Settling Small Estates under $150,000

          Effective January 1, 2012, in California, estates of decedents valued at less than one-hundred and fifty thousand dollars ($150,000) can be settled as small estates without probate.  Formerly, the limitation was one-hundred thousand dollars ($100,000). 

          To determine whether a decedent’s estate is a small estate the following are excluded:  Assets held in the decedent’s trust or in a joint tenancy with a surviving joint tenant; assets in which the decedent had a life estate only; assets that pass at the decedent’s death to designated death beneficiaries (e.g., life insurance, annuities, and retirement plans); and assets that pass to the decedent’s surviving spouse or surviving registered domestic partner, as relevant.  Also excluded is up to fifteen thousand dollars in uncollected (unpaid) salary or compensation owing to the decedent.

          If the total appraised value of the remaining assets is equal to or less than one-hundred and fifty thousand dollars ($150,000) then the estate is a small estate which may be administered through summary administration without formal probate.  Let us discuss how small estates are settled.

          When real property is not involved, then the so-called “affidavit procedure” may be utilized once forty days have elapsed since the decedent’s death.  This allows a beneficiary to claim ownership to all or a part of the small estate without obtaining a court order.  A certified death certificate is attached. 

          The affidavit may vary with the type of asset(s) and situation involved.  For example, if a promissory note is being transferred then particulars concerning the note are discussed.  With cars and boats DMV has its own preprinted affidavit to complete.  Financial institutions (especially banks) usually have their own preprinted affidavits. 

          With mobile homes, however, the affidavit procedure is unavailable.  Instead, the Department of Housing and Community Development (“HCD”) requires that its “Multi-Purpose Transfer Form” be completed along with the original title, registration and a tax clearance certificate if the mobile home is on the county tax rolls.

          The affidavit procedure creates a race to claim property amongst those claiming an inheritance right.  It can be a race amongst beneficiaries themselves and also by the beneficiaries against the decedent’s creditors.  Unlike with a probate, the decedent’s creditors must pursue their enforceable claims against the beneficiaries individually to the extent the beneficiaries receive assets from the small estate.  Unless the creditors open a probate before the affidavit procedure is utilized the creditors are in a weak position to recover their money.

          When real property is involved, however, the affidavit procedure can only be used if the total value of all real properties is equal to or less than fifty thousand dollars ($50,000).  If more, a petition for transferring title to real property of a small estate is required to obtain a court order transferring title.

          Now, let us consider a decedent who owned a bank account with $17,000; a car worth $5,000; a mobile home worth $50,000; and a lot worth $60,000.  All assets are titled in the decedent’s own name.  The combined appraised date of death value of all assets is $132,000.  The decedent’s heirs are his two children.  They wait forty days and take possession of the bank account and car using the affidavit procedure.  They complete HCD’s Multi-Purpose Transfer Form and submit it with the title, registration, death certificate and tax clearance certificate (if relevant) to HCD.  The lot is over $50,000, so a court order transferring title is necessary.  All of this is done without notice to creditors, outside probate.

          Families of decedents with small estates can save much money and time by using the appropriate summary administration method(s) relevant discussed above in lieu of probate.