Saturday, February 20, 2010

What to do with the property of someone who dies with very little?

After reading my post about probate, a reader asked me what happens when a relative dies with only a bank account, or a car, or some items of personal property. It is a good question.

The amount of complexity required to administer an estate is directly related to the amount of money the dead person had when he or she died. If the person died with nothing, nothing has to be done. The debts of the dead person will remain unpaid forever. The deceased owns no property, so there is nothing to distribute.

If the deceased owns property of certain types, there may be laws that apply to the particular type of property.

Bank Accounts:  If the deceased had money in the bank, but less than $25,000, a spouse or close relative can fill out a sworn statement requesting the bank deliver the money to the relative. The relative must promise to pay from that money the expenses of the dead person's last illness and buriel and all debts owed by the person when he or she died. The person who fills out this statement is normally the heir to the estate. Once the heir pays off the funeral expenses, the medical bills, and the dead person's Mastercard bill, the heir gets to keep the rest.

Cars. If the deceased own cars or trucks at death, those items can be transferred to the heirs by filling out an inheritance affidavit, that you can find at the Oregon DMV website. All natural heirs must sign the affidavit.

Accounts with Beneficiary Designations. Life insurance, deferred compensation accounts, 401(k) accounts. Pay on Death (POD) accounts and IRA accounts pass to family members through beneficiary designations. They do not pass through the probate process even if there is a will and a subsequent probate. If there is a beneficiary designation and you are the beneficiary, you get the money.
If the procedures listed do not work because, for instance, the deceased had more than $25,000 in the bank or the deceased left a will which gave the money to someone other than an heir, then there is a short form of probate specifically for the handling of small estates. To qualify as a small estate, the property owned by the deceased on the day of death has to have been worth less than $275,000 with no more than $75,000 in cash or personal property and no more than $200,000 in real estate.

If the estate qualifies as a small estate any person who has a right to some of the estate of the deceased can file an affidavit of claiming successor.  The affidavit is a short form of a probate petition. It gives the name of the deceased, the names of the heirs, and lists the property and debts of the dead person. If there is a will, the will must be attached. Copies of the affidavit must be sent to the other heirs, the State of Oregon and all creditors of the deceased. The person filing the affidavit is responsible for (1) sending copies, (2) collecting property owned by the deceased, (3) paying all the debts owed by the deceased, and finally (4) distributing the money to the heirs or the persons named in the will.

The filing fee for a small estate affidavit is currently $78. After accepting the affidavit for filing, the court takes no part in administration of the estate. There is no accounting and no judicial oversight. The administration only comes to the attention of the court if there is a dispute about the handling of the deceased's money. The small estate procedure is a fair amount of work and is easy to screw up if you don't follow the law carefully. It is, however, less expensive and far less burdensome than a full probate. If a person can use the small estate procedure, he or she should.

It is best to consult with a probate attorney about small estates, or to obtain a bank affidavit for the transfer of accounts. The legal fees are small, but the dangers of going it alone fairly large.

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