When a loved one passes away, their estate gets divided among their family members through a probate process. In legal and financial terms, an estate refers to all personal belongings, physical and intangible assets, land and real estate, investments, insurance, bank account, collectibles, furnishings, etc.
People that receive the decedent’s assets through inheritance are called beneficiaries. They are usually: a surviving spouse, domestic partners, children or a guardian of minor children, deceased’s parents, and sometimes even various other parties.
Whether the decedent left the will or a trust document, their estate would distribute in a manner defined by that document through a court process called probate process. If the decedent’s estate is large or complex in some way, or there are some disputes over who receives the property and how it’s divided, the probate process may take longer to settle.
If you are seeking ways to speed up the lengthy court procedure and save your money, you may be interested in the small estate administration process.
In this article, you will find out if you are eligible for the small estate administration process and learn how to file a small estate affidavit.
We will cover:
- What is a small estate affidavit?
- What qualifies as a small estate affidavit?
- When should you use a small estate affidavit?
- When can you not use a small estate affidavit?
- How to fill out a small estate affidavit?
- What are the costs of a small affidavit procedure?
- How to take care of your loved ones using Infinite banking?
A small estate affidavit, otherwise known as an affidavit for collection of personal property, is a legal document that involves a sworn statement allowing an individual to legally claim the decedent’s estate without going through a probate process.
The probate process is the first step in administering the decedent’s estate, intended to ensure that the decedent’s bills have been paid and that the assets are distributed to the beneficiaries. Unfortunately, the probate process is usually expensive and overly long.
You can skip the lengthy and complicated probate court procedure and take possession of assets that rightfully belong to you with the help of a small estate affidavit. Some small estates do not require administration, but many do.
In most states, the small estate administration process is a simplified court procedure that includes a small estate affidavit. When the affidavit is made, a clerk makes a copy of this affidavit. You can then use this affidavit with a certified copy of the death certificate to claim the decedent’s estate from the holder of the assets or financial institutions.
However, in other states, a small estate administration process may begin with a person filing a court petition. The court petition has to include specific information required by state law. The person making the petition must sign under penalty of perjury to the stated facts and pay the filing fee. A statement under penalty of perjury is very similar to an affidavit. Yet an affidavit must be sworn to by two disinterested witnesses in front of a Notary Public by the affiant.
A small estate qualifies as small only if its total value doesn’t exceed a specific maximum value, defined by the law, and varies from state to state. In some states, the total value of the decedent’s estate can be only up to $10,000, while in other states maximum value may be as high as $275,000.
It is safe to say that $50,000 is an average, but you should check your state’s specifications of a small estate before completing the small estate affidavit form.
If the descendant’s estate value is too high, you will have to proceed with the probate process.
It’s also important to distinguish what property qualifies as a small estate. For example, in some states, motor vehicles are not included under small estate laws.
Small estate affidavits are typically used when the total amount of the deceased’s assets are low enough in value that it does not exceed a relatively low threshold. Also, it’s important to note that some states don’t include real estate or real property in that calculation.
Each state has its procedures for processing a “small estate” with less or more court involvement, time, and money. Once individuals determine whether a personal estate qualifies as a small estate, they should ascertain whether the deceased had a last will.
As previously discussed, some states might require that the decedent had a testament, whereas others recognize a small estate affidavit is valid only if the person died intestate.
Intestacy is a legal term referring to a state of dying without a will. When someone dies intestate, the court determines who is entitled to the property in the estate and in what percentage. Nevertheless, if the estate goes to the probate court, a small estate affidavit cannot be used.
On condition that there is a will, the person named the executor of the estate can use the small estate affidavit. An executor or a legal personal representative is appointed by a court to oversee the administration of a decedent’s estate.
If there is no last will, it’s usually the beneficiary that uses a small estate affidavit.
Presuming that you are still eligible to file a small estate affidavit, you should check the laws of your state to assess whether the statutory time has passed to use the affidavit.
A certain amount of time from the decedent’s death has to pass before a small estate affidavit can be used, pursuant to the state’s law, although some states require no waiting period at all.
Keep in mind that some non-probate assets may be eligible for transfer under a small estate affidavit, such as trust assets, retirement benefits, life insurance, jointly owned properties, and assets held in bank accounts.
Some common instances in which a small estate affidavit may not be used are:
- Legal probate proceedings have already started.
- The total value of the assets exceeds the preset limits for a small estate. Some states do not allow individuals to receive real estate without going through the probate process.
- Some states may even exclude motor vehicles and registered watercraft (boats or jet skis) from small estate affidavits.
