When a person dies with $100,000 or less in assets, there are simple ways to settle the estate. One way is to use an Affidavit for Collection of Personal Property. Another way is to have the clerk of the circuit court open a Small Estate proceeding.
Before we discuss these procedures, let’s review the definition of an “estate.” When a person dies, that person is called a “decedent.” If the person has a revocable living trust, all assets in the trust are part of the trust estate. These assets will go to beneficiaries according to the terms of the trust. They are not included in the “decedent’s estate.” The decedent’s estate includes assets which were in the name of the decedent only, without a beneficiary, and without a joint tenant. Also, assets owned by the decedent as a tenant in common are part of the decedent’s estate. The decedent’s estate is sometimes called the “probate estate” or simply, the “estate.” Assets which have a beneficiary named, such as an IRA or life insurance, go directly to the beneficiary without probate. Also, assets that are held in joint tenancy or tenancy by the entirety go to the surviving owners without probate. These assets are not part of the decedent’s estate.
Suppose a person dies with the following assets: $1,000,000 of real estate in his revocable living trust; $100,000 in a joint bank account with his wife; $50,000 in an IRA with his daughter as beneficiary; 1/5 of a vacant lot worth $500,000 which he owns with his brothers and sisters as a tenant in common, and $5,000 in a credit union account in his name only. Upon death, the $100,000 of real estate owned as tenant in common and the $5,000 in the credit union account would have to go through a probate proceeding.
This estate would have to go through probate because the value is more than $100,000. If this person had put his 1/5 share of the vacant lot into his revocable living trust, then there would have been no need for a probate.
If a person dies with $100,000 or less in assets, with no real estate, the assets can be collected by using an Affidavit for Collection of Personal Property. An “affidavit” is a notarized statement. The Affidavit for Collection of Personal Property must be signed by the person claiming the property, and must be accompanied by a death certificate. The affidavit form is sometimes provided by the financial institution. Otherwise, it can be obtained from the court or from an estate planning attorney. Motor vehicles can be claimed by signing an affidavit at the county Department of Motor Vehicles. The value of motor vehicles does not have to be counted to see if the decedent had more than $100,000.
If the person dies with any real estate in his name only or as a tenant in common, even if the estate is not more than $100,000, a court proceeding is necessary. The Small Estates division of the circuit court can help you with a small estate proceeding without your having to hire an attorney. They charge a fee of 3% of the value of the estate, plus court filing fees and newspaper publication costs. If there are no complications, a small estate proceeding takes an average of 10 to 12 months, which is about as long as a regular probate should take.
One disadvantage of the small estate proceeding is that you cannot sell the property until everything is finished. If you want to sell the real estate without having to wait for a year or so, you would probably be better off hiring an attorney to do an informal probate proceeding. With an informal probate, you can start advertising the property for sale immediately, and you can sell it as soon as the court appoints a personal representative, which may take about 6 weeks after you retain an attorney.
© OKURA & ASSOCIATES, 2009
Sanford K. Okura received his Doctor of Jurisprudence Degree from Stanford University in 1976. He specializes in Estate Planning and Medicaid Planning to protect assets from nursing home costs, probate and estate taxes.
This written advice was not intended or written to be used, and it cannot be used by any taxpayer, for the purpose of avoiding penalties that may be imposed on the taxpayer. (The foregoing legend has been affixed pursuant to U.S. Treasury Regulations governing tax practice.)
This column is for general information only. The facts of your case may change the advice given. Do not rely on the information in this column without consulting an estate planning specialist.