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Estate Planning: What is Small Estate? But just because you have designated beneficiaries for most of your assets doesn’t mean your estate is small.

By Ilyce Glink and Samuel J. Tamkin

Q: Can I use the Illinois “Small Estate Affidavit” procedure to avoid probate even though my total estate’s value is over $100,000? While my total estate is greater than $100,000 my financial assets have “Pay On Death” beneficiaries and my home has “Transfer On Death” beneficiaries. My remaining assets transferring through my will are limited to an automobile and household furnishings, with a total value under $100,000.

What Small Estate Means?

A: While your question is specific to Illinois, many states differ in how they deal with small estate. We don’t have space to list all small estate rules from every state, so let’s focus on what a small estate actually means.

Let’s start with the idea that doing some basic estate planning is important, no matter what size your estate. We assume that you have a will, which is great. And, you have also thought about beneficiaries and seem to be using other estate planning tools, like Transfer on Death deeds (DOD) and Pay on Death (POD) documents. We hope you also have written valid powers of attorney for health care and financial matters.

You, like most or perhaps all, of our readers have bank accounts, real estate, and other financial assets. Using PODs and TODs, you’ve designated beneficiaries (your heirs) to receive those assets upon your death. That’s a savvy move, one that’s available in most states. The only items left in your estate that would require distribution are your automobile and household furnishings.

Small Estate Truly Means Small

But just because you have designated beneficiaries for most of your assets doesn’t mean your estate is small. When people talk about a small estate, they truly mean a small estate. In some states that amount is less than $100,000 for the value of the entire estate at the time of your death. In other states, it might be as little as $15,000, like in Michigan or Rhode Island.

But the total value of your estate includes everything, not just things you haven’t parceled out yet. Your home might be worth $500,000. You may have retirement accounts worth $1,000,000 and other financial assets worth another $1,000,000. All of these amounts are added to the total value of your estate.

Discuss with an Estate Attorney

When you die, your estate could have debts to pay or even owe estate taxes to the federal or state government along with any other taxes. Some states allow people that die with truly small estates to transfer some assets without having to go through probate. Given the way you phrased your question, we doubt your estate would qualify to avoid probate, but you’d need to discuss this further with an estate attorney.

If you die without a will and fail to plan properly, your estate could end up going through probate anyway. For example, if you want your home to go to a specific person and the TOD document was drafted improperly, the home may still be in your name and may not go to the person specified in the TOD deed.

A will should be written to deal with potential problems or issues with assets and heirs after death, even if you think you’ve taken care of everything. If you missed something, your estate’s representative could open up a probate case to distribute your assets as you may have wished.

Estate Planning: Ownership of Automobile

Now back to your question. Your family members could choose what furnishings they want and give away. But the real issue would be with the ownership of your automobile. In Illinois, you can file an affidavit with the Secretary of State indicating that the estate is valued at less than $100,000. If the value of the entirety of your estate at the time of your death was less than $100,000, the State of Illinois would accept an affidavit and allow the transfer of the ownership of the car to one of your heirs.

Transfer on Death Could Create Unintended Problems for Beneficiary

When it comes to your home, you might also find some pitfalls in trying to avoid probate and simply transfer the home to someone else upon your death. You should also know that using the transfer on death document for your home could create some unintended problems for the recipient of the home.

If your estate is worth quite a bit of money and the person that gets your home wants to turn around and sell it, they will have to deal with the title company and prove that your estate had no claims against it and owed no taxes. Even though the designated person now owns the home by virtue of the transfer on death instrument, the debts and taxes owed by the deceased owner would and could attach to the home.

In Illinois most title companies might require a payment of 2% of the value of the home in lieu of having the home go through probate. Well, if we said your home was worth $500,000 and the title company wants $10,000 to insure the title in the name of the buyer, you might as well have had the home go through the probate process and transfer the ownership there rather than through the transfer on death instrument.

Even though you think this is all settled, talk with a local estate attorney to make sure you’ve planned your estate properly. That way, you’ll know your assets will get to your intended heirs.