What is a Small Estate?
California Small Estates
In California, a small estate is defined by a monetary value of less than $150,000. All forms of property that are held only in the decedent’s name must fall under this value of $150,000. The estate can include real property, but there are special rules for real property.
Small Estates and Avoiding Probate
Because probate is slow and expensive, many tools have been developed to avoid probate. One of those tools involves a small estate. The idea is that if the estate is small in value, the cost of probate does not justify the benefit to the heirs or beneficiaries of the estate. This tool is driven by state law, not federal law, so the rules vary from state to state.
For real property (real estate), in order to qualify as a small estate, the real property must be valued by an independent appraiser appointed by the Court known as a probate referee.
For other forms of property, known generally as personal property, no such independent appraisal is needed. However, in dealing with personal property, it is best first to contact the financial institution concerned before having your attorney prepare the documents you’ll need to receive the property. The reason for this is that many financial institutions, but not all, have their own in-house forms which they require to be used to receive the property. If the financial institution does have their own in-house form, they will require that you use that form and not provide your own. Unfortunately, we know of many cases where people spend money for their attorney to draft documents, only to be turned down by the financial institution. Check with them first!
Capital Gains Tax
The valuation of property, both real and personal can be important not only to transfer the property to the heirs or beneficiaries but also to establish values for a special tax known as the capital gains tax. When valuing property for purposes of capital gains, it is best to contact your tax professional because the IRS may have special rules for establishing values relating to capital gains tax.
The Law Offices of David Baker has navigated these processes many times in the past 30 years while working in probate and estate planning. We work in the following California Bay Area locations: San Francisco, Berkeley, Albany, Pinole, Crockett, Martinez, El Sobrante, El Cerrito, Vallejo and Richmond. Call us or contact us today to discuss your situation (510) 724-2020.