How the Offset Works
Estate settlement sometimes involves a straightforward question: what happens when a beneficiary owes money to the person who passed away? Arizona addresses this directly. If a successor has a noncontingent debt to the estate, the amount due is subtracted from their share of the inheritance.
The amount of a noncontingent indebtedness of a successor to the estate if due, or its present value if not due, shall be offset against the successor's interest, but the successor has the benefit of any defense which would be available to him in a direct proceeding for recovery of the debt.
A.R.S. § 14-3903This applies to debts that are certain and not dependent on some future event. If the debt is not yet due, the estate calculates its present value and applies the offset. The key protection for the beneficiary is that any defense they could raise in a regular lawsuit still applies. If they dispute the debt, the personal representative cannot simply deduct it without addressing that dispute.
Why This Matters for Families
Family loans are common. A parent might lend money to an adult child for a down payment or business start. If the parent passes away before the loan is repaid, this statute ensures the estate does not simply hand the full inheritance to someone who still owes the estate money. It keeps the distribution fair for all beneficiaries. At the same time, it protects the borrowing heir by preserving their right to contest whether the debt is valid or enforceable.