POD bank accounts and creditors

[azref2627]

Jurisdiction

Arizona

My uncle passed recently and his only assets were three POD bank accounts (60k) left to a third party non legal representative. His credit card debt was 80k. He is survived by his wife.

I found this from a legal website:

4. If the estate is insolvent, can a creditor make a claim against other assets transferred outside probate?

Yes, a determined creditor can request payment from persons who inherited an asset outside the probate process. For example, if Child inherited an account from Dad through a pay-on-death designation at a bank, a creditor of Dad could demand payment from Child. In order to do so, the creditor would have to deliver a written demand to the personal representative. The personal representative may then request Child to give back up to the entire amount received from the bank account to the estate. If Child refuses, the personal representative (or the creditor itself) can initiate a court proceeding to obtain a judgment against Child. This process is subject to the two year statute of limitations against creditor claims.

Then I found this one from a different legal website that contradicts the other one.

Will You Have to Pay Any of the Account Owner's Outstanding Bills?
A common question that comes up when the owner of a POD account dies owing a significant amount of credit card or other debt such as medical bills or a mortgage is whether the POD beneficiaries will be required to use any of the POD money to pay off the outstanding debt. In general, the answer to this question will depend on whether the beneficiary is a guarantor of the debt (such as a co-signor on a credit card or mortgage) as well as applicable state law. In some states if the POD beneficiaries are not guarantors or co-signors of the debt, then the beneficiary will be able to have immediate access to the POD account, while in other states each POD beneficiary may have to sign an affidavit confirming that the POD account owner did not have any debt prior to collecting the money remaining in the POD account.

Does anyone know which is correct by AZ laws? So are the POD bank accounts used to pay off the creditors? How else do they get paid otherwise?

Thanks

 

[army judge]

Does anyone know which is correct by AZ laws? So are the POD bank accounts used to pay off the creditors? How else do they get paid otherwise?

My deepest, sincerest condolences upon the loss of your uncle.

His wife is the legal next of kin.

She is NOT required to cover his debts, and if things are as you recite, there's nothing of value for her to inherit.

If his spouse is listed on the checking/banking accounts with "rights of survivorship" she can take the money and run.

I am not advising her to do that.

If I were in her position, that's precisely what I would do.

Creditors and debt collectors are currently unable to hound, harass, annoy, molest, badger the dead.

May your uncle rest in eternal peace, OP.

She could probate the estate, but in this case it makes no sense.
Why?
There'll be nothing left for her to inherit.

If the creditors wish to be repaid, no need for you or his spouse to worry over their fates.

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 a minimum value requiring a probate.

Arizona law has a general rule that if a deceased person owned more than $100,000 of equity in real estate, or more than $75,000 of personal property (including physical possessions and money), then a probate is required to transfer the assets to the heirs. A Small Estate Affidavit may only be used when probate is not required.

If you and his spouse just must dabble in this, read this information about small estates and probate in AZ:
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https://www.superiorcourt.maricopa.gov/sscDocs/packets/pbse1.pdf
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Small Estate Affidavits
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The small estate affidavit might be the best way to proceed, if you must proceed, in settling his estate.

Not you, OP, but his spouse.

 

[adjusterjack]

There is no contradiction between those two paragraphs as they are referring to two different things.

I located the first paragraph on an AZ probate attorney's website. While I have no reason to question the attorney's credentials his assertion does seem to contradict the purpose of a POD account. I am an AZ resident so this concerned me enough to spend some time on it but, so far, I don't have an answer one way or the other. I emailed the attorney and asked him to cite an authority (statute or case decision). Might be a few days since it's already Friday evening but we'll see if I get a response.

The second paragraph comes from a generic website that is not specific to AZ and is of questionable credibility. However, any opinion that uses the words "in general" and "depends" is probably somewhat valid.

So are the POD bank accounts used to pay off the creditors?

The only answer I can give you at this point is that they are not voluntarily used to pay off creditors but there appears to be a possibility that a court of law at some point may compel a beneficiary to cover the debts of the deceased out of that money. Let's wait and see if I get a response from the lawyer.

How else do they get paid otherwise?

If the estate has no assets to pay creditors, then the creditors don't get paid.

However, if you are executor or representative of the estate you have some seriously strict duties with regard to creditors as addressed by ARS 14-3801 through 14-3816:

2016 Arizona Revised Statutes :: Title 14 - Trusts, Estates and Protective Proceedings

If the executor/representative of the estate fails to comply with those statutes then the executor/representative of the estate could end up being the one to pay creditors out of his own pocket.

 

[azref2627]

There is no contradiction between those two paragraphs as they are referring to two different things.

I located the first paragraph on an AZ probate attorney's website. While I have no reason to question the attorney's credentials his assertion does seem to contradict the purpose of a POD account. I am an AZ resident so this concerned me enough to spend some time on it but, so far, I don't have an answer one way or the other. I emailed the attorney and asked him to cite an authority (statute or case decision). Might be a few days since it's already Friday evening but we'll see if I get a response.

The second paragraph comes from a generic website that is not specific to AZ and is of questionable credibility. However, any opinion that uses the words "in general" and "depends" is probably somewhat valid.



The only answer I can give you at this point is that they are not voluntarily used to pay off creditors but there appears to be a possibility that a court of law at some point may compel a beneficiary to cover the debts of the deceased out of that money. Let's wait and see if I get a response from the lawyer.



If the estate has no assets to pay creditors, then the creditors don't get paid.

However, if you are executor or representative of the estate you have some seriously strict duties with regard to creditors as addressed by ARS 14-3801 through 14-3816:

2016 Arizona Revised Statutes :: Title 14 - Trusts, Estates and Protective Proceedings

If the executor/representative of the estate fails to comply with those statutes then the executor/representative of the estate could end up being the one to pay creditors out of his own pocket.

 

[army judge]

If the estate has no assets to pay creditors, then the creditors don't get paid.

Which is why if the debts are massive and the potential estate is small, it might behoove a person NOT to get involved.

Laziness, inactivity, apathy aren't as harmful to an organism, as some might lead one to believe.

 

[azref2627]

Thanks for the reply. I'll await the response you get from the attorney.

If named executor one can deny that obligation correct? The wife has Alzheimer's so she's out so the court would appoint someone else?

 

[army judge]

If named executor one can deny that obligation correct?

YES, serving as an executor is entirely voluntary.

The wife has Alzheimer's so she's out so the court would appoint someone else?

If his spouse has a legal guardian, the legal guardian MIGHT be able to serve in lieu of the spouse.

Frankly, this is much ado about nothing.

The $60 K in the bank will PROBABLY be gobbled up by the $80K of debt.

 

[adjusterjack]

There is background to this at freeadvice.com:

Creditors and real estate in AZ for probate

I missed your additional questions of the 25th but now that you've moved the discussion here, please stay here and not go back there because parallel discussions on different websites where we all participate just discourages responses.