When someone passes away without a will, family members are often left unsure what to do when it comes to settling the person’s estate. In general, there are four options: (1) a small estate affidavit; (2) an affidavit of heirship; (3) a determination of heirship; and (4) a dependent or independent administration of the estate. Which option is appropriate depends upon the facts of that person’s estate. The pros and cons of each of these options are discuss below.
Small Estate Affidavit
The Small Estate Affidavit is used to pass title to assets of smaller estates without the need for significant interaction with the probate court. There are certain eligibility requirements and the small estate affidavit is not available to transfer title to all types of property or in all situations.
For example, the total value of the estate, excluding homestead and exempt property, cannot exceed $75,000. In addition, the estate must be solvent meaning that it has more assets than liabilities.
One significant limitation of the small estate affidavit is transferring title to real property. The affidavit can only be used to transfer title to a homestead (if there is one). If the house does not qualify as a homestead or there are other pieces of real estate that require transfer, then the small estate affidavit cannot be used.
Another drawback is that there is no personal representative appointed in the case of a small estate affidavit – so if there is any need to administer the estate by collecting assets or paying debts – there is no estate representative with the authority to do so. Some third parties holding estate property may require letters of administration prior to disbursing that property and those letters are not issued with a Small Estate Affidavit.
The affidavit requires signatures from at least two witnesses and all of the distributees of the estate. Each person signing the affidavit is liable for any damage or loss that arises from a payment or transfer made in reliance on the affidavit. This may cause some people (particularly witnesses) to question whether they wish to assume such potential liability.
Affidavit of Heirship
An affidavit of heirship can be a useful alternative when the only assets that require a title transfer are real estate. Affidavits of heirship are occasionally used for other types of assets, but their acceptability will depend on the institution holding those assets.
Affidavits of heirship are less expensive options designed for small estates where the only asset is real estate. However, there are some limitations on the effectiveness of affidavits of heirship. One significant issue is that not all title companies will accept affidavits to establish chain of title to real property. In some cases, title companies may accept them but only after 2 or 5 years have passed.
Oftentimes, you will not know at the time the affidavit is used which title company will participate in a later sale and whether the affidavit is acceptable to them. Many title companies require additional information in the affidavit that is above and beyond what is required by law.
Another drawback is that there is no personal representative appointed in the case of an affidavit of heirship – so if there is any need to administer the estate by collecting assets or paying debts – there is no estate representative with the authority to do so.
The affidavit requires two witness signatures as well as the signatures of all heirs and each of them is liable for any false statements in the affidavit.
Determination of Heirship
A Determination of Heirship is a proceeding in the probate court held for the purpose of establishing the legal heirs to the individual who passed away. This carries a significant benefit in the form of a judicial determination of the identity of the decedent’s heirs.
In the case of a small estate affidavit or affidavit of heirship, the identity of heirs is established by the sworn statements of those heirs and witnesses. There is no hearing or court order confirming those facts and they can be easily disputed at a later date in court. This is the primary reason some third parties refuse to rely upon those affidavits.
Third parties will accept judicial determinations of heirship to identify heirs entitled to property. This stems from the fact that the court’s judgment comes after evidence is presented and witnesses appear in court. In addition, the court appoints an attorney ad litem to investigate the family history of the decedent and make a report to the court. Thus there is less opportunity for fraud or abuse.
The primary drawback to the Determination of Heirship is that it requires filing pleadings with the probate court, the appointment of an attorney ad litem, and at least one hearing before the court. This means it costs more money.
The benefit is a court order establishing the identity of the decedent’s heirs. This can prove particularly important in cases where the identity of heirs is questioned or the validity of claims of heirs are suspect.
Dependent or Independent Administration
The difference between a dependent or independent administration of the estate is the amount of probate court involvement in the administration. Independent administrations occur without significant involvement from the probate court. Dependent administrations require approval from the court before the administrator can take most actions.
Regardless of whether it is dependent or independent, an administration of the estate involved having someone appointed as administrator of the estate who will be responsible for collecting the decedent’s assets, paying off any liabilities, then distributing any remaining assets to the decedent’s heirs. In almost all cases, a Determination of Heirship will be filed at the same time as the application for administration of the estate.
The benefit of administering the estate is having a personal representative appointed that receives letters of administration from the probate court. Letters of administration provide the personal representative with legal authority to deal with third parties on behalf of the estate for the purpose of collecting assets and paying any debts. Third parties will readily provide information and assets to a personal representative in possession of letters of administration.
This means that the personal representative (with or without court involvement, depending on the type of administration) can handle any issue that comes up in administering the estate, whether it involves collecting estate assets, settling claims, paying liabilities, or distributing those assets to beneficiaries.
The primary drawback is cost. This is the most expensive option but is often the necessary option for estates with significant assets, liabilities, or property that has been left in the hands of third parties.