety and the Federal Bureau of Investigation in Washington, D.C. to complete a background check on the prints and return them by mail.

5. Be sure to leave the "Employer and Address" and "Reason Fingerprinted" section blank. Court Administration will complete these areas.


Background Check Required for Non-Relative Seeking Appointment as Guardian of a Minor

Pursuant to A.R.S. 14-5206.B., "[b]efore the court may appoint as guardian a person unrelated to the minor, the court shall, in order to determine the applicant's suitability as a guardian, require the potential guardian to furnish a full set of fingerprints to the court to enable a criminal background investigation to be conducted."

The person who wishes to be named guardian must undergo a criminal background investigation before the hearing on the petition to appoint a guardian. The court or clerk will forward the background check application, fingerprint card, inventory sheet, and processing fee directly to the Arizona Department of Public Safety, which conducts criminal history records checks pursuant to A.R.S. 41-1750 and applicable federal law, and is authorized to submit fingerprint card information to the Federal Bureau of Investigation for a national criminal history records check.

Upon completion of the background check, the Department of Public Safety then forwards the results to the court before appointment of a non-relative as a guardian for a minor occurs. The background check may take six to eight weeks to complete once the Department of Public Safety has received the paperwork from the court or clerk.

In most counties, the clerk's office is charged with the responsibility of distributing the fingerprint cards and instructions for fingerprinting to applicants for appointment as guardian. In Maricopa County, the Probate Court Administrator's Office handles the fingerprinting process.

In my next entry, I'll offer some practical advice regarding the fingerprinting procedure.


Thursday, January 14, 2010

Arizona's Beneficiary Deed

An ideal tool for those with a modest-sized estate in which the residence is the primary estate asset, the beneficiary deed is similar to payable on death accounts in that it allows for the transfer of real estate on the death of the owner to whomever the owner designates as beneficiary, thereby avoiding probate.

Pursuant to A.R.S. 33-405, a beneficiary deed is “[a] deed that conveys an interest in real property, including any debt secured by a lien on real property, to a grantee beneficiary designated by the owner and that expressly states that the deed is effective on the death of the owner transfers the interest to the designated grantee beneficiary effective on the death of the owner subject to all conveyances, assignments, contracts, mortgages, deeds of trust, liens, security pledges and other encumbrances made by the owner or to which the owner was subject during the owner's lifetime.”

In addition, the statute allows for multiple beneficiaries who may take title in any recognized form, and may designate a successor grantee beneficiary, which should be indicated in the event a beneficiary predeceases the owner of the property. A beneficiary deed may also be used to transfer an interest in real property to the trustee of a trust, even if the trust is revocable.


A beneficiary deed allows for the avoidance of probate. Arizona allows for the transfer of real estate by affidavit, however, pursuant to statute the value of all the real property in the estate, less liens and encumbrances as of the date of the decedent’s death, cannot exceed $75,000. The use of a beneficiary deed to transfer real property will avoid the need for a probate proceeding in cases where the equity in the property is in excess of $75,000.

A beneficiary deed does not carry with it the disadvantages associated with adding someone as a joint tenant. Many aging parents are using the technique of adding their adult child or children as joint tenants to avoid a probate proceeding upon their death. However, this can result in unintended tax and other consequences. Should their child become involved in a lawsuit (divorce, tort action, or bankruptcy), the property on which that child’s name has been added is subject to those proceedings.

A beneficiary deed is easily revoked. A beneficiary deed is easily revoked by the owner, or if there is more than one owner by any of the owners who executed the beneficiary deed, by executing and recording the revocation as provided by law in the office of the county recorder in the county in which the property is located.

A beneficiary deed is an effective tool for transferring property in the case of unmarried couples. An unmarried couple does not enjoy the benefits a married couple does in the event the relationship ends, and it’s often difficult to determine the property rights of those involved. Particularly in cases where property has been purchased solely with the assets of one party, it might be more appropriate to place one’s partner on the deed as a beneficiary rather than a co-owner.


