Small Estate Questions

Financial Planning Estate Planning and the Fool
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Our father passed away last week. A sad week after he passed more quickly than expected. My two siblings and I have started the grieving process, while also taking some necessary steps (obituary, arrangements, which were long-ago established and has very much helped, etc.).

Now I’m trying to plan next steps to administer his small estate in the state of Washington. Before my questions for anyone gracious enough to reply and offer their expertise, some basic facts.

  • I’m the first listed “personal representative” on his will, with the other siblings following as alternates. I’m not in the state of Washington (which matters) and the next alternate is a sibling who is a Washington state resident. I believe, if we follow one path, I can be appointed as the personal representative, but a Washington resident would also have to be appointed or recognized as an “agent”, both from a legal perspective and especially to do things locally.

  • A few years ago my dad, who was a widower, set up his will and accounts so that almost everything was outside the will (no trust, but a payable-on-death account that is expected to work as expected). The amount remaining to be covered by the will is well south of $100,000, which is a threshold in Washington state to be considered “small estate”. The remaining assets are one vehicle in his name and his personal possesions in his room (at a sibling’s home). The combination of his will and the tangible property list with the will say that the vehicle is to be sold with proceeds to be shared equally, and also provides guidance on how to distribute his personal property.

I’ve done some reading in the past on how we might approach this, but as I’m sure happens often I thought I had more time. Although Washington seems to have good alternative paths to avoid “full probate” and to avoid legal fees in our situation, I plan on lining up a phone consultation with a Washington-based estate attorney to talk through my plans, get ideas and input, etc. The purpose of this post is to think out loud and get any feedback in what I’m thinking (or mis-thinking) before that call.

For disussion below, I’ve used a few sources to help me understand what’s possible and how it might work: the King County website on small estates, a Nolo press article on this topic, and in general various Washington state “RCW” sections (“Revised Code of Washington”). If others have some useful sources, much appreciated. I recognize that this is very Washington state-specific, so there may not be a lot of experience by the experts here. But I believe many other states have equivalent approaches available, with different nuances, that experience with may help me understand this state. Please feel free to offer any thoughts you might have on any/all of the follwoing.

First, regardless of the approach used, I understand that we have to file the will with the local superior county clerk. We’ll be figuring out exactly where we do that, what their schedule/availability is under the current COVID environment, etc. Any suggestions/commments/experiences on this are welcome.

Washington offers a “small estate affidavit” approach. This Nolo article summarizes the options, with references to relevant RCW sections: https://www.nolo.com/legal-encyclopedia/washington-probate-s… In general, Washington says says that the purpose for this (and an alternative below) are intended to vastly reduce the number of estates that have to go through probate. It appears that no personal representative needs to be appointed by the court. The heirs in the will (we three siblings) simply need to wait some number of days, complete a notarized affidavit of what possesions we received as part of the distribution under the will, send that “officially” to the other heirs, and then send that affidavit to a specific office in Olympia, WA.

  • Handling the sale of the vehicle is my first question. I assume the title of the vehicle would have to be transferred to one of the heirs first, then sold, with proceeds distributed as prescribed in the will. The WA DMV has a form for such a transfer, where the person receiving the new title describes why they’re entitled. Perhaps this will work, with a copy of the will and an affidavit from the other heirs indicating they’re OK with that.

  • Second question relates to filing taxes (which I’ll ask more narrowly on the tax board). An “Executor’s Guide” book from Nolo says that to receive a refund for a decendent’s tax return (which their will be for 2021, and next year for 2022), a “court-appointed” personal representative has to sign the form, with appropriate documentation that they’ve been court appointed. Does this alone mean that the “affidavit” approach can not be used? If that’s the case, then it seems that this affidavit approach would almost never be possible because there would so frequently be a final tax return with a refund.

  • Has anyone seen the affidivit approach work (in any state, even if slightly different from Washington’s)?

Washington also offers two versions of a “small estate / simplified” probate, avoiding a “full probate”. In the Nolo article, https://www.nolo.com/legal-encyclopedia/washington-probate-s… , under “Simplified Probate Procedures”, halfway down starting with “If the personal representative doesn’t file an application for a court order …”, the article describes an approach that’s appealing if the affidavit approach doesn’t work.

  • Both versions require the court to appoint a personal representative, and I assume the in-Washington “agent” I mentioned above. Do I have to travel to the local county superior court for that or could my sibling go there and accomplish that for both of us? I will be trying to contact the county court this week for guidance, but I guess I’m pessimistic on reaching them or getting good help. One alternative is for me to simply decline administration of the will and let the next sibling be appointed the personal representative. Some small issues there, but it may be possible.

  • However a personal representative is appointed, then I believe the sale of the vehicle could go forward, with the personal representative (or agent) selling it without transfer of title. Probably a question of DMV on how to do that.

  • The approach that looks best is to simply file a letter with the court after everything is settled. Has anyone seen this work, even if in another state?

I know the above are very specific to Washington state, but any thoughts are appreciated.

Maggie

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Just wanted to say I am sorry to hear about your loss. It is a painful thing to deal with.

