In posts one and two of this series, I discussed what probate really is and avoiding it through the use of beneficiary deeds.  This post is dedicated to small estate affidavits.

A small estate affidavit can be used when all of the probate personal property is worth less than $50,000 TOTAL (soon to rise to $60,000 in August 2011).  Note that the property passing at death may be a lot more than $50,000, but if most of that property passes by trust, beneficiary designation or joint tenancy than you may still qualify for a small estate affidavit for the rest of the property if its combined value falls within the limit.   If the property exceeds the limit or some of the probate property is real estate, you should not use the small estate affidavit.  As the Denver Probate Court's memo tells us, improper use of an affidavit can be a crime. 

The point of the small estate affidavit is that there is no court involvement.  No one petitions the court.  The persons entitled to receive the property just use the affidavit to collect it from the bank or get a new title from the DMV, etc. 

Who is entitled to receive the property?  That depends on what the will says.  If there is no will, that depends on who inherits without a will (something way beyond the scope of this blog post.)

Sounds good.  Why would you want to probate instead of using a small estate affidavit?  Similar to Part 2 of the series, you might need to put one person in charge.  For starters, collecting on a small estate affidavit also means accepting responsibility to apply the property collected to the decedent's debts.  The instructions for the small estate affidavit make it clear that by collecting  the property you must still "take care of any obligations outstanding at the time of the decedent's death." 

So, let's assume our client Louise dies with everything passing outside of probate except a  $12,000 bank account and a car worth $4000.  Louise has 4 children.  When Louise dies, her funeral bill is $3,000.   If one of Louise's children submits a small estate affidavit to the bank, the bank may decide to give that child all of the $12,000 or it may decide that each child must come in separately to get $3000.  Assume that the bank gives one child $12,000.  Assume that another child uses the small estate affidavit to sell the car and collect $4,000.  Which child is responsible to pay the funeral home?  What if the child who sold the car says I'm keeping all the $4,000 because it is 25% of the $16,000 total?  Will the other children have to sue him to get him to pay his fair share of the funeral bill? 

None of this considers the fact that the creditor deadline without a probate can be as long as twelve months, so the children may not know what all the bills are until a year after Mom's death. 

Notice that it doesn't really matter if Louise had a will or not.  If a will is never admitted to probate, each devisee (read beneficiary) named in the will has a right to collect  his share under the will using the small estate affidavit. 

Why else might we probate even if the estate is small?  The small estate affidavit is not valid until 10 days from the date of death.  Probate can start after 5 days.  In some instances, such as with the bank account for a small business owner whose family needs to make payroll, getting access to the assets sooner rather than later can be important.

In cases where we can't be sure the family will get along, probating even a small estate can ensure that a personal representative can collect all the probate assets, pay all the bills and only then distribute what's left.  I did just that when I was named personal representative in a will because the decedent's children were not able to work together.   I could have used a small estate affidavit, but I wanted the shortened creditor's period and court approval to give me authority to administer the estate without getting approval from all of the heirs.  This process worked for this family because the father had done estate planning, using a will to name a personal representative and set out exactly how his estate was to be administered. 

Next post, probate as a means to handle creditor's claims.