June 15, 2010

Small Estate Affidavit

My relative recently passed away, do I need to go through probate?

Fortunately, California has a simplified probate procedure when the value of the decedent's personal property estate does not exceed, subject to certain exceptions, $100,000. This process is commonly referred to as "small estate affidavit" or "small estate declaration." Collection via small estate affidavit allows a person to receive an inheritance by presenting an affidavit or declaration to the holder of the decedent's personal property, a bank for example. It is one of the three methods for collecting small estates without a formal probate proceeding. The other two pertain to obtaining real property and are infrequently used.

AUTHOR'S UPDATE: The valuation threshold has changed. The bill discussed in this subsequent post became law in 2012. 

Small estate affidavit may be used be either the beneficiaries named in a will or a trust, or the decedent's intestate heirs if the decedent had no will. Prob C § 13100; Prob C §§ 6401 - 6402. For example, if you were named in your late relative's will as a beneficiary and their estate was quite modest, then you could take advantage of the small estate affidavit process.

In order to qualify, (1) the gross fair market value of the decedent's personal and real property assets in California must be less than $100,000, subject to exclusions found in Prob C § 13050, and (2) 40 days have elapsed since the decedent's passing. Prob C § 13100. 

The exclusions found in Prob C § 13050 include real property held in joint tenancy, multiple party bank accounts, payable on death bank accounts, assets held in a revocable trust, life insurance contracts, etc. Thus, if the decedent owned a home in joint tenancy,  took out a substantial life insurance policy which named a beneficiary or left their favorite cousin as the pay on death beneficiary of their bank account, none of these assets would count towards the $100,000 limitation.

The 40 day waiting period provides the beneficiaries the opportunity to collect the decedent's bills: television, Internet, phone, credit card, utilities, etc., since the billing cycle is often 30 days. This is particularly important because the beneficiary of the decedent's estate is liable for the decedent's outstanding debts, but only up to the value of the transferred property. Prob C §§ 13109, 13112. For instance, if Danny Decedent left Bobby Beneficiary with a $50,000 inheritance and $90,000 in credit card debt, Bobby would not be liable for the unpaid balance of $40,000.

The required contents of the affidavit are found in Prob C §§ 13110-13116. 

Below is an explanation of the the small estate affidavit process: 

(1) The beneficiary needs to provide evidence that the decedent actually owned the property the beneficiary is inheriting. Prob C § 13102(a). 

For example, if the decedent had a Wells Fargo savings account, the beneficiary could provide the bank with a recent bank statement of the decedent. 

(2) The beneficiary needs to provide a certified copy of the decedent's death certificate. Prob C § 13101(d). 

The fee for a certified death certificate is nominal. For example, in Santa Clara County, the fee is $12. 

(3) The beneficiary needs to provide proof of identity. Prob C § 13104. 

This can most easily be accomplished if the beneficiary has the declaration notarized by a notary public.  

(4) If the decedent owned real property in California, an inventory and appraisal by a referee of that real property. Prob C § 13103. 

For example, the decedent owned open space in Willits, that was not valued over $100,000. 

(5) If the decedent's probate is pending and the decedent's personal representative has consented to payment, transfer or delivery of the property to the declarant or affiant, a copy of the consent and of the personal representative's letters, attached to the affidavit or declaration Prob C § 13101(e).  

Unlike attorney fees for a formal probate proceeding, attorney fees for summary procedures are not set by statute but rather by private agreement between the client and attorney.