Smaller sized estates may still require probate

Here’s another question I am asked regularly: how small does an estate have to be before it does not have to go through probate?

Back when I was starting out, and in fact for quite a few years after that, the answer was easy. If it was less than $15,000 and there was no real estate, it did not have to go through probate. Anything above that, and it did. That was it, plain and simple. It was easy to figure out, although it was an awfully low amount, and that meant that a lot of cases had to go through probate when they shouldn’t have.

In 2008 they changed the law. The amounts are a lot higher now, but it is a little bit more complicated.

First of all, there still cannot be any real estate; if there is, it has to go through probate. So what you do if you own your home? In the right circumstances, you can record a transfer on death deed while you are still alive, so that the property goes directly to one or more heirs on your death. If that does not work for you (for instance because you have multiple heirs and they don’t get along, or your heirs are minors, financially irresponsible, or significantly disabled) you may have to put the property into a revocable living trust.

Either way you have taken the real estate out of what would have been the probate estate, so it doesn’t count for purposes of whether you can use the simplified procedure.

Second, the total of “vehicles subject to registration” must be less than $100,000. Yes, you read that correctly, One Hundred Thousand Dollars. Relatively few people have a problem qualifying on that part of it, other than a few who collect classic cars, or own a really nice “land yacht”.

But the third prong of the test is the most difficult. All other assets – that is, all other assets that would otherwise have to go through probate – must total less than $50,000. For most people that is still not a problem, but there are a lot of people who have more than that. They may have jewelry, collectibles, tools, firearms or other assets that push them over that limit. Also if there are any accounts which don’t have a designated beneficiary, the value of those accounts add into this figure.

I recently handled a probate for a man who had a living trust, but he had one account which was never designated to go to the trust (you can designate a trust as the death beneficiary on most types of financial accounts). Even though all of his other assets were in the trust, because the balance of that account was more than $50,000, his estate had to go through probate. Most of that money ended up being eaten up paying for the cost of probate itself. That’s a shame, because it wasn’t a very big estate. Just a little too big, though, for the simplified procedure.

But either way, under the old rule or the new, there is a simple way to handle those truly small estates. All it takes is a form. The technical term for this simplified procedure is the “Affidavit for Collection of Personal Property”. It is a one-page form that has to be signed in front of a notary. The person who signs it must affirm under oath that he or she believes that the estate meets the amounts for a small estate, that he or she is the person entitled to handle the estate, and that he or she promises to make sure everything is paid out the way it is supposed to be. And that means if there are creditors, they have to be paid just like they would in a probate; and if there is a will, it dictates who gets whatever is left over.

This simplified procedure can be very useful, and not just for folks who die without a whole lot of money. I have been able to use it many times for people who were quite wealthy, but had a few assets which were not taken care of through other means.

Kenneth Kirk is an estate planning attorney in Anchorage. This article should not be taken as legal advice in a specific situation; for legal advice, you should consult an attorney directly.

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