Q: Your answer to the reader about inheritance taxes in Pennsylvania addressed the questions about federal taxes and a gift tax, but isn’t there misinformation in the question about avoiding probate on a cash estate of $250,000?
A: Each state has its own rules governing estate taxes — the taxes paid on an estate’s value when a person dies. If we don’t know where someone lives, and knowing that this is a nationally syndicated column, we try to provide readers with general answers. For specific answers, we always suggest you speak with a qualified professional who understands your specific financial situation.
Let’s start with your first question. The $250,000 estate question has to do with a large amount of cash that was owned by an estate when the decedent passed away. The soon-to-be-heir wanted to know if there was a tax on cash.
If the cash went into a bank account that was jointly owned with his children, then that cash wouldn’t have had to go through probate. In a joint account, the survivor automatically becomes the sole owner on the account upon the death of the co-owner. Likewise, if the account holding the cash was a trust account naming specific people as the successor beneficiaries, those beneficiaries would get the cash without having to go to probate court.
But if there hadn’t been a will or those assets wouldn’t transfer automatically upon the father’s death, then the cash would have probably gone through probate.
You also asked about how much in assets states will allow residents to pass down without going through probate.
Some states allow the transfer of small amounts of money from the decedent's accounts to the surviving heirs by using a small estate affidavit. Oregon has a small estate affidavit limit of $275,000 and Wyoming’s is $200,000. There are a handful of states with small estate affidavit limits of $100,000 or $150,000, including Alaska, Arkansas, California, Hawaii, Idaho, Illinois, Iowa, Ohio, Utah, Washington and West Virginia.
Most of the other states will require an estate to go through probate if the estate value is over $50,000. As with most things, however, the devil is in the details. For example, Florida allows for Summary Administration of Estate valued at $75,000 or less, or where the decedent has been dead for more than two years. And, the total estate does not include the value of real estate, according to Florida Probate Code 735.201.
In New York, only an estate valued at over $30,000 must be probated when there is a will, according to the New York City Bar. The court has "‘a small estate proceeding’ when the estate is below $30,000. And, an estate without a will is ‘administered,’ not probated,” according to the website.
In Michigan, the value of the estate can’t exceed $15,000 or you must go through probate. But the total value doesn’t include jointly owned property or other exempt probate assets.
Lastly, even when some states allow the transfer of assets from the deceased person’s account to their heirs, the institutions holding those funds might not readily transfer the funds without knowing that a probate court is involved. Thus, there is no hard and fast rule when it comes to cash left in an account where the owner died and you need to figure out how to transfer that money to the surviving heirs. Because each state has different laws regarding probate, your best bet is to talk with a local estate attorney.
Ilyce Glink is the author of “100 Questions Every First-Time Home Buyer Should Ask” (Fourth Edition). She is also the chief executive of Best Money Moves, an app that employers provide to employees to measure and dial down financial stress. Samuel J. Tamkin is a Chicago-based real estate attorney. Contact them through the website, BestMoneyMoves.com.
©2022 Ilyce R. Glink and Samuel J. Tamkin. Distributed by Tribune Content Agency, LLC.