The Small Estate Affidavit is a key estate planning tool used to avoid Probate for a person’s estate. When planning someone’s estate - I always see if we are able to use a Small Estate Affidavit.
A Small Estate Affidavit is an affidavit that banks, financials institutions, and other individuals or entities can rely on to transfer someone’s “Probate Assets” without actually having to go through the court process of probate.
Probate Assets vs. Non-Probate Assets:
All assets can be classified into two general categories for estate planning purposes – Probate Assets and Non-Probate Assets.
1. Non-Probate Assets are assets that automatically transfer to a person's heirs or legatees when they die. These Non-Probate Assets are assets that are either jointly owned (with right of survivorship) with another person (think of a car, home or bank account that a married couple owns together) or are assets that have beneficiary designations that say who will automatically receive these assets (think of the beneficiaries you have named for your retirement accounts and life insurance policies).
2. Probate Assets are assets that are not jointly owned - meaning they are only owned by one person and do not have beneficiary designations. Because Probate Assets are only owned by one person and they don’t have beneficiary designations – these assets do not automatically transfer to someone else when the owner dies.
Because Probate Assets do not automatically transfer upon death we have to determine and do two things:
Determine Who Will Inherit: The first thing we have to do is determine who is going to inherit the Probate Asset. In order to determine who inherits a Probate Asset - we have to look at the decedent’s Will - if they had one. If they did not have one - we have to look at Illinois law (or the law of the state where they died) to see who inherits these assets.
Transfer Legal Title: The second thing we have to do is to actually transfer legal title of those assets to those people that are going to inherit the asset. This is where the Small Estate Affidavit becomes so important with estate planning.
Two ways Probate Assets can be Transferred to a Decedent’s Heirs:
1. The first way is through a court process called “Probate”. Probate is the court process that comprises various steps, rules and procedures so that a person's “Probate Assets” can be transferred to their heirs. (To read more about the Probate process, check out my article Probate: What is it and How to Avoid it.)
2. The second way is through the use of a Small Estate Affidavit. Illinois and other states do not want a lot of "small estates" going through probate clogging up their court systems. In order to prevent this - Illinois has passed a law stating that if someone’s probate assets total less then a certain dollar amount - they can use a statutory form provided by the state (the Small Estate Affidavit) to transfer personal property such as bank accounts, cars, brokerage accounts, etc. from a decedent's estate to their heirs. At this time, if someone has less then $100,000 of Probate Assets, then a Small Estate Affidavit can be used to transfer those assets instead of having to go through the long and expensive process of Probate.
Note: A Small Estate Affidavit cannot transfer real estate - it can only transfer non-real estate assets. To learn how to avoid probate for your personal residence CLICK HERE to read my article about the Illinois TODI.
How to Know if You Can Use a Small Estate Affidavit for Your Estate:
I go through a Probate Assets Analysis with my clients to determine whether their estate would qualify for a Small Estate Affidavit. For this analysis, I use a one page diagram that I have developed over the years that categorizes all assets of a person’s estate as either Probate or Non-Probate. We use this Probate Asset Analysis Diagram as the road map to our clients’ estate plans. It tells us if their estate will avoid probate by being able to use a Small Estate Affidavit – and if not – what options we need to consider for their plan. If Probate cannot be avoided by using a Small Estate Affidavit the next option is usually designing a “Trust” based estate plan. CLICK HERE to read this article I wrote about how Trusts are used to avoid probate.
The Small Estate Affidavit is a key estate planning tool used to avoid Probate for a person’s estate. By analyzing the assets of a person's estate by using the Probate Asset Analysis Diagram we have developed at the Ritchie Law Office, Ltd. over the years, we can quickly assess if your estate will avoid probate through a Small Estate Affidavit and if not, what other options can be used to avoid probate.
This article is a service of Attorney Chad A. Ritchie and the Ritchie Law Office, Ltd. Click Here or call (309) 662-7000 to learn more about what it’s like to meet with the Ritchie Law Office, Ltd. for your initial estate planning meeting. We call this initial Estate Planning meeting a “Ritchie Wealth Planning Session”.
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