When a person dies, there may not be enough assets to justify filing a probate proceeding. This article discusses a solution that is sometimes available to transfer assets using a “small estate affidavit.”
The small estate affidavit is basically a standard form executed in front of a notary that lists the names of the deceased’s successor(s) and the assets to which each successor is entitled. The form is not filed with the court. A person may distribute assets based on receipt of the affidavit without liability and is not required to make any inquiry into the truth of any statement in the affidavit.
To illustrate, assume that a person died three weeks ago leaving two successors, no probate has been opened, and the only asset was a bank account containing $50,000. One of the successors could execute and deliver to the bank a small estate affidavit indicating the names of the two successors and that each is entitled to half of the assets; the bank may then distribute $25,000 to that successor without liability. If the bank should refuse to honor the affidavit, the successor could bring suit to compel it to do so.
It should be noted that many types of assets transfer automatically upon a person’s death (or, in the case of a trust, don’t require transfer at all) without the need for probate proceedings. Examples include the following:
• Assets owned as “joint tenants” (as distinguished from “tenants in common”), which automatically transfer to the surviving joint tenant(s);
• Assets on which a “pay on death” beneficiary is named, such as bank accounts and life insurance policies, which transfer automatically to the beneficiary or beneficiaries;
• Assets conveyed by a “beneficiary deed,” which is a special type of deed that takes effect upon a person’s death.
It is unnecessary to use a small estate affidavit (or any other probate proceeding) with regard to assets that transfer automatically or are held in trust.
A small estate affidavit may only be used where the remaining assets after those that transfer automatically or are held in trust do not exceed $60,000 in value after deducting liens and encumbrances. A small estate affidavit can only be used to obtain the distribution of personal property, not real property. Other restrictions include that it must have been at least 10 days after the person’s death and there cannot be a pending request to open a probate proceeding in any jurisdiction.
A small estate affidavit doesn’t just work to obtain funds from an account, as in the illustration above, but can also be used to obtain any of the deceased’s personal property. To give some examples, a small estate affidavit can be used to collect payment from someone who owed the deceased money; to obtain title to the deceased’s vehicle (assuming that it was not titled as a joint tenant as referenced above); or to obtain the deceased’s personal effects from a nursing home.
A person who executes a small estate affidavit is liable to anyone with a superior claim in the assets, which could include a personal representative appointed to administer the probate estate, a creditor, or another successor. Thus, before executing a small estate affidavit, a person should consider consulting with an attorney about how the estate should be distributed and potential liabilities and issues. The affidavit should only be used to bring about the same result that would otherwise happen through probate.
In the right circumstances, a small estate affidavit can effectively transfer a deceased’s assets without the need for probate proceedings.
Noah Klug is owner of The Klug Law Firm, LLC, in Summit County, Colorado, emphasizing real estate, business, and litigation. He may be reached at 970-468-4953 or Noah@TheKlugLawFirm.com.