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An Overview of Small Estate Processes

Contents

    What Is in an Estate?

    When a person dies, he or she is called a decedent. A decedent leaves property behind. That property needs to be passed on to those who will inherit it. The property could include:

    • Real property (houses and other buildings, land and the things attached to it)

    • Personal property (furniture, cars, and other things not attached to land)

    • Bank accounts

    • Stocks and bonds

    • Debts owed to the person

    The law spells out how a person’s property can and must be distributed when that person dies. In Michigan, the probate courts are in charge of making sure a decedent’s estate is distributed correctly. This is called probate administration. The estate includes a lot of the decedent’s property, but some things can be left out. The estate does not usually include:

    • Insurance policies,

    • Jointly owned property,

    • Retirement accounts, or

    • Trusts that are not established by a will.

    Jointly Owned Property

    Jointly owned property is property owned by more than one person. It is generally not included in an estate. Examples of jointly owned personal property are if you and the decedent are both listed on the title of a car or if you have joint bank accounts. When the decedent died, you automatically have full ownership of that property, so it is not part of the estate. You may want to take a copy of the decedent’s death certificate to the bank or Secretary of State to remove the decedent’s name from the account or car title.

    However, sometimes joint ownership is more complex. If you own real property with the decedent, or if you own any type of property with the decedent and someone else, ownership can be hard to understand after a death. Read the article Jointly Owned Property to learn more about this, or use the “Find a Lawyer” link to look for legal help in your area.

    Small Estates

    There are different ways an estate can be administered. If the estate does not have much property in it, you may be able to use a small estate process where the probate court is not involved at all, or only a little bit.

    Whether an estate is small depends on the value of the property in it. The dollar limit can change each year. If a person dies in 2014-2017, an estate must be valued at $22,000.00 or less to be small. If a person died in 2012 or 2013, the estate must be valued at $21,000.00 or less. If a person died in 2009 – 2011, the estate must be valued at $20,000.00 or less. The small estate processes are called assignment of property and transfer by affidavit.

    Sometimes an estate is so small that an even simpler process can work. If the decedent just left a car, personal property, or wages from a job, those things can be transferred individually.

    This article has an overview of all of these processes. Read the article An Overview of Informal Probate to learn about other probate processes if the estate you’re dividing doesn’t qualify for one of these. Distributing property after someone dies can be complex; you may want to talk to a lawyer. You can use the “Find a Lawyer” link to look for legal help in your area.

    Other Concerns: Decedent’s Will, Social Security, Income Taxes

    In addition to dividing a decedent’s property, you may have other concerns after someone dies.

    Will or No Will?

    Sometimes people prepare a will before their death to explain how they would like their property to be distributed. However, the small estate processes ignore the wishes in a decedent’s will. Instead, the legal formula of inheritance is used to divide property. That formula is described below.

    If you would like to follow the will instead, you will need to go through informal probate. Read the article An Overview of Informal Probate to learn about this process.

    If the decedent did not leave a will, or if you are an heir and choose to follow the legal inheritance formula, you may use the small estate processes.

    Social Security Benefits

    If the decedent was getting Social Security benefits, the Social Security Administration (SSA) should be notified of the death as soon as possible. The funeral home director may file a form to tell the SSA about the death, or you may need to do this yourself.

    If the decedent was paid benefits for the month after his or her death, the benefits will have to be paid back to the SSA. If the benefits are direct deposited and the account is still open, the SSA may withdraw the funds.

    You can learn more from the SSA’s publication about stopping payments and applying for survivor benefits if you are eligible.

    Income Taxes

    When a person dies, his or her estate becomes a new taxpayer for income tax purposes, separate from the person. The estate must get an Employer Identification Number (EIN) from the IRS. You can learn more about how to get an EIN on the IRS’s website. The number that is assigned is used on any accounts in the name of the estate such as bank, credit union, and brokerage accounts.

    The EIN is also used to file the decedent’s final income tax return. You can learn about what is needed for the final tax return on the IRS’s website.

    Assignment of Property

    Assignment of property is the small estate process you must use if the decedent had real property. However, even if there was no real property, you may choose to use assignment of property if an estate is small. This is the only small estate process where a Probate Judge reviews and approves the division of property.

