The Use of the Small Estate Affidavit
Colorado has a process whereby a decedent with a probate estate with less than $64,000 of value can be collected and distributed without having to commence an estate administration with the courts. The use of the Affidavit for Collection of Personal Property (“Affidavit”) can reduce administrative costs and further simplify the administrative procedure of probate, even where Colorado’s procedure has been greatly streamlined by the adoption of the Uniform Probate Code.
There are some limitations to the use of this Affidavit.
First, the Affidavit cannot be used to transfer a decedent’s interest in real property, which can only be transferred with Letters Testamentary and/or Letters of Administration, which are issued by a court. Thus, if the Decedent has real property solely in his or her name at death or held as a tenant in common with others, an Estate will have to be opened to enable the real property to be distributed or sold.
Second, to be able to use an Affidavit, the decedent’s assets, less liens and encumbrances, cannot exceed $64,000 (for 2016). Finally, there cannot be an appointment of a personal representative pending or having been granted in Colorado or another state. The Affidavit is not filed with a court but is presented to any person indebted to the decedent or having possession of decedent’s tangible personal property. If a person or entity refuses to honor the Affidavit without reasonable cause, that person can be liable for all costs, including reasonable attorney fees and costs incurred to get the property transferred.
There are a variety of situations in which such Affidavits can be extremely convenient:
1) Where the decedent’s assets generally pass to a surviving spouse or children through the use of joint titling, nonprobate transfers, or payment upon death transfers, but there remain certain, small assets which were in the decedent’s sole name, such as a car;
2) If the decedent’s beneficiaries are clear, with or without a will in place, or where the decedent’s heirs are uncontested and the probate assets in the decedent’s name are below the threshold;
3) Decedent used a revocable trust to transfer the majority of his/her assets, but there were a few loose ends which need to be tied up with an Affidavit.
Besides the inability to use Affidavits to transfer real property, there are other times when the use of an Affidavit may not be advisable. For example, if the decedent dies and the vast majority all of his or her assets are passed through non-probate transfers (for example, by a beneficiary designation form for a 401k or IRA, or through the use of jointly titled assets), but the surviving spouse needs to file an estate tax form 706 (which many CPAs will suggest doing to keep the portability of the deceased spouse’s unused exclusion intact). In this situation the use of a small estate Affidavit may not be advisable because the surviving spouse may not be in a position to act as a Personal Representative for filing a federal tax return. The IRS forms request that the Personal Representative (or Executor) sign the return.