05/24/2017

Trust and Estate Law


The Affidavit for Small Estates: How, When, and Why to Use It

This is a follow-up to a June 2013 article about the statutes governing affidavits for small estates. The initial article, written by a Trust and Estate Section subcommittee, discussed problems with the statutes as they existed at that time. Since then, the committee proposed statutory amendments to alleviate those problems. This article reviews those amendments, which became effective August 1, 2014. 

CRS §§ 15-12-1201 and -1202, the “affidavit statutes,” are a part of the Colorado Probate Code and provide for the easy and cost-efficient collection of personal property in small estates. These statutes allow parties to avoid the expense of court proceedings and help alleviate ever-increasing loads on already overcrowded court dockets.

This article discusses the history of the affidavit statutes and the procedure for using an official affidavit to collect personal property in small estates.

Evolution of the Affidavit Statutes

The procedure for collecting personal property of a decedent without opening a probate proceeding has been available in Colorado since 1963. In addition to the statutes, there is an Affidavit Form for the collection of personal property of a decedent (Affidavit or JDF 998)1 and Instructions for completing the Affidavit (Instructions or JDF 999),2 both of which are approved by the Colorado Supreme Court.

The amount of personal property that can be collected with the Affidavit has traditionally been tied to the exempt property and family allowance amounts available to a surviving spouse and minor children under CRS §§ 15-11-403(1)(b) and -404(1). The rationale for this is to allow a decedent’s family to collect these amounts without the expense of a probate proceeding, because these amounts are not subject to creditor claims. It should be noted that real property cannot be collected or transferred by using an Affidavit.

In spring 2012, a subcommittee of the CBA Trust and Estate Section’s Statutory Revisions Committee (SRC) began meeting to discuss the customary practice and uses of the Affidavit, to compare those uses with the language of the statutes, and to discuss possible amendments of the statutes to codify those uses. The subcommittee found that the statutes were not always consistent with the Affidavit or the Instructions, and that there was confusion about how the Affidavit could be used. The subcommittee decided to begin by writing an article on the subject, which alerted practitioners that there was not uniform agreement in the interpretation and uses of the statutes. The article was published in the June 2013 issue of The Colorado Lawyer,3 and discussed the following topics:

  • Who can sign an Affidavit?
  • Who can collect the decedent’s personal property?
  • What is the potential liability of a person collecting the property?
  • Whom is the holder of property authorized to deliver the property to?
  • What is the liability of the holder of property?
  • What property can be collected with an Affidavit?
  • Can the Affidavit be used to collect personal property if the decedent owned real property?

While the subcommittee was working on the article, a CBA member informed the SRC that the newly appointed general counsel for credit unions believed that the affidavit procedure did not apply to credit unions, but only to commercial banks. In response, the SRC quickly added a section to the Trust and Estate Section’s 2013 Omnibus Bill to amend CRS § 15-12-1201(1) to include the words “funds on deposit at any financial institution” in the description of personal property covered by the affidavit procedure, clarifying that credit union accounts were subject to collection by Affidavit.

After the article was published, the SRC authorized the subcommittee to work on changes to the statutes that would alleviate the confusion and contradictions that were pointed out in the article. These changes were made part of the Trust and Estate Section’s 2014 Omnibus Bill and became law effective August 1, 2014.

What Did the Statutes Say in 2013?

Before the 2014 amendments, the affidavit statutes provided:

§ 15-12-1201. Collection of personal property by affidavit.

(1) At any time ten or more days after the date of death of a decedent, any person indebted to the decedent or having possession of any personal property including but not limited to funds on deposit at any financial institution, tangible personal property, or an instrument evidencing a debt, obligation, stock, chose in action, or stock brand belonging to the decedent shall pay or deliver such property to a person claiming to be the successor of the decedent upon being presented an affidavit made by or on behalf of the successor stating that:

(a) The fair market value of property owned by the decedent and subject to disposition by will or intestate succession at the time of his or her death, wherever that property is located, less liens and encumbrances, does not exceed sixty thousand dollars;

(b) At least ten days have elapsed since the death of the decedent;

(c) No application or petition for the appointment of a personal representative is pending or has been granted in any jurisdiction; and

(d) Each claiming successor is entitled to payment or delivery of the property in the respective proportion set forth in such affidavit.

