When it comes to estate planning in Huntsville, Alabama, it’s important to note that no estate is too small to plan for. 

Any Huntsville attorney will tell you that if you have something to leave behind, then it’s worth taking the time to plan for it to ensure it ends up in the right hands. This is especially true if you’re not just leaving behind any assets but a family as well.

Another common misconception about small estate planning is that a lawyer isn’t necessary for the probate process. While this is up for debate, we will say that a Huntsville attorney is essential if you’d like your family to avoid probate altogether. 

Keep reading to learn more about Alabama’s small estate probate process and when to hire a lawyer.

What Constitutes as a Small Estate in Alabama?

Put simply, a small estate in Alabama has a total value of $25,000—or less, with that number indexed for inflation.

According to the Alabama Small Estates Act of 1979, which was later modified in 2009, the State Finance Director can adjust this number. The annual basis for changes depends on the Consumer Price Index, excluding real estate property.

There are also other exclusions, which can make figuring out if you’re within the “small estate” limitations confusing. The rule of thumb is that you wouldn’t count any jointly owned assets, retirement plans, payable-on-death (POD) bank accounts, transfer-on-death (TOD) brokerage accounts, real estate, or any other assets within a living trust. This is because these assets are passed on to already named beneficiaries.

This goes for any life insurance policies with named beneficiaries.   

Here’s an example scenario:

Let’s say that at the time of your passing, you own the following assets:

• A checking account with $2,250

• A savings account with $2,500

• Bonds with a value of $6,500 and no outstanding loans

• An IRA with $30,000 that has your children named as beneficiaries

• A life insurance policy worth $50,000, with your spouse and children named as beneficiaries

To figure out whether you’re above or below Alabama’s small estate limit, your bank accounts would be totaled in addition to your bonds. This comes to a total of $11,250. Your IRA and life insurance proceeds aren’t counted as they go directly to your beneficiaries.

This means that the value of your total estate falls within the state’s small estates limitations. However, suppose you don’t have a will or any living trust. In that case, the rest of your assets will be distributed accordingly with Alabama’s intestacy laws.

How Does the Probate Court Handle Small Estates?

Not all states will require probate for small estates. Alabama, however, does. Probate is necessary for all estates to ensure that an individual’s assets are correctly verified and distributed, especially if that individual dies intestate.

Fortunately, small estate probate is more straightforward than the traditional probate process for sizable estates. But, of course, the process can still take months, and all expenses or arrangements must be paid and made before asset distribution can happen.  

However, suppose the deceased’s family can file a “petition for summary distribution.” To file the papers, vital all heirs must be appropriately identified. Then, the heir designated as the “petitioner” must file the petition with the probate court in the country where the decedent has passed. 

It should be noted that this petition is essentially a request for the probate court to move forward with the simplified procedure explicitly designed. In that case, the correct documents are essential for small estates. In this case, the court may authorize the affiant in question to distribute the assets accordingly without going through regular probate procedures.

To be granted the simplified procedure, three things need to be done:

• First, there’s a 30-day waiting period to ensure that the small estate limitations have not been adjusted for inflation, in which case could affect whether or not the estate is still considered “small.”

• All funeral expenses must be paid, or arrangements for them to be paid must be made by the affiant.

• The notices must publish notice of the request in the newspaper within the country where the deceased was living at the time of their death.

Once the green light is given for the petition, the affiant will be responsible for paying any claims against the estate in this specific order:

1. Funeral expenses

2. Administrative court fees

3. Medical expenses as per the last illness (if applicable)

4. Any state, county, or municipal taxes owed by the deceased

5. Any debt owed to creditors, secured or unsecured

Once the above claims against the estate have been paid, the affiant can move forward with distributing assets as per the deceased individual’s will. However, if there is no existing will, the affiant must follow the state intestate succession laws.

Is There a Way to Bypass the Probate Process Altogether?

The probate process can be both confusing and stressful. Fortunately, there are some ways around it. They just require some advanced planning on your part. 

While wills are essential for avoiding the intestate succession laws, living trusts are the best and most common way to skip probate court altogether. A living trust is a document that allows you to name a beneficiary for specific assets while also transferring the ownership of those assets as soon as the trust is authorized.

Of course, the beneficiary won’t receive those assets until the time of your passing or a specified time or date. However, since they technically fall under the ownership of that beneficiary, they are no longer part of your estate. They, therefore, cannot be touched by the probate court.

Another common way to avoid probate court is to name a beneficiary for any open accounts. For example, you can opt to make your bank account payable-on-death (POD) and any brokerage accounts transferable-on-death (TOD) to a specific beneficiary. Of course, you’ll still have total control over the accounts. Still, once you pass on, they’ll go directly to your beneficiary without further involvement.

The last standard option is to ensure all properties and accounts are jointly owned with your spouse (if applicable). If your spouse’s name is on each account or deed as the joint owner, then the ownership is automatically transferred to them in full at the time of your death.

Do I Need a Lawyer to Probate a Small Estate in Alabama?

The short answer here is yes, you need a lawyer to probate a small estate in Alabama. If you’d like to set up a living trust or utilize the other methods of avoiding probate court, then a lawyer is vital.

Of course, even if you don’t want to do any of those things, it may be necessary for your heirs or the affiant of your estate to confer with a lawyer regarding specific legal processes. 

Either way, it’s always a good idea to be as prepared as possible for estate planning in Huntsville, Alabama. So get in touch with us today to speak with Sarah S. Shepard or another experienced Huntsville attorney about planning your estate, regardless of its size.