Saving Time and Money on Small Estates

Many people have heard horror stories about the cost of probate and want to minimize their expenses. Fortunately, if they leave relatively small estates, it is possible to achieve amany of the goals of probate at reduced cost and in less time through a small estate process. The process varies dramatically from state to state, so it is advisable to consult a lawyer if you think your estate, or the estate of a recently departed loved one, might be eligible.

The Basics

In Oregon, an estate including less than $75,000 personal property and less than $200,000 real property, gross value, is eligible for the small estate process. If no one starts a probate within 30 days of the decedent’s passing, the executor of a will, or anyone who would inherit, or a creditor, may file an affidavit with the probate court reporting the death and listing everyone who might inherit (including those who would inherit without a will, even if there is a will) and any known potential creditor. (For more details about the form of the affidavit, consult a lawyer.) Copies are sent to everyone named in the affidavit, the Department of Human Services, and the Oregon Health Authority.

The affidavit includes a commitment to pay off all creditors who come forward within four months, a statement that reasonable efforts to locate creditors have been made, and a commitment to distribute the rest of the estate. So long as nobody asks the court to review matters or files a petition for a full probate, and none of the creditors’ claims are disputed, however, the courts generally do not follow up. As a result, the small estate process in Oregon is fairly quick and inexpensive.

Washington’s procedure is a reversal of the Oregon process. Estates valued at less than $100,000 net, not including community property of a surviving spouse or domestic partner, are eligible. Forty days after the decedent’s passing, whoever possesses the property may pay off all of the creditors, send notices offering proposed distributions to anyone who may inherit, and, if no one objects, file an affidavit with the court reporting matters. (Once again, talk to a lawyer to ensure the proper form is used.) A copy of the affidavit is sent to the Department of Social and Health Services to determine if it has a claim (even if it was already contacted and paid). The person signing the affidavit completes the distribution if Social and Health Services does not make a claim. Most notably, Washington does not require the person filing the affidavit to ensure that estate taxes are paid, bu, in most cases, there won’t be unless there are a lot of nonprobate assets.

Possible Additional Uses of Small Estates

The most obvious use of the small estate process is to resolve estates of moderate value. With the decrease in housing values since 2008, it is likely that a large number of estates have fallen below Oregon’s $275,000 limit.

It is also possible, however, to try to plan an estate so that the value that would be subject to probate is below the small estate limit. For example, trusts, real property held in forms that pass without a will, joint bank accounts, and insurance or retirement accounts not naming the estate as beneficiary generally would not be counted if set up properly. Most trusts are already designed to try to minimize probate assets, so as long as new property is regularly placed in the trust, minimization is possible.

It should be noted, however, that minimizing the value of probate assets does not affect two significant calculations. First, in Oregon, a surviving spouse or domestic partner’s protection from disinheritance is now counted as a percentage of the total estate of both parties. Trusts and property that passes automatically on death are included in the count.

Similarly, state inheritance and estate taxes continue to be measured against everything that passes on death, and if the federal inheritance tax is revived, it probably will follow the same form. Because the Washington law does not make the person filing a small estate affidavit responsible, most likely, those who would inherit, or the trustee of any trust, probably would demand that the taxes be resolved before an affidavit is filed.

If you think you may be inheriting all or part of a small estate, and you want to take care of it without the expense of probate, a brief consultation with a lawyer often can speed the distribution and save money. Similarly, if you want to set up your estate in a way that it is likely to be eligible for a small estate, you should consult a lawyer to determine if it can be done in your state and whether it would be a good idea.

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