Modest estates that use a small estate affidavit can save a family and beneficiaries time and money by avoiding the probate process of transferring title of small assets, particularly assets such as bank accounts and other personal property less than $50,000. However, beneficiaries need to be careful about using small estate affidavits, as they have an obligation of paying the decedent’s creditors before undertaking the gift of the property in question. The failure of beneficiaries to pay a decedent’s creditors with the property or funds left to them, using a small estate affidavit, may run into trouble.
For example, California Probate Code §§ 13109 and 13112(b) allows creditors to initiate a civil suit against the beneficiaries for up to the amount of the transfer made in a small estate affidavit. For example, if there was a bank account that didn’t have a beneficiary designation and a small estate affidavit was used to transfer $30,000.00 of funds out of decedent’s name to successor beneficiaries, and decedent’s estate had $20,000 worth of debts, it is possible that the creditors could file a suit against the beneficiaries to recover $20,000.00 outstanding if the beneficiaries fail to pay the outstanding creditors.
If there is a question about debts owed by the decedent, the beneficiaries should contact an attorney to assist them with negotiating debts with creditors and properly executing the small estate affidavit to ensure that the beneficiaries aren’t sued later for taking the gifts while leaving the decedent’s debts outstanding.