(2) A transfer agent of any security shall change the registered ownership on the books of a corporation from the decedent to the successor or successors upon the presentation of an affidavit as provided in subsection (1) of this section.

(3) The public official having cognizance over the registered title of any personal property of the decedent shall change the registered ownership from the decedent to the successor or successors upon the presentation of an affidavit as provided in subsection (1) of this section.

§ 15-12-1202. Effect of affidavit. The person paying, delivering, transferring, or issuing personal property or the evidence thereof pursuant to affidavit is discharged and released to the same extent as if he dealt with a personal representative of the decedent. He is not required to see to the application of the personal property or evidence thereof or to inquire into the truth of any statement in the affidavit. If any person to whom an affidavit is delivered refuses to pay, deliver, transfer, or issue any personal property or evidence thereof, it may be recovered or its payment, delivery, transfer, or issuance compelled upon proof of their right in a proceeding brought for the purpose by or on behalf of the persons entitled thereto. Any person to whom payment, delivery, transfer, or issuance is made is answerable and accountable therefor to any personal representative of the estate or to any other person having a superior right.

What Changed in 2014?

The basic requirements for using an Affidavit have not changed and remain in CRS § 15-12-1201(1):

  • The fair market value of all probate assets owned by the decedent, less liens and encumbrances, cannot exceed a specific amount.
  • At least 10 days must have passed since the date of death.
  • No application for probate can exist anywhere.
  • Only personal property can be collected with the Affidavit.

Amount Subject to Collection by Affidavit

Before 2012, the combination of the exempt amount and family allowances equaled the Affidavit amount. The exempt amount was $26,000, and although there was no specific amount for the family allowance, it was generally accepted to be $24,000. The affidavit amount was $50,000.

As of January 1, 2012, the exempt amount was increased to $30,000. Again there was no specific amount for the family allowance, but it was generally accepted to be $30,000. The affidavit amount was increased to $60,000. Most notably, provisions were added to automatically increase all three amounts annually by a cost of living adjustment (COLA) pursuant to CRS § 15-10-112.

However, the manner in which the COLA increases were applied to these values after 2012 resulted in a combined amount for the exempt amount and family allowance that did not match the increase in the affidavit amount.

Because the family allowance is not a specific amount, the decision was made to correct the problem by tying the affidavit amount to the exempt amount, which is specified. Thus, CRS § 15-12-1201 was amended to remove the specific amount and instead state that the affidavit limit is twice the exempt property amount:

(1)(a) The fair market value of property owned by the decedent and subject to disposition by will or intestate succession at the time of his or her death, wherever that property is located, less liens and encumbrances, does not exceed twice the amount set forth in section 15-11-403, as adjusted by section 15-10-112. (Emphasis added.)

Second, because there is no longer a specific amount in the affidavit statute, the COLA can no longer be applied to this statute, so the reference to CRS § 15-12-1201 in CRS § 15-10-112(2) (the COLA statute) was deleted. Any COLA increase to the exempt amount now automatically increases the affidavit amount.

The amount allowed for collection by Affidavit in 2014 was $64,000. The application of a COLA to this statute did not result in an increase until 2017, when the affidavit limit increased to $66,000.

Who Can Make/Sign the Affidavit?

CRS § 15-12-1201(1) continues to state that the Affidavit may be “made by or on behalf of the successor” (emphasis added). Under CRS § 15-10-201(51), “Successors” means “persons other than creditors, who are entitled to property of a decedent under his or her will or this code.”

Thus, a person does not have to be a “successor” to sign an Affidavit. This allows any successor of the decedent, or even a non-successor, to sign the Affidavit on behalf of all successors.

Who Can Collect Property With an Affidavit?

While the statute clearly defined who could sign an Affidavit, the prior version of CRS § 15-12-1201(1) was unclear as to whether the holder of property could pay that property to anyone other than the successors of the decedent, and in any amounts other than the amounts to which they were respectively entitled. It provided that any person indebted to the decedent or possessing the decedent’s personal property “shall pay or deliver such property to a person claiming to be the successor of the decedent.”

