Dear Mr. Premack: I am in my second marriage. My husband had two children and I had two children from our previous marriages. We maintain several separate accounts with funds we had before we got married. My husband’s intent was to leave one of his accounts to his son, but the account itself just listed my husband as owner without further instructions. He intended for that account to go to his son, and I’d like to see that it does, since my husband died last month. His Will leaves all assets to me, but I don’t want to probate his Will if I can avoid the time and expense. The bank won’t release the account to me, and won’t release it to his son. The bank suggested a “small estate affidavit”. What is it? Will it work to get this account to his son? Thank you. – J.N.
When someone dies, that person’s unfinished business must be handled. Bank accounts and other financial investments must be distributed to the proper heirs. The institutions that hold those deposits desire very strongly to pay the parties who are legally entitled to receive the funds. If funds are paid to someone, and shortly later someone else arrives with a “better” legal claim, the institution has an expensive legal problem. Thus, they only pay when the identity of the legally entitled party is very clear.
When a person dies, there are four ways the bank can legally establish to whom they should pay the funds. First, the bank may have a contract with the parties that tells them who to pay. This contract is usually part of the “signature card”. If the agreement specifies a pay-on-death beneficiary, or has a right of survivorship, the bank can safely and legally distribute the funds to the identified individuals. Your husband did not utilize this approach.
Second, if there is no such contract, the bank looks to the decedent’s Last Will and Testament. If the Will is admitted to probate, there will either be a court-appointed Executor to whom the bank can safely and legally distribute the funds, or a court order identifying the specific individuals to whom the funds must be delivered. Your husband did have a Will leaving all assets to you. As such, the Executor could probate it, claim the assets, and gift the balance of that account to his son (taking into consideration any gift taxes that may be due).
Third, if there is no such contract and there is no Will and the estate is smaller than $50,000, then bank may be able to rely on a “Small Estate Affidavit.” Note: if there is a Will, the law does not allow you to use a Small Estate Affidavit. This solution is unavailable to you, and is also undesirable, and the bank should not have mentioned it to you. But so that you understand that conclusion, here is how a Small Estate Affidavit works:
- Your attorney creates court pleadings in the form of an Affidavit which complies with state law.
- All the heirs join together to sign the Affidavit. Remember, this can be used only if there is no Will, so the state’s laws of descent and distribution determine the identity of the heirs. In a second marriage situation dealing with separate property, the surviving spouse and the decedent’s children are all legal heirs (not just the child he intended to receive the funds).
- The Affidavit is signed by two people who knew the decedent but who are not heirs.
- The Affidavit is filed with the county clerk and is presented to the probate Judge. If it receives the Judge’s approval, the heirs buy certified copies of the Affidavit and approving Order from the clerk, which identifies the heirs and authorizes banks and other persons who hold estate assets to deliver those assets to those heirs.
Finally, if there is no Will and the estate is larger than $50,000 (so that a Small Estate Affidavit cannot be used) the estate may have to go through a Determination of Heirship proceeding and a Dependent Administration.
Overall, the first two approaches (a contract or a Will) are the best. The contract or Will allow his instructions to be followed. The third and fourth approaches (Small Estate Affidavit or Administration) are not legally available to you since your husband had a Will, and are undesirable since state law then decides who receives the funds.
Paul Premack is a Certified Elder Law Attorney and a Five Star Wealth Manager (Texas Monthly Magazine 2009-2012) practicing estate planning and probate law in San Antonio.
Original Publication: San Antonio Express News, May 28, 2013