In the case of joint owners, the surviving owner can defeat the purpose of the beneficiary deed. In cases where there are joint owners of property, and they have executed and recorded a beneficiary deed, upon the death of the first joint owner to die, the surviving owner can revoke the beneficiary deed. It’s for this reason that the use of a beneficiary deed might be problematic for couples with prior marriages and children from those prior marriages, as there is no provision in the statue for an irrevocable beneficiary designation.

There is the possibility of conflict in the event multiple beneficiaries are named. In cases where multiple beneficiaries are named, there is the potential for disagreement as to how the property should be managed and whether the property should be kept in the first place or, alternatively, sold. The use of a revocable living trust might be the better alternative to manage these issues.

There are issues with the use of a beneficiary deed when leaving property to minor children. Due to the numerous issues involved with leaving assets to minor children, a child’s trust (either testamentary or living) should be named as the beneficiary of the beneficiary deed.

There are possible estate tax issues when using a beneficiary deed to transfer property on one’s death. Using a beneficiary deed to transfer property on one’s death precludes the use of the property to fund a credit shelter trust, because the property does not pass into the trust until the death of the surviving spouse.

Although extremely popular and an effective estate planning tool in some situations, due to the drawbacks, the use of a beneficiary deed is not recommended for every estate plan, and the advantages and disadvantages of using a beneficiary deed should be considered carefully before executing and recording one as part of one’s estate plan.

A.R.S. 33-405


Thursday, January 7, 2010

Lawyers On Call - Free Legal Advice for Arizonans

On February 2, 2010, the topic for Lawyers On Call will be credit resolution problems. See the State Bar of Arizona web site for more information.

State Bar of Arizona


Wednesday, January 6, 2010

Brooke Astor’s Son Found Guilty – Sentenced to 1 – 3 Years in Prison

Brooke Astor’s only son, Anthony D. Marshall, was sentenced on December 21, 2009, to one to three years in prison for defrauding his mother, stealing millions of dollars from her as she suffered from Alzheimers. (A co-defendant, Francis X. Morrissey Jr., a lawyer who did estate planning for Mrs. Astor, was also convicted of a series of fraud and conspiracy charges, as well as one count of forging Mrs. Astor’s signature on an amendment to her will.)

Credit: The New York Times

In addition to the legal issues involved, this story caught my attention due to my interest in the transatlantic liners of the early to mid-1900s. On April 14, 1912, the R.M.S. Titanic struck an iceberg in the middle of the North Atlantic and subsequently foundered on April 15, 1912 at approximately 2:20 a.m., sinking to the bottom of the ocean and taking over 1,500 souls with her.

One of the many people to die in the sinking was John Jacob Astor IV. After assisting his young, pregnant wife Madelaine into a lifeboat, Mr. Astor stood back with the other men while the other women and children entered the lifeboats, which was customary back then.

John Jacob Astor IV Credit: Picture History

Madelaine Astor Credit: Titanic-Titanic

It was Vincent Astor, son of John Jacob Astor IV, and married to Brooke Astor at the time of his somewhat sudden death of a heart attack on February 3, 1959, who brought his father's body back to New York (his body was recovered from the Atlantic after the sinking) and presided at his funeral after the sinking. In 1948, Vincent set up the Vincent Astor Foundation and, upon his death, half of his $130 million estate went to the Foundation which his widow, Brooke, was to administer.

Over the course of her life, Brooke Astor carried out her husband's wishes, donating over $200 million to various charities during her lifetime. Although, unfortunately, her good work might be overshadowed by the recent events involving her estate, this classy lady can rest in peace knowing she carried out her late husband's wishes.

Brooke Astor Credit: Fox News

On a bit of a side note, Vincent left his half-brother, Jack, nothing. The child with whom Madelaine Astor was pregnant while on the Titanic and, in my opinion, unintentionally disinherited, is, ironically, the one responsible (he left a son and grandson when he died in July of 1992) for carrying on the Astor name in the United States. I find it a bit interesting that Vincent left him nothing, as he had to have known that his father would have wanted to provide for him and, although it's my understanding that Vincent didn't like him (his half-brother) much and didn't respect his choices in life, it's interesting that he didn't do the right thing, so to say.