Many times the decedent’s successors (e.g., the children) want one of them to act as the fiduciary for all by collecting all property, using it to pay certain expenses (such as funeral, attorney fees, and accountant fees), and then distributing the remaining property to all successors in their respective proportions.

In fact, the Instructions provided for just that in the first bullet: “Any interested party can collect all of the assets, take care of any obligations outstanding at the time of the Decedent’s death, and distribute the remaining assets to the persons entitled to receive distributions . . . .”

However, the statute did not specifically allow such actions. Thus, CRS § 15-12-1201(1) was amended (1) to allow the holder of property to “pay or deliver such property to a person claiming to be a successor of the decedent or acting on behalf of a successor of the decedent . . . .” (emphasis added); and (2) to provide that the Affidavit may specify that the property be paid to someone other than a successor.

How Are Successors Protected if Another Person Collects Their Property?

In allowing a person other than a successor to collect property on behalf of a successor, the subcommittee wanted to provide some protection for successors and guidance as to the responsibilities and liabilities of the person collecting on behalf of others. It was decided that the best way to do this would be to specify that the collecting person, whether or not a successor, is acting in the same fiduciary manner as an agent under a power of attorney. Thus, a new subsection was added to CRS § 15-12-1201, which provides:

(4) The duties owed to a successor by a person acting on behalf of the successor in the making, presentation, or other use of an affidavit under this section are the same as the duties of an agent to the agent’s principal, and the breach of such duty is subject to the same remedies as are available under the law of this state with respect to an agent subject to part 7 of article 14 of this title, including but not limited to the remedies available under part 5 of article 10 of this title. A successor who makes, presents, or uses such an affidavit where there are two or more successors is a person acting on behalf of each other successor.

Can an Affidavit Be Used to Collect Personal Property if the Decedent Owned Real Property?

CRS § 15-12-1201(1) states that only personal property can be collected with an Affidavit. Thus, only a personal representative, duly appointed by the court in a probate proceeding, can transfer title to real property.

But if the decedent owned real property, and if the other requirements of the affidavit procedure are met (the combined value of probate assets, including the real property, less liens and encumbrances, is less than the affidavit limit, and probate proceedings have not been filed), can the decedent’s personal property be collected with an Affidavit?

In its 2013 The Colorado Lawyer article, the subcommittee listed several reasons why one might not want to transfer real property (or at least not right away) but may want to take control of the personal property immediately:

· The real property has little or no value and the successors want to abandon it.

· The value of the real property is unclear and the successors want to wait until the value is known to decide whether to open a probate proceeding to transfer it or abandon the interest until a later date (e.g., mineral interests not in production).

  • The successors are minors requiring not only a probate proceeding, but also conservatorship proceedings, to transfer the real property to them. In such case, it could be beneficial to postpone the transfer of the real property until the successors attain the age of majority.
  • It is necessary to gain possession of the personal property before commencing a probate proceeding to protect that property. A delay in filing probate may occur because of a prolonged search for a Will, disputes among the heirs or beneficiaries, or a decision to wait until the one-year creditors period has expired.

As long as a probate proceeding has not been commenced, the personal property can be collected by Affidavit. However, the person or persons who collect such personal property will be accountable to a personal representative once one is appointed, and may have to turn over the personal property or its value to such later-appointed personal representative to ensure the payment of valid administration expenses, taxes, creditor’s claims, and other valid expenses.

Collection of Funds Owed to Decedent Relating to Real Property

When the Trust and Estate Section asked the CBA’s Legislative Policy Committee (LPC) to approve the 2014 proposed statutory changes, an LPC member who is a real estate attorney raised a question regarding the handling of personal property that is secured by real property. This would include funds that a decedent loaned to a third party in the form of a mortgage or deed of trust, or any other evidence of indebtedness secured by real property.

