Larger ‘Small Estates’ Qualify for Collection by Affidavit

Written by Jacque Mingle

Posted on Sep 30, 2013

“Small estates” in Arizona got a bit bigger this month.  September 13 was the effective date of legislation amending A.R.S. § 14-3971, which allows personal property, vehicles, and real property to pass to heirs or devisees with a “Small Estate Affidavit” instead of via the probate process.

The key to the statute is that the assets involved must be “small.”  Estates with personal property assets, such as jewelry, art, bank accounts, furniture, furnishings, vehicles, etc., valued at $75,000 or less (minus liens or encumbrances), and/or with real property valued at $100,000 or less (minus liens or encumbrances) can avoid probate. Before the amendment, the limits were $50,000 for personal property and $75,000 for real estate. For an estate to be eligible for this procedure, the total value of the estate cannot be more than $175,000 ($75,000 in personal property + $100,000 in real estate). If a decedent has, say, $30,000 in personal property and $300,000 in real estate, you cannot use this process to collect the $30,000.

The person (or persons) entitled to the decedent’s property – heirs-at-law by statute if there is no will and those named in the will (“devisees”) if there is a will – may collect the property by presenting an affidavit. The statute outlines what must be in the affidavit, and the procedure required for the type of property.

Transferring Real Estate

The most complicated procedure is for real estate. First, the real estate must qualify, meaning the decedent’s equity in the property must be valued at less than $100,000. To determine the value, you may use the property tax assessment in the year of the decedent’s death, minus any outstanding debt on the property. Note that the assessed value is often significantly different than the fair market value. For example, the 2013 assessed value of a randomly selected three-bedroom home in central Tucson was $235,000, but it just sold for $380,000.

If you do the math, and the value is under $100,000, you may use the affidavit process to transfer it into the heir’s name. Otherwise, a probate procedure will be necessary.

The statute requires a six-month waiting period from the date of the decedent’s death before an affidavit can be used for real estate. This is perhaps the biggest downside of this procedure; many heirs do not want to wait that long and opt for probate to get the property transferred faster.

The statute requires that the affidavit include the following specific information:

1. A description of the property.
2. That the person filing (the “affiant”) is legally entitled to the property.
3. The value is less than $100,000.
4. There is no probate application pending, or it has been more than a year from the closing of an estate or discharge of the personal representative, or no personal representative has been appointed in the past year.
5. Six months have passed since the date of death.
6. No other person is entitled to the property.
7. All funeral expenses, expenses of last illness, and unsecured debt have been paid. (This nixes the process if proceeds from sale of the property are needed to satisfy expenses and debts.)
8. No federal estate taxes are due.

If every element of the statute is satisfied, an “Affidavit for Transfer of Title of Real Property” must be filed in the probate court, either in the county where the decedent lived or in the county where the property is located (if the decedent lived out of state). A certified death certificate must accompany the affidavit, and if the property is passing by will, the original will must be included as well (or must have already been probated). The probate registrar will then issue a certified copy of the affidavit, and it then must be recorded with the county recorder in the county where the property is located. Note that any attachments (death certificate or will, if applicable) will not be returned to you.

If there is an outstanding mortgage on the property, it still has to be paid.  Mortgages usually include a due on sale clause that includes any kind of transfer.  But federal law protects some transfers resulting from the death of the borrower, including the transfer of a residence to a joint tenant, spouse, or other family member.  Non-relatives certainly should check with the lender to get approval.

Personal Property and Vehicle Transfers

The procedure for bank accounts and cars is far simpler.

Again, the total value of the personal property must be less than $75,000. Instead of a six-month waiting period, there’s a waiting period of just 30 days after date of death. Then an Affidavit for Collection of Personal Property can simply be presented to a bank or the Motor Vehicle Department, and the funds may be released to you or a new title issued. The affidavit must also include the list above – you are entitled, no one else is, the value of all personal property is under $75,000, there’s no probate proceeding or one has long closed, debts and expenses have been paid, etc.

The bank is not likely to give you any trouble; the statute protects financial institutions from liability when it makes a transfer as a result of a small estate affidavit.

This process, no surprise, does not cost as much as probate. An attorney might charge roughly $1,000 for a real estate transfer, including drafting the documents, but then you need to add the court’s filing fee and recording fee of about $300. An affidavit for collection of personal property is probably under $400. An uneventful probate generally costs $2,000 to $3,000.

Avoiding It All

It should be noted that both probate and affidavit for collection procedures can be avoided. For real estate, you can use a beneficiary deed, which transfers real estate upon the death of the owner and there is no limit to the value of the property that can be transferred with one of these deeds. There’s a similar process for vehicles; the MVD form can be found here. Bank and brokerage accounts also can be passed without probate by utilizing pay or transfer on death provisions (POD or TOD). Also, if you have a trust, but leave a small asset or vehicle outside the trust, your trustee can use the affidavit process to transfer those assets to the trust using your pourover will, provided that you have not made arrangements for them to pass in another fashion, such as joint tenancy, beneficiary deed, or POD/TOD.