A: Each state has its own rules governing estate taxes – taxes paid on the value of an estate when a person dies. If we don’t know where someone lives, and knowing that this is a national column, we try to provide readers with general answers. For specific answers, we always suggest speaking with a qualified professional who understands your particular financial situation.
Let’s start with your first question. The $250,000 estate issue relates to a large sum of money that belonged to an estate at the time of the deceased’s death. The future heir wanted to know if there was a cash tax.
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If the money was paid into a bank account held jointly with his children, that money would not have had to go through probate. In a joint account, the survivor automatically becomes the sole account holder upon the death of the joint holder. Similarly, if the account holding the money was a trust account naming specific people as successor beneficiaries, those beneficiaries would receive the money without having to go to probate court.
But if there hadn’t been a will or if those assets hadn’t been automatically transferred on the father’s death, the money would likely have gone through probate.
You also asked how many assets states would allow residents to pass on without going through probate.
Some states allow the transfer of small amounts of money from the accounts of the deceased to the surviving heirs using a Small Affidavit of Estate. Oregon has a small estate affidavit limit of $275,000 and Wyoming’s is $200,000. There are a handful of states with affidavit limits for small estates of $100,000 or $150,000, including Alaska, Arkansas, California, Hawaii, Idaho, Illinois, Iowa, Ohio, Utah, Washington and West Virginia.
Most other states will require an estate to be probated if the value of the estate is over $50,000. As with most things, however, the devil is in the details. For example, Florida allows summary administration of an estate worth $75,000 or less, or where the deceased has been deceased for more than two years. And, the total estate does not include real estate value, according to Florida Probate Code 735.201.
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In New York, only an estate valued at more than $30,000 needs to be probated when there is a will, according to the New York City Bar. The court has “”a small estate proceeding” when the estate is less than $30,000. And an estate without a will is “administered” and not probated,” according to the website.
In Michigan, the value of the estate cannot exceed $15,000 or you must go through probate. But the total value does not include property held in joint ownership or other exempt probate assets.
Finally, even when some states allow the transfer of assets from the deceased person’s account to their heirs, the institutions holding these funds may not easily transfer the funds without knowing that a probate court is involved. Thus, there is no hard and fast rule regarding the money remaining in an account where the owner is deceased and you need to figure out how to transfer that money to the surviving heirs. Since each state has different probate laws, your best bet is to speak with a local real estate attorney.
Ilyce Glink is the author of “100 questions every first-time home buyer should ask(Fourth Edition). She is also the Managing Director of Best Money Moves, an app employers provide to employees to measure and reduce financial stress. Samuel J. Tamkin is a Chicago-based real estate attorney. Contact them via the website, BestMoneyMoves.com.
©2022 Ilyce R. Glink and Samuel J. Tamkin. Distributed by Tribune Content Agency, LLC.