Articles for Financial Advisors

State Exemptions from Probate

State Exemptions from Probate

As a general rule, property left in a will must go through probate. However, there are exceptions; many states allow small estates to be transferred free of probate or under a very simplified probate process. Many estates—worth hundreds of thousands of dollars—legally qualify as “small” and eligible for special transfer procedures that speed up the delivery of property to inheritors. There are two basic kinds of probate shortcuts for small estates:

Affidavit procedure—no court required. If the total value of all the property left behind is less than a certain amount, the people who inherit personal property (anything but real estate) may be able to skip probate completely. The exact amount ranges from $5,000 to $150,000, depending on the state.
If the estate qualifies, an inheritor can prepare a short document stating that he/she is entitled to a certain item of property under a will or state law. This paper, when signed under oath, is called an affidavit. When the person or institution holding the property—for example, a bank where the deceased had an account—receives the affidavit and a copy of the death certificate, it releases the money or other property.
Simplified court procedures. Another option for small estates is a quicker, simpler version of probate. In some states, these procedures are easy to handle without a lawyer. In other states, you may need a lawyer, and may face at least some attorneys’ fees, court costs, and delays. Most states have both kinds of procedures; some offer just one.
The reason larger estates may qualify (as a small estate) is that when adding up the value of the estate, many states exclude large chunks of assets. For example, many states do not consider the value of vehicles, real estate, or real estate located in another state. Many states do not count the value of property that will not go through probate (e.g., titled in the name of a living trust, JTWROS, or POD account. 
Talk to the executor; even if the estate qualifies for a simplified probate procedure, it will have no meaning unless the executor knows the option is available. Many confused or intimidated executors turn everything over to a lawyer and inheritors pay the price.
The court order admitting the will to probate authorizes transfer of the deceased’s property to those entitled to it under the will. Furthermore, since the will has been proved in court, title to the property transferred in this way is not open to challenge. However, independent administration does normally require an attorney.
Texas has an affidavit procedure allowing personal property worth up to $50,000 to be transferred outside of probate, but the affidavit can be used only for people who die intestate, leaving no valid will. Thus, this affidavit procedure is of no use to people who plan their estates, which includes writing a will.

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