Revocation by Divorce Statute
Arizona has a “revocation by divorce” statute, which automatically rescinds a spouse’s pre-divorce or pre-annulment revocable bequest of property to a former spouse. The statute is based on a presumption that a divorce or annulment indicates an intent that neither spouse would wish to leave any part of his or her estate to the other. The Arizona Court of Appeals resolved an interesting case regarding this statute. In the case, a woman died leaving a sizable estate that was to be disposed of through a will and trust. In both the will and trust, she stated that she was married, and directed the bulk of her estate to be distributed to her husband. However, after the decedent’s death it was discovered that the husband had been married to someone else and, as a result, the marriage to the decedent was declared void. However, the Court of Appeals decided that because the marriage was not declared invalid until after the wife’s death, the marriage was declared void and, therefore, the “revocation by divorce” statute did not apply.
Foreclosure Proceeding in Probate Action
The Arizona Court of Appeals held that even after a probate is opened, a secured creditor can foreclose its lien against estate property, even without obtaining authorization from the probate court or personal representative. In the case, a loan to a decedent was secured by a recorded deed of trust on real property. While the probate was pending, and without seeking approval from the court or the personal representative, a first position lender foreclosed its deed of trust and sold the real property through a non-judicial trustee’s sale. Another secured creditor who was participating in the probate objected, asserting that the first lender wrongfully converted estate assets by conducting the sale without obtaining permission from the personal representative or the court. The court noted that, although A.R.S. §14-1304 grants the probate court jurisdiction over all subject matter relating to the estate of decedents, the statute has no application to a proceeding by a secured creditor to enforce his right to his security, even after the appointment of a personal representative. As a result, the court held that, under Arizona law, a secured creditor has the right to choose its remedy and may enforce its security interest outside the supervision of the probate court.
Drafting a Joint Trust
A husband and wife created a joint trust, with assets to be distributed upon both of their deaths to their daughters and a grandson. The husband and wife were named co-trustees. A few years after the wife’s death, the husband, as sole trustor and trustee, executed an amendment to the trust to include additional beneficiaries. After the husband’s death, the successor trustee petitioned to set aside the husband’s amendment. While the trust provided that during their joint lifetimes the husband and wife could jointly amend or revoke any provision of the trust, the trust was silent as to whether either husband or wife had the right to amend or revoke the trust after the death of the other. The Arizona Court of Appeals recognized the general presumption that a settlor has the power to amend, but because the trust explicitly reserved the right to amend for the husband and wife jointly, the surviving spouse, alone, could not amend or revoke the trust.
Redemption of Tax Liens
Certain parties purchased tax liens on two parcels of property, which they then attempted to foreclose by suing the landowner of record. After filing suit, the lienholders learned that the owner of record had died, and the lienholders obtained a default judgment quieting title to the property in the lienholders. The decedent’s son then moved for a new trial, asserting that he became vested with an interest in the property upon the decedent’s death and, therefore, he had a right to redeem the tax lien, which was not foreclosed by the default judgment against the decedent. The Court of Appeals agreed with the decedent’s son holding that a foreclosure action is only effective against those named in the action, and any heir who is not named as a defendant retains a right to redeem the tax lien.
Valuation of Estate
A decedent’s will provided for dispositions out of the estate first to certain individuals, and then to certain non-profits. The estate was valued as of the date of death, and it was determined that the dispositions to the individuals would exhaust the estate assets, leaving no assets to pay to the non-profits – an abatement. (Abatement is the reduction of certain transfers specified in a will, necessitated because estate assets are insufficient to pay debts and other transfers.) However, administration of the estate was prolonged and a subsequent appraisal determined that the estate assets had appreciated in value. The personal representative of the estate argued that the specified transfers to the non-profits abated as of the date of death, and any post-death appreciation benefitted the creditors and unabated beneficiaries. However, the Arizona Court of Appeals disagreed. Under Arizona law, estate property includes income and appreciation during the administration of the estate. As such, increased value goes towards realizing the intent of the maker of the will, which, in this case, was to provide transfers to certain non-profits. As a result, the Court held that the value of assets on the date of distribution applies for purposes of determining whether transfers are abated.
