I often have clients come into my office asking that a succession be done for the estate of the loved one. But in many cases a simpler and significantly less expensive procedure is available.
In 2016, a mom and son (let’s call them Bill and Jill) asked me to draft the succession over the estate of “Jack”, their husband and father. Jack and Jill only had a house, a bank account, and a car. I informed them that I could easily prepare an Affidavit of Small Succession for only $750. This would save them time and money. They were delighted at the news, because they were previously quoted a fee of $2,000 by another attorney for a full blown succession.
Under Louisiana law, this is called an “Affidavit of Small Succession.” Here is how it works.
Pursuant to La. C.C.P. art. 3421, et seq., a “Small Succession” does not have to be probated. In other words, if a succession qualifies as a Small Succession, the heirs do not have to go through a court process in order to get good title to the property of their deceased spouse or parent.
There are certain general criteria that have to be met to qualify as a Small Succession. These are:
- The Succession must have a gross value of $75,000 or less. “Gross value” means the value of all property of the succession before debts and expenses.
- The person had to have died without a will. This is important.
- The heirs of the person who died are only his or her (a) surviving spouse, (b) descendants (children and grandchildren), (c) ascendants (parents and grandparents), and/or (d) siblings (brothers and sisters) or the descendants of siblings. Therefore, if the heirs of a person include his or her cousins, his succession will not qualify as a Small Succession.
In general, the Affidavit of Small Succession must be signed by at least two (2) heirs, including the surviving spouse (if there is a surviving spouse), and must contain all of the following:
- The date of death of the decedent and his or her address of residence;
- That the decedent died without a Will;
- A statement indicating if the decedent was married or unmarried on the date of death, and the name and address of the surviving spouse, if any;
- The names and addresses of all of the heirs of the decedent, their relationship to the decedent, and a statement that an heir not signing the affidavit (a) cannot be located, or (b) was given a ten (10) day notice of an intent to execute an Affidavit of Small Succession and the heir did not object;
- A description of the property left by the decedent, including the legal description of real estate, and whether such property was community property or separate property of the decedent;
- An indication of the value of each item of property, and a total value of all property (remember, this cannot total to more than $75,000);
- A statement indicating the share of the property inherited by each heir and the surviving spouse, if any; and
- An affirmation that the persons signing the affidavit have accepted the succession, and that all of the information in the Affidavit is true and correct to the best of their knowledge.
Keep in mind that there are certain benefits, but also some significant drawbacks to filing an Affidavit of Small Succession.
The benefits can include:
- An attorney does not have to be hired. In fact, you can simply go to a Louisiana Notary Public to have this done, assuming the Notary is qualified. I would not suggest going to just any Notary.
- Even if an attorney is hired (and this would be a good idea) the costs and legal fees of an Affidavit of Small Succession are small in relation to probate. To find out more about the probate process, click here. Legal fees will generally be in the range of $500 to $1,000, and Clerk of Court fees generally under $100, whereas legal fees for probate proceedings may generally start at $1,500 and court costs will generally start at $250. Therefore, the Affidavit of Small Succession is generally less than half of what you would spend in a probate proceeding.
- In most cases, an Affidavit of Small Succession can be done much more quickly than a probate proceeding.
- The values of both spouses do not have to be aggregated to qualify. In other words, if husband dies with $75,000 or less of property, and wife dies with $75,000 or less of property, their total estates can be $150,000 or less, and each of their successions would still qualify. However, the estates of both spouses should have their own separate Affidavit of Small Succession.
The significant drawbacks to an Affidavit of Small Succession can include:
- To keep costs as low as possible, an heir may be tempted to hire a non-lawyer Notary to draft the Affidavit, and that person may not have a good understanding of Louisiana inheritance law. The non-lawyer Notary could draft a defective Affidavit of Small Succession, which could put you in the position of having a cloud on the title to your real estate, or having to do the Affidavit over again.
- Many banks and financial institutions do not accept an Affidavit of Small Succession as proof of heirship. These financial institutions will demand a judgment signed by a Judge before putting a decedent’s bank accounts in the name of heirs. That would necessitate a court proceeding. Therefore, from a practical perspective, an Affidavit of Small Succession is often limited to the transfer real property rather than bank accounts and other financial assets.
- Remember, to qualify for an Affidavit of Small Succession, you could not have signed a Last Will and Testament. To qualify for the Affidavit process, you may unwisely believe that you should not sign a Last Will and Testament or a trust, when almost everyone needs good estate planning.
- Heirs may be tempted to indicate that property that is worth significantly more than $75,000 is worth $75,000 or less. That would have the potential of getting heirs into tax trouble, because the tax basis for computing tax gains on the sale of property is generally “stepped-up” to the value of the property at date of death.
Example: Heirs inherit a property worth $150,000 which was purchased by their dad for $50,000 many years ago. Their tax basis for computing gains on the sale of the property should now be stepped-up to a $150,000 date of death value. When the heirs sell the property, they should have no gain or loss ($150,000 value – $150,000 stepped-up tax basis = $0 gain). However, to qualify for an Affidavit of Small Succession, the Heirs indicate that the property is worth only $75,000. By law, the IRS is allowed to presume that their tax basis is only $75,000 rather than $150,000. Heirs, being penny wise and pound foolish, have just cost themselves a capital gains tax of $19,500 ($150,000 value – $75,000 lost basis X 26% combined federal and state capital gains tax).
In summary, I would never recommend an Affidavit of Small Succession as part of an overall estate plan. It is not an estate planning device. An Affidavit of Small Succession comes into play in my practice when a family approaches me for probate work, and after deciding that the family qualifies, I suggest it as a less costly alternative to full blown probate. The bottom line is that you should not let the Affidavit of Small Succession procedure tempt you away from doing good estate planning. To learn more about how to hire a good estate planning attorney, click here.