Under a probate proceeding, a personal representative can transfer such indebtedness to the successors by using an assignment, to which Letters Testamentary/of Administration are attached, and which are both recorded with the clerk and recorder of the county in which the real property is located. After much discussion with the CBA’s Real Estate Section, a new subsection was added to CRS § 15-12-1201 to specify that an Affidavit can be recorded in lieu of Letters in order to transfer such assets:

(3.5) In the event that an instrument or other evidence of an indebtedness is secured by real property, in order to act on behalf of the holder of the indebtedness secured by a mortgage, deed of trust, or other security document, the person making the affidavit must record, with the clerk and recorder of the county where the real property is located, a copy of the affidavit and a copy of the decedent’s death certificate or a verification of death document.

Consequences for Refusing to Honor an Affidavit

One of the complaints the subcommittee heard about the affidavit process was that there were no consequences for a person or institution that refused to honor an Affidavit. To address this concern, the subcommittee put “teeth” into the affidavit statutes, similar to those in the power of attorney statute. It divided CRS § 15-12-1202 into subsections and added a new subsection, which specifies that refusal to honor the Affidavit without reasonable cause will result in the holder of the property being liable for all costs, including attorney fees, incurred by those trying to collect the assets, and places the burden of proof on the refuser/holder rather than the collector:

(3) If a proof of right has been established in a proceeding under subsection (2) of this section, any person to whom an affidavit was delivered and who refused, without reasonable cause, to pay, deliver, transfer, or issue any personal property or evidence thereof belonging to the decedent, as provided in section 15-12-1201, shall be liable for all costs, including reasonable attorney fees and costs, incurred by or on behalf of the persons entitled thereto. The person to whom an affidavit was delivered bears the burden of proving reasonable cause by a preponderance of the evidence.

Checks Made Payable to the Estate of the Decedent

Another problem with the use of the Affidavit was that some banking institutions were refusing to cash checks made payable to the estate of the decedent, rather than to the decedent individually. This prompted the addition of a new subsection to CRS § 15-12-1201:

(1.5) An instrument or other property that is payable or deliverable to a decedent or to the estate of a decedent is considered property of the decedent subject to subsection (1) of this section. A successor or person acting on behalf of a successor under subsection (1) of this section may endorse an instrument that is so payable and collect such amount.

Safe Deposit Boxes

CRS § 15-10-111 allows entry to a decedent’s safe deposit box with an Affidavit. The subcommittee proposed an amendment to this statute to coordinate it with the amendments being made to the affidavit statutes allowing someone other than a successor to collect property on behalf of the successors. The amendment allows access to a safe deposit box by “[a] person claiming to be a successor of the decedent, or acting on behalf of a successor of the decedent.” (Emphasis added)

In addition, the two groups of bankers in Colorado alerted the SRC and the subcommittee that they felt that CRS § 15-12-1201 did not clearly state whether the contents of a safe deposit box could be collected with an Affidavit, and asked for two additional amendments.

The first request was to amend CRS § 15-12-1201(1) to add safe deposit boxes to the list of assets subject to collection by Affidavit in that section.

The second request was to add a new subsection to coordinate this statute with the safe deposit box statute:

(3.7) Pursuant to section 15-10-111(1)(a)(I) and (1)(b), a safe deposit box may be entered and its contents shall be delivered upon presentation of an affidavit made pursuant to subsection (1) of this section.

The bankers’ final request was to be absolved from liability for allowing the property held in the safe deposit box to be collected by Affidavit. The subcommittee felt that this was already covered under existing statutes:

  1. CRS § 15-12-1202(1), which specifies that a person delivering personal property pursuant to an affidavit “is discharged and released to the same extent as if he dealt with a personal representative of the decedent” and is “not required to see to the application of the personal property or evidence thereof or to inquire into the truth of any statement in the affidavit” (emphasis added); and
  2. CRS § 15-10-111(5) (Entry into safe deposit box of decedent), which specifies that “[a] custodian shall not be liable to a person for an action taken pursuant to this section or for a failure to act in accordance with the requirements of this section unless the action or failure to act is shown to have resulted from the custodian’s bad faith, gross negligence, or intentional misconduct.”

However, the bankers disagreed, reading CRS § 15-10-111 as having an implied duty for bankers to determine whether the value of the contents of a safe deposit box was under the affidavit limit. For example, if a banker saw $100,000 in bearer bonds in the box, did he have a responsibility to deny the removal of property?