    To use this process, you must know all the property and the heirs the decedent had, and have information about the funeral or burial expenses. You must also be an heir or the person who paid the funeral bill.

    Property

    You must list all real property and personal property with the value of each. For decedents who died after March 28, 2013, the value of real property is the net value. If there is a mortgage or other lien on the property, the property’s value will be the market value minus the mortgage or other lien amount. For decedents who died before March 28, 2013, the mortgage or lien is not subtracted from the market value of the home.

    Unlike real property, the value of the personal property is its market value. Any liens or loans on personal property will not be deducted when determining its value.

    Who Will Inherit?

    After funeral and burial expenses have been paid, the court will order any remaining property be divided among the heirs. The inheritance formula determines which heirs inherit property, and how much of the property each person will get. If the estate is small and there is a surviving spouse, that person inherits all the property.

    If there is no surviving spouse, any property will be given or paid to direct descendants of the decedent, starting with the decedent’s children. If all of the decedent’s children are still alive, they will split the property equally. If a child died before the decedent, that person’s children will split the share equally. If the decedent had a grandchild who should inherit, but he or she died before the decedent, his or her children will split the shares equally. If inheriting children or grandchildren die before the decedent with no living children of their own, the line of inheritance stops there. Their share will be divided between the remaining descendants.

    If there are no living descendants of the decedent, the property will be split between the decedent’s parents equally. If only one parent is still living, that parent inherits all the property. If both parents died before the decedent, the property will go to their descendants, starting with the decedent’s siblings. The same rules of representation mentioned above apply.

    If an inheriting sibling died before the decedent, that person’s children will split his or her share of the property equally. The same is true if an inheriting niece or nephew died before the decedent. If inheriting siblings, nieces, or nephews die before the decedent with no living children of their own, the line of inheritance stops there. Their share will be divided between the remaining heirs.

    If no descendants of the decedent’s parents are living, the property is divided among the decedent’s grandparents. Half of the property will go to the decedent’s paternal grandparents, and the other half will go to the maternal grandparents. If only one maternal or paternal grandparent is living, he or she will take the full half of the property. If both grandparents on one side died before the decedent, their half of the property goes to their descendants, starting with the decedent’s aunts and uncles. The same rules of representation mentioned above apply.

    If an inheriting aunt or uncle died before the decedent did, that person’s children will split the share of the property equally. The same is true if an inheriting cousin died before the decedent. If inheriting aunts, uncles, or cousins die before the decedent with no living children of their own, the line of inheritance stops there. Their share will be divided between the remaining heirs.

    There are other rules too, including special rules if an heir dies after the decedent does. You can use the Do-It-Yourself Settling a Small Estate to help you figure out who will inherit and what share each heir will receive. It will tell you the shares each person is entitled to, but some things (like cars) cannot easily be divided. Decide how to divide the existing property so everyone gets the share they deserve.

    Assignment of Property Process

    To start this process, file a Petition and Order for Assignment with the probate court in the county where the decedent lived. If the decedent lived outside Michigan, file the Petition and Order for Assignment in the county where the decedent had property. You can use our Do-It-Yourself Settling a Small Estate to create this petition.

    There is a $25.00 filing fee. There is also an inventory fee based on the value of property in the estate. You must file a certified copy of the death certificate with the petition. You must also file proof that the funeral and burial expenses have been paid or a bill showing the amount owed.

    The court will order the funeral and burial expenses be paid or reimbursed to whoever paid them. This means all paid and unpaid funeral expenses will be deducted from the value of the estate when determining if it is a small estate. If there is no cash available, then something may have to be sold to pay those expenses. Read the article Small Estates: How does Assignment of Property Work? to learn more about this process.

    Notice to Decedent’s Creditors

    This process does not include any notice to creditors. If a creditor tries to collect a debt within 63 days of when the order is issued by the court, the person who got the property will have to pay the debt, up to the amount or value of the property the person got. This does not apply if the decedent’s spouse or minor children got the property. For example, if the decedent’s brother got $1,000.00, a creditor the decedent owed $500.00 could get the $500.00 from him. If the decedent had owed the creditor $1,500.00, the brother wouldn’t have to pay more than $1,000.00 to the creditor. If the decedent’s spouse or minor child got the property, he or she would not have to pay the creditor anything.

