Underwriting Q&A: Is a Small Estate Affidavit an acceptable/insurable procedure to handle the affairs of an intestate decedent?(TX)

A: In limited situations, the Small Estate Affidavit may be relied upon to evidence a transfer of the decedent’s homestead property as discussed below.

The Small Estate Affidavit is an intestate procedure (individual died without a valid last will and testament) that allows the distributee(s) of the estate to skip the appointment of a personal representative by submitting an affidavit to the court. This method is available if the estate assets, excluding the homestead, exceed the known liabilities, it has been 30 days since the decedent’s death, and the value of the assets are under 75K. The affidavit must contain this information along with a list of all known assets and liabilities, names of distributee(s), heirship information and be sworn to by two disinterested witnessed and all distributee(s). The judge then may approve the affidavit, which will allow transfer of title to the homestead if the homestead is the only real property the decedent owns.

This option is very limited as title to the decedents homestead may be transferred only to a distributee who occupied the property as the distributee’s principal residence on the date of the decedent’s death, per the statutes (e.g., the surviving spouse, a minor child, or adult child currently residing in the homestead). If the facts in the subject transaction do not meet this scenario, discuss with underwriting counsel as to whether or not the small estate affidavit may be relied upon as evidence of heirship.

Title examiners should be cautious in relying on a Small Estate Affidavit. It is very common for parties to file “fill in the blank” affidavits, indicating the parties are not represented by counsel. In these situations, it is likely that the affidavit will contain errors and omissions that may affect our decision to rely on the affidavits. Many small estate affidavits are filed to deal with personal property and bank accounts, omitting any reference to real property. As mentioned above, in certain cases the Small Estate Affidavit may be relied upon to evidence a transfer of the homestead property. However, this is not possible if the affidavit makes no mention of the homestead property.

Examiners should also beware of expenses listed under the liabilities, as we may need sufficient proof that those items have been paid prior to closing (e.g., expenses related to last illness or funeral expenses).

If it is determined that we may rely on the Small Estate Affidavit, certified copies of the Small Estate Affidavit and Order Approving the Small Estate Affidavit should be recorded in the real property records of the county where the subject property is located. Once recorded, the distributee(s) would be placed in title and searched for liens/adverse matters prior to insuring the transaction.