Dealing with Estates: Using Small-Estate Affidavits in Banking
Financial institutions are often presented with the dilemma of what to do with bank accounts after the death of the primary account holder. Of course, accounts held jointly or with a “payable-on-death” (POD) designation are generally easy to handle. At the death of the primary account holder, the co-owner or designated beneficiary can simply claim the money directly from the bank with a certified copy of the death certificate. This can be done without probate court proceedings.
When the bank account does not have a joint owner or POD designation, the account holder’s estate is often presented to the County Court for probate proceedings. Once a probate case is opened, the Court will appoint a personal representative to administer the estate by issuing letters of appointment. Banks can and should generally rely on a certified copy of the letters of appointment when transferring the account to the decedent’s personal representative.
Probate Avoidance
The probate process can be a time-consuming and expensive process. As a result, people often go to great lengths to avoid probate court. In certain circumstances, nearly every state has a law that allows certain “small estates” to avoid probate by using an Affidavit for Transfer of Personal Property Without Probate, also known as a “Small Estate Affidavit.” These affidavits allow a decedent’s personal property to be transferred to his or her successors without a formal probate proceeding. In Nebraska, the Small Estate Affidavit must comply with Section 30-24,125 of the Nebraska Probate Code.
Small Estate Affidavit Requirements
Personal property, including bank accounts, may be transferred to a person (or persons) claiming to be the successor of the decedent using a Small Estate Affidavit if:
- At least 30 days have elapsed since the decedent’s death;
- The total amount of the decedent’s personal property subject to probate proceedings does not exceed $50,000; and
- There are no probate proceedings conducted or pending for the decedent’s estate in Nebraska or any other state.
In addition to these basic requirements which must be asserted in the affidavit, Nebraska law requires the Small Estate Affidavit to also include statements (i) providing the claiming successor’s relationship to the decedent and/or the basis of the successor’s claim to the bank account; and (ii) that the successor is entitled to payment or delivery of the bank account. The affidavit must be signed under oath before a notary, under penalties of perjury, stating that all of the statements in the affidavit are true. In addition, a certified copy of the death certificate must be attached to the affidavit.
Required Compliance with Small Estate Affidavit
If a financial institution refuses to deliver the funds pursuant to the affidavit, Nebraska law allows the person claiming a right to the bank account to bring an action against the institution to compel the transfer. While this would force the claimant to prove the facts in the affidavit, such a refusal could result in the reimbursement for that person’s attorney fees if there was not a valid reason to deny payment.
Reliance on Small Estate Affidavit
Nebraska law protects financial institutions that rely on a Small Estate Affidavit; specifically providing that persons paying or delivering personal property pursuant to a Small Estate Affidavit are “discharged and released to the same extent” as if the bank had transferred the bank account to the decedent’s personal representative. In that case, the recipient of the transfer becomes “answerable and accountable” to the estate or any other person claiming a superior right. Therefore, financial institutions should generally not become subject to double payments if there is a transfer to an improper recipient.
Basic Safeguards
It is important to note that financial institutions are not required to look beyond the four-corners of the affidavit or to otherwise “inquire into the truth of any statement in the affidavit.” However, to be safe, financial institutions should consider implementing certain basic safeguards before transferring an account to someone claiming to be a successor:
- The 30-day waiting period can be verified using the death certificate;
- The affidavit would, of course, be invalid if the decedent owned one or more accounts at the institution with an aggregate date of death value in excess of $50,000 – provided that only “probate assets” are included in this limitation, so accounts held jointly or with a POD designation are not included for this purpose;
- The affidavit should be prepared in compliance with Nebraska law, be signed under oath, notarized and subject to penalties of perjury;
- The person claiming to be a successor should provide sufficient identification;
- All persons designated in the affidavit as entitled successors should generally sign the affidavit.
Conclusion
While this process is less familiar for some financial institutions, it is a legally acceptable way to transfer a decedent’s bank account. Financial institutions should not blindly accept each and every Small Estate Affidavit presented to them; however, Nebraska law does require financial institutions to transfer bank account proceeds pursuant to a properly completed affidavit.