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Maggie
We went through a similar situation with my widowed MIL when she died a couple of years ago in Oregon.

Her estate was small enough to allow for the affidavit. This proved to be sufficient to allow my wife to act as estate rep and allowed her access to MIL’s bank account. No automobile, RV or other item titled to her so we didn’t have to deal with retitling. Small life insurance and deferred annuity had beneficiaries so no problem there. Almost all personal items distributed agreeably between siblings.

The one sensitive area I found was the distribution of personal items of high value that weren’t specifically addressed in the will. I’d suggest identifying these and agreeing on how to distribute. The easiest is to sell and put the proceeds in the bank account to be eventually divided equally. But if one of the adult kids wants one of the item, it needs to be understood that heir needs to buy the interests of the other beneficiaries and not just taken. This proved to be a sore spot with MIL’s estate, as there was an expensive hunting rifle MIL still had from her husband. It had a value of about $700 and the oldest son wanted it, but it was difficult to explain to him that was fine, but because it was not addressed in the will, that he only owned 25% of it and had to buy out the interests of the other siblings. Didn’t go over well.

We didn’t have a car titled to the deceased to deal with, but hopefully the affidavit will allow for the changing of the title ownership so you can sell it and put the net proceeds in the bank account.

One other point you don’t raise and it may not apply and perhaps is best used as a planning tool is jointly held property, such as a bank or brokerage account. My oldest sister did this with our next oldest sister…oldest sister added next sister to her bank accounts as a joint holder just before she went in to major heart surgery. Well, oldest sister did not survive the operations (low chance of survival) so her bank accounts automatically transferred to next sister, who used them to manage estate and then after everything was settled, distributed the cash equally to all siblings. Very easy and cost nothing. But beware: when the oldest sister died, the bank accounts were OWNED by next sister, period. She could have decided to keep $$ and not distribute, as the assets were hers alone. So using this strategy necessitates 100% trust in the sibling added jointly to the accounts. And the final settlement of dividing up the account to all siblings represents a gift that is outside of the estate.

And one other thing we learned…institutions do not read wills, and they will tell you this…or at least they told us that.

Best wishes

BruceM

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We had a similar situation when my aunt passed away with no children, only 9 nieces and nephews. She took care of most personal property when she sold her house and went into a nursing home. But she still had jewelry and half a dozen gold coins she had collected. Selling the items would have been costly.

The executors decided to divide them into lots and let the heirs draw for them in a lottery.

This seemed to work reasonably well. Each heir got a keepsake and their own choice on what to do with it.

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richinaz - Thank you for your thoughts.

pauleckler - Thank you for sharing your lottery approach on dividing your aunt’s personal property. I’ve done some reading on possible approaches to allow siblings to choose what they want and resolve duplicate requests in a fair way.

BruceCM - Thank you for sharing that you successfully used the affidavit approach. Although not in the same state, my reading says these approaches are similar across states, with some differences in details, so it gives me comfort that this is an appropriate approach for us. My sense is that we will avoid the sensitive situation you experienced on high value items, but thanks for sharing it – who knows how others will respond when we actually go through a process. And our father’s financial accounts had already been set up in a payable-on-death structure, not too different from what you described, so I expect no problems there. Your last comment on institutions “not reading wills” – yes, we have heard that from one source. And one IRS form states the same. Kinda makes sense.

As an FYI for anyone interested, an update on one issue I raised - filing taxes. I finally read IRS Publication 559 more closely. The sources I read that said a court-appointed personal representative would have to sign a return that included a refund are not quite correct. The form that will be submitted with the return allows for stating the signer is not a court-appointed representative but will “… pay out the refund according to the laws of the state …”. So it seems I can file taxes.

One further question has come to mind, given that probate will not be filed: General guidance to executors is to publish a “notice to creditors” in newspapers. And I see reference to filing (with a superior court) and publishing in newspapers a “Nonprobate Notice to Creditors”. There isn’t much risk of creditor’s knocking on our door, but is this still a good idea when taking the no-probate/small affidavit approach?

Thanks again to those who replied. Any thoughts on the question above would be much appreciated.

Maggie

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One further question has come to mind, given that probate will not be filed: General guidance to executors is to publish a “notice to creditors” in newspapers. And I see reference to filing (with a superior court) and publishing in newspapers a “Nonprobate Notice to Creditors”. There isn’t much risk of creditor’s knocking on our door, but is this still a good idea when taking the no-probate/small affidavit approach?

It depends on the source of what you’ve been reading for “general guidance”, vis-a-vis the laws of your particular state.

In Wisconsin, where I live, it’s very common for the trustee(s) of a trust to publish such a notice in the paper, to start a 90-day deadline for creditors to file a claim with the trustee, the same as would be done in probate, after which the claims are barred, and the trustee is free to make distributions without personal liability. Otherwise the trustee could be personally liable for the debts.

How this applies in your state, I don’t know, nor whether it applies to trusts, affidavit transferors or transferees, or surviving joint owners. If you can’t find out easily, you should consult a lawyer. Do-it-yourself probate alternatives can be just as foolhardy as do-it-yourself probate and will drafting.

Bill

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