    Transfer by Affidavit

    If a small estate does not have any real property, the estate may be distributed using the transfer by affidavit process. This does not involve filing anything with the court. Instead the person who will inherit the decedent’s property can get it by presenting the death certificate and the Affidavit to whomever holds the property, such as a bank. You can use our Do-It-Yourself Settling a Small Estate to complete the affidavit.

    To do this process, you must know all the property and the heirs the decedent had. You must wait 28 days after the decedent’s death to use the Affidavit to transfer property. You must also be an heir entitled to some or all of the property, and you must know the names and addresses of the other heirs who will inherit a share of the property.

    To use this process, the estate must:

    • Not include real property,

    • Have a value less than or equal to the limits for a small estate ($22,000 for decedents who died in 2014-2017), and

    • Not have an application for a personal representative filed or granted.

    Property

    All personal property must be listed with the value of each item. When using this process, you can deduct any liens and loans for all personal property in the estate. For example, if a car has a value of $8,000 but the decedent still owed $2,000 on the car loan, the value of the car will be listed as $6,000 on the Affidavit.

    However, you cannot deduct the funeral expenses when determining if the estate is small. Should the estate be too big to qualify for this process without deducting funeral and burial expenses, you may want to consider using the assignment of property process, which allows funeral and burial costs to be deducted.

    Who Will Inherit?

    The same inheritance formula mentioned above determines which heirs inherit property, and how much of the property each person will get.

    Transfer by Affidavit Process

    The first step in the process is to complete the affidavit. You can use our Do-It-Yourself Settling a Small Estate to complete the affidavit. Sign it in front of a notary. You can find a notary at many banks and credit unions. You may have to pay a small fee to have it notarized.

    Then show the affidavit and a copy of the death certificate to whoever holds the property. The holder of the property should turn it over to you. The holder may keep a copy of the affidavit for its records.

    For example, if your father died and left a bank account and some personal property in an apartment, you could use this process. After the affidavit is notarized, you could take it with a copy of the death certificate to your father’s bank. The bank should give you the money in the account. If the affidavit says more than one person is entitled to part of the account, it might be distributed as checks to each person entitled to a share. You could then go to the apartment and show the landlord the notarized affidavit to collect your father’s personal property.

    Notice to Decedent’s Creditors

    This process does not include any notice to creditors. There is also no time limit as to when a creditor can collect. If a creditor tries to collect a debt from the decedent, the person who got the property will have to pay the debt, up to the amount or value of the property the person got. This does not apply if the decedent’s spouse or minor children got the property. For example, if the decedent’s brother got $1,000.00, a creditor the decedent owed $500.00 could get the $500.00 from him. If the decedent had owed the creditor $1,500.00, the brother wouldn’t have to pay more than $1,000.00 to the creditor. If the decedent’s spouse or minor child got the property, he or she would not have to pay the creditor anything.

    Money Due from an Employer

    If the decedent’s estate is being administered through assignment of property and an employer owed the decedent money or benefits, show the employer a certified copy of the Order for Assignment. The employer should then give you the money or fringe benefits owed to the decedent. If the decedent’s estate is being administered through transfer by affidavit, use the Affidavit to show what should be given to you.

    If the only property the decedent left is money from an employer for wages or fringe benefits, you do not have to get a court order. The employer may have a contract, policy, or plan that says how the wages or benefits should be distributed. If the employee filed a signed statement with the employer that said to whom wages and benefits should be paid, the employer should pay them to that person. If there is no contract, policy, plan, or signed statement, the employer should give the wages and benefits to the employee’s surviving spouse. If there is no surviving spouse, the wages and benefits should be given to the employee’s children. If no children, they should be given to the employee’s parents. If there are no surviving parents, they should be given to the employee’s siblings.

