1. What are Small Estate Affidavits?
Small Estate Affidavits are used in Arizona to transfer assets from a deceased person to the heirs when the total value of the assets is below the minimum value requiring a probate.
Under Arizona law, the general rule is that if a deceased person owned more than $100,000 of equity in real estate, or more than $75,000 of personal property (including physical possessions and money), then a probate is required to transfer the assets to the heirs. A Small Estate Affidavit may only be used when a probate is not required.
2. How do you transfer real estate by Small Estate Affidavit?
If the entire value of the deceased person’s equity interest in real estate is worth less than $100,000, then each property otherwise subject to traditional probate may be transferred using an Affidavit of Succession to Real Property.
When determining the value of real estate for this purpose, the amount of equity is calculated by using the current year’s assessed value for property tax purposes less any outstanding debt. This amount is sometimes substantially different than the fair market value. For example, the fair market value may be $250,000, but the assessed value for property tax purposes only $195,000.
Filing the affidavit is a two step process. First, the affidavit is filed in the probate court in the county where the property is located, along with a certified copy of the death certificate, and the original will if there is one. Second, a certified copy of the affidavit must be recorded in the same county.
3. What if the property has an outstanding mortgage?
The typical mortgage will state any transfer of the property will trigger a due-on-sale clause. In other words, the mortgage becomes due and payable immediately upon sale or transfer. Thus, the beneficiary of property subject to a mortgage should contact the lender before making a transfer using the Affidavit of Succession to Real Property. The mortgage lender does not have to agree to use of the affidavit procedure. It may prefer a probate in order to refinance the mortgage.
4. What are the problems with using a Small Estate Affidavit for Real Estate?
The main drawback of using an Affidavit of Succession to Real Property is the successor beneficiary must wait six months after the owner’s death before filing it. Often the better approach – although more expensive – is to petition for informal probate anyway because it can be opened (and closed) before the six month waiting period would have ended. Using an informal probate will permit a faster closing than using the Small Estate Affidavit.
When filing the affidavit, the successor beneficiary must also verify that no estate taxes are due and that funeral expenses, expenses of last illness, and all unsecured debts of the owner have been paid. In some cases – where the home is basically the only substantial asset – this last item may prohibit the use of the Small Estate Affidavit because sale proceeds are needed to pay these expenses first.
5. How do you transfer cash accounts and cars by Small Estate Affidavit?
The counterpart to the Affidavit for Succession to Real Property is the Affidavit for Collection of Personal Property. It is a highly useful tool for closing out small accounts and transferring car titles without much hassle; provided the total value of personal property subject to probate is less than $75,000. Most financial institutions and the MVD will be eager to accept it.
Unlike the six month waiting period applicable to the Affidavit for Succession to Real Property, the waiting period to use the Affidavit for Collection of Personal Property is only 30 days after date of death.
The Affidavit for Collection of Personal Property is not filed anywhere, but instead is presented to the financial institution or MVD office. By law, a financial institution is released from liability when it transfers an account to the person identified in a Small Estate Affidavit.
6. How much does a typical Small Estate Affidavit cost?
An estate attorney will usually agree to handle the process of filing an Affidavit for Succession to Real Property for about $750 to $1,000, plus expenses of several hundred dollars more. The typical fee for preparation of an Affidavit for Collection of Personal Property is about $250 to $400, with no additional expenses. Many financial institutions – and the MVD – will have pre-printed forms of the Affidavit for Collection of Personal Property available for ready use.
About the Author
Thomas J. Bouman provides legal counsel in the areas of estate planning, estate settlement, and asset protection. He brings a highly systematic approach to the practice of law, which is critically important when wading through the complex, and often bizarre, legal requirements associated with estate and trust law. Mr. Bouman is author of the Arizona Estate Administration Answer Book and a prominent member of Wealth Counsel, LLC, the nation’s premiere organization of estate planning attorneys.