Posts tagged small estate set aside
What is the small estate set-aside?

The Small Estate Set-Aside was previously discussed in the context of family protection statues, but it is worth mentioning again for purposes of probate avoidance.

California Probate Code Sections 6600-6615 permit a summary set-aside of a deceased person's estate if all of his or her personal property and California real estate has a net value of $20,000 or less. The key here is that we look to the net value of the property rather than the gross value. This means that we reduce the value of the property by any debt, mortgages, liens, and other encumbrances (as well as the value of the probate homestead, if any).

This procedure, however, is only available to the surviving spouse and to the deceased person's minor children.

Although somewhat limited in scope and only allowed to be used by certain family members, it can be an incredibly useful tool when the appropriate context arises. More often than not, the surviving spouse and minor children are the ones who are faced with the need to probate the deceased person's estate any way. In addition, with the rising level of household debt, it's not uncommon for a deceased person's estate to have relatively little equity (especially if he or she is young).

What is a "small estate set aside"?

If a deceased spouse's estate is worth less than $20,000, it may be set aside and distributed to the surviving spouse and/or minor children. The relevant law is California Probate Code Sections 6600 to 6615. The purpose is to provide assets to a surving spouse and minor children, even contrary to what a Will may say.

To make use of the small estate set aside law, however, the "net estate" cannot exceed $20,000.

What is the "net estate" and how do you calculate it?

A "net estate" is the value of the assets includable in the estate minus any liens or encumbrances on the assets. For example, if the only asset of the estate is a parcel of land worth $100,000, and it has a mortgage of $90,000, then the net estate would be $10,000.

The estate does not include non-probate assets such as life insurance, retirement accounts, joint tenant accounts, assets subject to a probate homestead, and real estate outside of California.

Because of the relatively small amount of the small estate set aside, it usually doesn't have a significant impact on a deceased spouse's Will. However, a court has discretion in allowing for a small estate set aside.

Thus, if you want to leave your estate to someone other than your surviving spouse or children:

  1. Make it clear in the Will
  2. Request that the disposition not be affected by the small estate set aside laws, and
  3. Clearly indicate assets have been provided for the surviving spouse and/or children outside of the probate estate.


What protection does your family have during the probate process?

Probate is the process by which the Court oversees the administration of your estate, including the payment of any debts and the transfer of your assets to your beneficiaries or heirs. What some people don't know, however, is that there are a number of statutes within the California Probate Code that are intended to protect your family (e.g., surviving spouse and your descendants).

While this is typically a positive benefit for your family, it may not be what you intended, for example, if you had others beyond your family that you wanted to care for and who you wanted to have as the beneficiaries of your estate. Under the law, your family's needs may have priority over your other beneficiaries, which may ultimately affect your estate plan.

Here are some of the family protections available:

  1. Family Allowance - An allowance that is provided to your family during the probate administration period, which would utilize the estate assets.
  2. Probate Homestead - May allow your family to continue using your home after your death, which would prevent other beneficiaries from receiving the home.
  3. Small Estate Set Aside - A court may allow estates that are worth $20,000 or less to be set aside for the benefit of a surviving spouse or minor children to the exclusion of the beneficiaries named in a Will.

Understanding the impact of the provisions in your estate plan is vital in ensuring that you and your family have a plan that is predictable and that your wishes are ultimately carried out.