Therefore, in 2015, with the approval of the Trust and Estate Section, the bankers made additional amendments to CRS § 15-10-111 that make it clear that the banks do not have this responsibility.

Aligning the Form with the Statute

Once the legislature passed the statutory amendments, the subcommittee went to work with the Trust and Estate Section’s Rules and Forms Committee to change the Affidavit and Instructions to comply with the new statutory changes. This resulted in a new and improved Affidavit and Instructions.

Expanded and User-Friendly Instructions

Because the Instructions were to be greatly expanded, the first change was to divide them into sections with headings to make them more user friendly.

Who Is Entitled to Property Versus Who Can Collect Property

Because the property can now be paid either to the person signing the Affidavit or to the successors, the Affidavit was amended to reflect this distinction. Thus, the words “Successor or a person acting on behalf of a Successor” are now used throughout the Affidavit and the Instructions.

Affidavit. Formerly, the Affidavit only provided that the funds be paid to the successors (as listed on the table provided):

5. The Successor(s), listed below, is/are entitled to the payment or delivery of any personal property belonging to the Decedent, including but not limited to funds on deposit at any financial institution, tangible personal property, and instruments evidencing a debt, obligation, stock, chose in action (right to bring a legal action), or stock brand. The proportion or percentage that each Successor will receive is listed below:



Now that someone other than a successor is allowed to collect assets on behalf of all successors, the Affidavit has been amended to include two tables: one to list the successors of the decedent and what they are entitled to receive, and the other to state to whom the property is to be paid. This also allows for flexibility in providing how the property is to be distributed. For example, if there is a specific bequest under a will, the Affidavit could be filled out to stipulate that the specific bequest go directly to the intended successor/beneficiary, and all other assets to one or more persons as specified in the table:

6. The Successor(s), listed below, is/are entitled to any personal property belonging to the Decedent, including but not limited to funds on deposit at or any contents of a safe deposit box at any financial institution, tangible personal property, and instruments evidencing a debt, obligation, stock, chose in action (right to bring a legal action), or stock brand. The amount, proportion or percentage that each Successor is entitled to is as follows (see Instructions):

7. The property shall be paid or delivered as described in the following table and then the property shall be distributed to successors in accordance with paragraph 6 above (see Instructions):

Instructions. Instructions 5 and 6 explain how these tables are to be filled out:

5. Under # 6 of the affidavit, if all assets are to be divided among the successors in the same manner, then you may state “All Assets” under “Description of Property”. If all assets are not to be divided among the successors in the same way then list each asset separately. Separate affidavits may be filled out for one or more assets.

6. Under #7 of the affidavit, if all assets are to be paid to the same person(s) in the same manner, then you may state “All Assets” under “Description of Property”. If all assets are not to be paid to the same persons(s) in the same way, then list each asset separately. Separate affidavits may be filled out for one or more assets.

Reference to “Interested Parties” Deleted from Instructions

Another problem that was outlined in the 2013 article was that the Instructions stated that any “interested person” could sign the Affidavit and collect the assets on behalf of the “successors.” The problem was that creditors are “interested parties” as defined in CRS § 15-10-201(27). However, creditors have no rights in an affidavit situation; they may perfect a claim against a decedent’s assets only through a probate proceeding, and they have the authority to institute such proceedings themselves.

The new Instructions no longer reference “interested parties” and incorporate the statutory changes allowing collection of property by someone other than a successor:

1. Any successor of the decedent, or any person acting on behalf of one or more successors, can collect assets and distribute them to the persons entitled to receive distributions by presenting an affidavit (JDF 999). All of this can be done without seeking court appointment as personal representative for the estate in certain circumstances.

Notice Regarding Protection for Holder and Consequences for Refusing to Honor Affidavit

Affidavit. The new Affidavit contains a box at the top with a notice about the protection a holder of property has when honoring the Affidavit under CRS § 15-12-1202(1) and the consequences for refusing to honor an Affidavit under new CRS § 15-12-1202(3). The notice provides:

If a person or entity holding property of a decedent refuses to honor this Affidavit without reasonable cause, such person or entity shall be liable for all costs, including reasonable attorney fees and costs, incurred by or on behalf of the persons entitled so such property (§ 15-12-1202(3), C.R.S.)

