Top 10 Mistakes People Make When Handling A Small Estate is a lot

Coping with the passing of a loved one is a significant challenge. Not only do you have to deal with the emotional weight of losing them, but there will also likely be a great deal of paperwork and complex legal matters to manage. You might think that organizing the handover of a small estate would be relatively straightforward, but things can easily get confusing.

Below, you’ll find the top 10 mistakes people make when handling an estate of this size, helping you navigate the process as quickly and efficiently as possible. 

1) Not Seeking a Professional Opinion

Unfortunately, it’s all too common for people to think they can manage everything on their own and then end up in hot water. Managing the logistics of someone’s estate is a complicated affair, and you’ll always want to secure professional help as early as possible. 

Before you make any important decisions, consult with an estate attorney and get some basic advice. It’s an investment you won’t regret.

2) Not Understanding Probate Threshold

Probate threshold refers to the minimum estate value at which a full probate process is required. Each state in the US has its own probate threshold, and estates below this amount can often be organized through a small estate procedure, which seeks to simplify things. 

You’ll need to be acutely aware of where you are on the spectrum, as this governs the entire procedure. If you get the figures wrong, paperwork and documentation may have to be filed again, significantly delaying the handover.

3) Not Keeping Accurate Records

One of the biggest mistakes people make is not keeping accurate records. Given that you’ll have a lot on your mind after the passing of a loved one, it’s easy for small details to slip by, but receipts, bank statements, and signed acknowledgements must be acquired and stored securely as soon as possible. 

It’s very common for information like this to get lost, and sometimes a single missing piece of paper puts up a huge roadblock.

4) Addressing Real Estate Too Late

Even when your loved one only owned a small home, property comprises a significant part of their estate, and it’s important to get things in order early. 

Given how substantial an element this is, not dealing with the legal elements quickly enough can mean significant delays in transferring the estate as a whole. Sometimes, the process can take years if it’s not dealt with in time. 

Work with a qualified legal professional to establish where the land lies and act quickly. 

5) Not Considering Debts and Creditors

Just because your loved one passed on a small estate doesn’t mean that big debts haven’t accumulated, so it’s critical to establish if there’s anything to be owed as soon as you’re able. 

These debts could ultimately be passed onto you, so make sure you’re completely clear on your state’s rules for notifying creditors. Again, you’ll also need to make sure you keep clear records of anything relating to outstanding debts and create digital backups in case something goes missing (as that’s certainly not a position you want to be in). 

6) Distributing Assets Too Early

Once you’re in control of your loved one’s assets, you may feel under a lot of pressure to distribute them accordingly, but doing so too early would be a big mistake. 

You’ll need to first ensure all debts are verified as discussed above, as well as matters pertaining to tax and ownership – nothing should be transferred until these elements are concretely acknowledged to prevent needing to ask for money you’ve already given away. 

7) Neglecting to Consider Non-Probate Assets

It’s important to understand that not every asset relating to your loved one’s estate goes through probate. 

Accounts involving other named individuals and some agreements relating to property are usually transferred automatically outside of the probate system, so be sure to verify how each asset is processed to avoid unnecessary headaches later. 

8) Forgetting About Final Taxes

Something that’s essential to remember is that the IRS will always require a final income tax return for the deceased person, even if the estate seems small enough for it not to matter. 

If the estate generates any income on its own, an estate tax return may also need to be filed, but only if the total estate value exceeds the federal or state estate tax exemption. 

Neglecting to make this final filing can result in harsh penalties and, at the very least, delays in bringing things to a close. Make sure you double-check all elements relating to your loved one’s taxable income during their final year. 

9) Not Communicating Properly With Family 

Family communication is extremely important when managing an estate, so it’s critical to get everyone on board, even if relationships are strained. 

Anyone involved should be adequately informed about what’s happening at each stage in the process. It’s a good idea to set up a joint WhatsApp or Facebook group including each individual, or even a regular group email to help keep people in the loop. The more people actively engaged in trying to ensure a swift resolution, the quicker the process will be. 

10) Overlooking Digital Assets

Many times, digital assets are overlooked as relevant parts of the estate in question. Make sure aspects like online banking, cryptocurrencies, and important files stored on computer hard drives and in the cloud are all accounted for, as these elements could easily be lost forever if no one knows about them. 

You may need to approach a specialist to learn how to appropriately transfer certain digital assets (such as crypto), as they might need to be processed through specific legal frameworks. Always reach out if you’re unsure so that you don’t inadvertently corrupt something. 

Wrapping Up

Hopefully, you now feel a little more confident about how to handle a small estate. It’s certainly a lot of effort, but when all’s said and done, you’ll be glad you made sure to do things by the book.