- A person may not be able to use a small estate affidavit if they do not meet the will requirements in their state or if they do not wait for the statutory time to pass before they file the affidavit.
Firstly, fill out the basic information such as your and the decedent’s name and address, and then you should proceed in the following order:
- Verify the date when the decedent passed away — The date of death must be verified, as well as the city and the state where the decedent passed away. You can find this information on their official death certificate.
- Confirm whether the decedent died intestate or testate — Every state has different requirements. Some states require the last will, while others will only allow a small estate affidavit to be used if the decedent died intestate. Some states might allow both instances. If the decedent made a will, be sure you have a copy of it. If someone is named the executor of that will, they should file this form.
- Provide confirmation of payment for all burial and funeral expenses. If the decedent’s funeral costs haven’t been paid in full, you must provide the list of expenses and the total amount owed.
- Provide a list and details of any liabilities or claims against the estate. If the decedent left behind any debts, the estate must settle those debts first. The remaining value of the decedent’s assets will be passed to the beneficiaries afterward.
- List all surviving heirs to the decedent — provide name and addresses of surviving heirs that could rightfully claim ownership of the deceased’s estate.
- Submit an asset list with descriptions and values. Accurately describe all personal property being distributed (excluding real property in certain states) and append the fair market value of the decedent’s property. Personal property includes vehicles and general possessions like jewelry, clothing, art collection, etc.
- Submit a description of the decedent’s real property being distributed. If you’re claiming a transfer of ownership of the decedent’s real property, provide a complete description of that property and the dollar amount of said property. Real property refers to any house or land that would require a deed or title to be transferred. Only some states permit the transfer of real property through a small estate affidavit.
Do not forget to include a proposed order and a copy of the death certificate when filing the Small Estate Affidavit, and supply all necessary information regarding the assets, debts, and the family and marital history of the decedent.
In most cases, the affidavit has to be notarized for it to be valid.
Each county has its own filing fees, and the court costs vary as well. If you want to save some money on attorney’s fees, you can prepare the affidavit and other documents on your own. Still, expect to pay the clerk’s filing fee, between $250 and $400.
If, however, you choose to hire an attorney, your total expenses may vary between $500 to $1,000 and more if the heirship situation is complicated.
As you may know already, the probate process is expensive, lengthy, and exhaustive; that is why you should devote your time to estate planning. It is important to make plans for the future, ensure the financial safety of your beneficiaries on time, and learn how to take control of your finances now. You could easily achieve that with an understanding of the Infinite banking concept.
Infinite banking is a process of using whole life insurance to finance your lifestyle and things you would typically finance through a bank. The infinite banking concept is unique because it imitates how a traditional bank operates and borrows money. Without the need to depend on a third party, you become both a creditor and a lender.
Instead of borrowing money from a bank, you borrow money against yourself. You single-handedly dictate cash flow while still allowing your whole life insurance policy to earn dividends (money) even though you are using that money elsewhere. In other words, you build wealth while borrowing and repaying the money held in the cash value of your permanent life insurance policy.
The major advantage of the whole life insurance policy is that you can borrow money using your own policy’s cash value as a policyholder. Using this borrowing setup, you would never have to borrow money from a bank again and instead would borrow for yourself (from your whole life insurance policy) and pay yourself back over time. This way, you become your own bank. You will never have to deal with high banking fees or interest rates on loans again.
The main goal of Infinite banking is to duplicate the process as much as possible, and the best way to do that is by lending and repayment of money typically held in the cash value of a permanent life insurance policy. This duplication process is going to build the value of your bank.
Infinite banking allows you to work towards achieving your individual financial goals for yourself and your family too. It will help you gain control over your finances without dealing with banking fees or interest rates on loans.
Infinite Banking involves:
- Overfunding (with after-tax funds) a high cash value whole life insurance policy from a life insurance company.
- Accumulation of Cash Value(tax-free) throughout the years you are a policyholder of your Whole Life insurance policy.
- Tax-Free Loans taken out against your whole life insurance policy’s cash value to use for your financial expenses.
Following these three steps lead to creating your own bank. You can borrow from yourself and use that money elsewhere, yet you will still earn dividends through your Whole Life insurance policy.
Implementing the Infinite Banking strategy can help you finally reach the financial goals you always wanted. Entering the Banking Business gives you better control over your finances and secures the future.
If your loved one passed recently and there are very few assets in the estate, a small estate affidavit may be a suitable option to claim your inheritance. Make sure to ask for legal advice if your particular case seems more complex. If this article helped you, you might be interested in other financial topics on our blog.
Also, if you want to learn more about Whole Life Insurance and improve your finances, you can check our masterclass free of charge!