The person or entity paying, delivering, transferring, or issuing personal property pursuant to this affidavit is discharged and released to the same extent as if he/she/it dealt with a personal representative of the Decedent. (§ 15-12-1202(1), C.R.S.).

Instructions. The new Instructions also notify Affidavit users of this provision:

12. If a person or entity holding property of a decedent refuses to honor this Affidavit without reasonable cause, such person or entity shall be liable for all costs, including reasonable attorney fees and costs, incurred by or on behalf of the persons entitled so such property (§ 15-12-1202(3), C.R.S.)

13. The person or entity paying, delivering, transferring, or issuing personal property pursuant to this affidavit is discharged and released to the same extent as if he/she/it dealt with a personal representative of the Decedent. (§ 15-12-1202(1), C.R.S.).

Collection of Funds Owed to Decedent Relating to Real Property

Affidavit. The new Affidavit specifically references new CRS § 15-12-1201(3.5) regarding the transfer of personal property that affects real property:

4. This affidavit is not valid for the transfer of real estate. To transfer personal property that affects real estate see § 15-12-1201(3.5) C.R.S.

Instructions. And the new Instructions also provide this direction:

4. To use the affidavit to transfer any document owned by the decedent that places a lien against real estate (such as a mortgage or deed of trust), the affidavit must be recorded with the clerk and recorder of the county in which the real estate is located, along with a copy of the decedent’s death certificate or other verification of death pursuant to § 15-12-1201(3.5).

Specifying the Fiduciary Duties of a Person Acting on Behalf of a Successor

Affidavit. The new Affidavit now specifies that a person acting on behalf of a successor is acting as an agent:

8. Any person collecting property on behalf of one or more successors shall be deemed an agent of such successor with all the duties of an agent under Colorado law.

Instructions. And the new Instructions specify that agency:

7. Under #6 of the affidavit, a person, whether or not a successor, who collects property on behalf of one or more successors, is acting as an agent for such successors, and is responsible for distributing the property to all successors as specified in #6 of the affidavit.

Return of Assets

Affidavit. The new Affidavit now warns that any person who receives property by its use is liable to a subsequently appointed personal representative, or anyone with a superior right to that property:

9. I understand that any person who receives property pursuant to this affidavit is answerable and accountable to any subsequently appointed personal representative of the estate or any other person having a superior right to the estate.

Instructions. And the new Instructions also make this clear:

8. Any person who receives property pursuant to this affidavit is answerable and accountable to any subsequently appointed personal representative of the estate or any other person having a superior right to the estate.

Department of Motor Vehicles Form

Finally, the Instructions warn that the Department of Motor Vehicles (DMV) will not accept the JDF Affidavit form. The DMV has its own affidavit form that must be used to transfer motor vehicles, and the Instructions specify the form number and where to obtain it:

14. The Colorado Department of Motor Vehicles (“DMV”) will NOT accept JDF 999 but instead requires the use of its own affidavit (DR 2712) to transfer title to motor vehicles, motorcycles, motor homes, etc. owned by the Decedent (see Colorado.gov/revenue/dmv).

Conclusion

This three-year subcommittee project has cleared up confusion, added clarity, and fixed common problems with the use of the Affidavit. The result is that the affidavit procedure is now clear and easier to use for both attorneys and the public.

Notes

1. JDF 999, “Collection of Personal Property by Affidavot Pursuant to § 15-12-1201, C.R.S.,” www.courts.state.co.us/Forms/PDF/JDF%20999-%20Small%20Estate%20Affidavit%20R3-17.pdf.

2. JDF 998, “Instructions for Completing Affidavit for the Collection of Personal Property of a Decedent,” www.courts.state.co.us/Forms/PDF/JDF%20998%20Small%20Estate%20Affidavit%20Instructions.pdf.

3. Heller et al., “JDF 999 Collection of Personal Property by Affidavit Pursuant to CRS §§ 15-12-1201 and -1202,” 42 The Colorado Lawyer 49 (June 2013).

 

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