Private Client Services Update – Use of Small Estate Affidavits to Clean Up After Probate Avoidance Trusts
These days it is very common for estate planning clients to create revocable trusts for probate avoidance and ease of estate administration, even if the clients do not face estate tax liability under the current system. As we are well aware, those clients fail to achieve the probate avoidance benefits of their trusts if they fail to fund their trusts during their lifetimes. Attorneys and other advisors should (and often do) work with clients to ensure that most of their assets, and certainly all the large assets, are in their trusts. We draw deeds to transfer real estate to the trusts. We re-title their brokerage accounts, their stock, their CDs and their money market accounts. Sometimes, we even have clients transfer their regular checking accounts, their vehicles and their tangible personal property into their trusts.
Nevertheless, for most clients, at least something is forgotten. It could be a checking account that hasn’t been used in years, a vehicle, a fractional interest in real estate, or assets purchased or inherited by the decedent after the trust already was in place. In the past, if the value of the forgotten assets was in excess of $15,000, the decedent’s executor had to go through the full probate process. As a result of an update to the law in 2010, this threshold has now increased to $50,000, a much more realistic figure.
Under these circumstances, a small estate affidavit can be used to collect and distribute assets in the decedent’s name as long as the value of the entire probate estate is less than $50,000. The use of a small estate affidavit does not require an executor or administrator to qualify on the estate and does not require any reporting to the Commissioner of Accounts.
In order to use a small estate affidavit, certain criteria must be satisfied, all of which are listed in Virginia Code Section 64.1-132.2. As previously mentioned, the decedent’s entire personal probate estate must not exceed a value of $50,000. Additionally, at least sixty days must have passed since the decedent’s death, no one must have qualified as executor or administrator, and the decedent’s will (if any) must have been probated (meaning, put to record in the Clerk’s Office). The affidavit must name the person or persons entitled to payment of the decedent’s assets. If there is more than one person entitled to the assets, then one of them may be designated by the group to collect and distribute the assets.
If a decedent dies with a pour-over will and $30,000 worth of assets that were not transferred to his trust during his lifetime, one option would be for the trustee of the trust to use the small estate affidavit to transfer the probate assets to the trust. However, if it makes more sense for these assets to be distributed directly to a surviving spouse, the surviving spouse could first file claims for family allowance ($18,000) and exempt property ($15,000), which are given priority over any other claims against the estate. Then, the surviving spouse will be the person entitled to be paid the assets of the probate estate, up to her claim amount of $33,000.
The small estate affidavit is another tool which when used properly can make the probate process easier and more cost-effective for clients.
Sarah Messersmith is an associate attorney at Kaufman & Canoles, where her practice focuses on wills, trusts and estates. Sarah’s work with clients ranges from the initial structuring and implementation of their estate plans to the resulting estate and trust administration. Her practice also includes working with owners of closely-held businesses and representation of clients in all aspects of real estate transactions. Sarah serves on the Board of Trustees of the Sarah Bonwell Hudgins Foundation and the Executive Council of the Virginia Bar Association Young Lawyers Division, and is a member of the Peninsula Estate Planning Council. She is a Peninsula native and works in the firm’s Hampton office. Sarah can be reached at (757) 224.2950 or firstname.lastname@example.org.
The contents of this publication are intended for general information only and should not be construed as legal advice or a legal opinion on specific facts and circumstances. Copyright 2023.