    Transferring a Vehicle

    If the decedent owned a vehicle, its title can be transferred using a form from the Secretary of State’s (SOS) office if:

    • The estate is not going to be distributed through the probate court (excluding small estates),

    • The decedent’s vehicle or vehicles are worth $60,000.00 or less, and

    • There is not a lien on the vehicle or you can pay the lien in full at the time of transfer.

    This process will not work for boats.

    To transfer the title, the surviving spouse or heir must complete a Certification from the Heir to a Vehicle. You will need information about the vehicle, such as the year, make, model, Vehicle number (VIN), and title number.

    If you use our Do-It-Yourself Settling a Small Estate, you will get a completed certification form for each vehicle you are transferring. You will have to certify there is no probate proceeding started, and you do not expect one to be started in the future. The assignment of property process does not count as a probate proceeding. You will have to determine who is inheriting the vehicle and complete the form.

    When you go to the SOS office to transfer the title, take a copy of the death certificate with you. If you have a copy of the vehicle title, bring it too. You can learn more on the SOS website.

    If there is no surviving spouse, more than one heir may each have an equal right to the car. Those who will not be getting the title in their names may complete a Certification Statement to state they give up that right.

    If the car is transferred to someone who is not the spouse or an heir, the person who gets it will have to pay use tax. The use tax is paid at the SOS office when the title is transferred.

    Personal Property

    If the decedent’s estate is being administered through assignment of property, take a certified copy of the Order Assigning Assets to show any holder of property that it should be given to you. If the decedent’s estate is being administered through transfer by affidavit, use the Affidavit to show the property should be given to you.

    If neither process is being used, and the decedent left only clothes and up to $500.00 cash, those items can be transferred to a decedent’s spouse, child, or parent without a court order. This request can only be made to a:

    • Hospital,

    • Assisted living facility or nursing home,

    • Morgue, or

    • Law enforcement agency.

    The spouse, parent or child needs to show:

    • Proof of his or her identity,

    • A sworn statement proving the relationship, and

    • A sworn statement that there is not an estate proceeding and there won’t be one.

    A sworn statement is a written statement that is notarized by a notary public. Many banks and credit unions have a notary public. There may be a charge for getting the statement notarized.

    Which Process Is Right for Me?

    Probate Administration

    Of all the options, probate administration is the most expensive and takes the most time. It gives notice to creditors, so heirs will know creditors won’t come after them to collect debts the decedent owed. It also has the most oversight, and allows you to follow the wishes in a decedent’s will.

    If the decedent had more than $22,000.00 in assets after allowable deductions, you probably need to use probate administration because the small estate options are not available. If you use this process, you may want to talk to a lawyer. You can use Find a Lawyer to look for legal help in your area. You can also read the article An Overview of Informal Probate to learn more.

    Assignment of Property

    If the value of the estate is less than $22,000.00 after the decedent’s funeral costs and any mortgages or liens on real property are deducted, you can file the needed documents in court and get a certified copy of the Order the same day if you use the assignment of property process. It is less expensive than probate administration, and can be done without a lawyer. If you do have a lawyer help you, the legal fees will be less than they would for full probate administration.

    This process can be used to distribute all the property in the estate. It does have the risk of having a creditor try to collect the decedent’s debt from heirs for up to 63 days after the order is signed.

    Transfer by Affidavit

    If the value of the property in an estate was less than $22,000.00, and does not have any real property in it, you may execute an affidavit to transfer. This process is less expensive than assignment of property, but can only be used if there is no real property in the estate.

    However, you cannot deduct the funeral expenses when determining if the estate is small. Should the estate be too big to qualify for this process without deducting funeral and burial expenses, you may want to consider using the assignment of property process.

    This process can be used to distribute all the property in the estate. It does have the risk of having a creditor try to collect the decedent’s debt from heirs, and there is no time limit as to when a creditor can collect.

    Transfer a vehicle

    Use this Secretary of State form to transfer a vehicle if the total value of the vehicles is less than $60,000.00 and a personal representative was not appointed. It can be used if the rest of the property is being distributed using assignment of property, transfer by affidavit, or if there is just personal property. Transfer fees and taxes will have to be paid if the vehicle is transferred to anyone other than a family member.