May 13, 2011

Small Estate Affidavit

Here are some of the most commonly asked questions in regards to a small estate affidavit:

1. Is there an official small estate affidavit form?

No, there is no official small estate affidavit form.

2. Where can I obtain a small estate affidavit form?

Various websites have sample forms which can be downloaded which satisfy the requisite criteria for a small estate affidavit. There is no need to purchase a form from a stationary store. Save your money.

3. What date do you use for the valuation of the decedent’s estate?

The date of death is the date used for determining the value of the decedent’s estate. Prob C §13052. This does not pose a major concern for assets such as publicly-traded stock or a bank account. Yet for assets such as a LLC or partnership interest or non-publicly traded stock, an appraiser might be required due to the fluid valuation of those peculiar assets.

4. Can I still file for probate even though small estate affidavit is available?

Yes, small estate affidavit is an optional process whereby a person is always free to petition for probate if so desired.

5. What are some reasons why a person would use a small estate affidavit?

Generally speaking, the small estate affidavit process, as opposed to probate, is economical and expedient.

6. What are some reasons why a person would not use small estate affidavit?

It is common today for a decedent to leave behind an estate that is bordering on insolvency. Since a beneficiary is liable for the decedent’s debts, a beneficiary is barred from stripping an estate of its assets while leaving intact the estate’s liabilities. In light of this, a beneficiary might petition for probate in order to sort out the decedent’s liability to avoid future problems.

For example, assume that Danny Decedent left behind an $85,000 estate. The $85,000 was composed of a $40,000 bank account and $45,000 in Southern Company stock, a stock traded on the New York Stock Exchange. Conversely, Danny’s estate had $65,000 in liabilities, namely hospital bills. A beneficiary of Danny’s estate might consider using the probate process to inherit Danny’s estate to ensure that all debts are paid off before the assets of the estate are distributed. This would avoid the possibility of the hospital pursuing the beneficiary in the future to satisfy Decedent’s debts.

7. Do statutory probate fees attach to small estate affidavit?

No, attorney fees are set by private agreement between the attorney and client, not by statute for the small estate affidavit process.

8. What happens if the holder of the decedent’s property does not comply with the small estate affidavit process?

A beneficiary may file a lawsuit against the holder of the decedent’s property to compel the holder to release the property to the beneficiary. Prob C §13105(b). If the court finds that the property holder acted unreasonably, the beneficiary shall be awarded attorney fees. Prob C §13105(b).

9. What type of asset is most commonly the subject of a small estate affidavit?

The asset most commonly obtained via the small estate affidavit is a bank account. Of note, a bank account may be easily transferred outside the small estate affidavit process if the decedent names a pay-on-death beneficiary to the account (“P.O.D.”).