Allowances and Exempt Property When It Comes to Inheritance

An allowance is a sum of money payable to a deceased person’s (the “decedent’s”) spouse and children, before payment of any of the decedent’s debts. Allowances operate as a protection against disinheritance by the testator (the person who executes a will) since these are rights conferred by statute. They also protect the family against creditors because the allowances take precedence over all creditors’ claims except the expenses of administration. The allowances discussed in this apply to the estates of decedents who were domiciled in Arizona at the time of death. For a decedent who was not domiciled in Arizona at the time of death, the allowances are governed by the law of the decedent’s domicile at death.

Under Arizona law, the decedent’s surviving spouse and/or children are entitled to:

1. a homestead allowance in the amount of $18,000:
2. an exempt property allowance of not more than $7,000; and
3. a reasonable allowance for maintenance during the period of administration, known as a family allowance. These allowances are discussed in greater detail below.

Homestead Allowance

A decedent’s surviving spouse is entitled to a homestead allowance of $18,000. If there is no surviving spouse, each minor child and each dependent child of the decedent is entitled to a homestead allowance of $18,000, divided by the number of minor and dependent children of the decedent.  The homestead allowance is exempt from and has priority over all claims against the estate, except expenses of administration.  The homestead allowance is chargeable against any benefit or share that passes to the surviving spouse or minor or dependent child by the decedent’s will, by a non-probate transfer, or by intestate succession, unless it is otherwise provided by the decedent’s will or by the governing instrument for a non-probate transfer.

Exempt Property

In addition to the homestead allowance, the decedent’s surviving spouse is entitled from the estate to a value that is not more than $7,000 in excess of any security interests in the estate in the following:

1. household furniture
2. automobiles
3. furnishings
4. appliances
5. personal effects.

If there is no surviving spouse, the decedent’s minor and dependent children are entitled jointly to the same value as above. If the encumbered property is selected and the value in excess of security interests and that of other exempt property is less than $7,000, or if there is not $7,000 worth of exempt property in the estate, the spouse or minor or dependent children are entitled to any other assets of the estate to the extent necessary to make up the $7,000 value.

Rights to exempt property and assets needed to make up a deficiency of exempt property have priority over all claims against the estate, except expenses of administration. The right to any assets to make up a deficiency of exempt property abates as necessary to permit earlier payment of the homestead and family allowances. These rights are chargeable against any benefit or share passing to the surviving spouse or minor or dependent children by the decedent’s will, by a non-probate transfer, or by intestate succession, unless it is otherwise provided by the decedent’s will or by the governing instrument for a non-probate transfer.

Family Allowance

The decedent’s surviving spouse and minor children whom the decedent was obligated to support, and children who were in fact being supported by the decedent, are entitled to a reasonable allowance in money out of the estate for their maintenance during the period of administration. This allowance may not continue for longer than one year if the estate is inadequate to discharge allowed claims. The allowance may be paid as a lump sum or in periodic installments. It is payable to the surviving spouse, if living, for the use of the surviving spouse and minor and dependent children. Otherwise, this allowance is payable to the children or to persons who have the care and custody of these children. If a minor or dependent child is not living with the surviving spouse, the allowance may be made partially to the child or the child’s guardian or other person who has the care and custody of the child, and partially to the spouse, as their needs may appear.

This allowance is flexible, and much is left to the determination of the personal representative (the person who administers the will following the testator’s death) and the court. The statute provides for a “reasonable allowance,” and what is reasonable depends on many factors. Some factors include the previous standard of living and the nature of other resources available to the family to meet current living expenses until the estate can be administered and assets distributed. While the death of the principal income producer may necessitate some change in the standard of living, there must also be a period of adjustment. If the surviving spouse has a substantial income, this may be taken into account.

The family allowance is exempt from and has priority over all claims, except expenses of administration and the homestead allowance. The family allowance is chargeable against any benefit or share passing to the surviving spouse or children by the decedent’s will, by a non-probate transfer, or by intestate succession unless otherwise provided by the decedent’s will or by the governing instrument for a non-probate transfer.