WFG Oregon Underwriting Bulletin -2013-1 MFT
Small Estates Estate Proceedings-Statutory Authority: ORS 114.5050 to ORS 114.560

BASIC DEFINITION: An expedited procedure for administering a decedent’s estate without the time and expense of a full probate. There is no bonding requirement, no court’s appointment of a personal representative, and no periodic or final reports to the court as there are with a full probate. The lack of court oversight makes title insurance somewhat riskier when title derives through a Small Estate Proceeding. There is no extra risk premium, but there should be thoughtful underwriting.

VALUE OF ESTATES ELIGIBLE: Per ORS 114.515, a Small Estates Affidavit “may be filed only if”the fair market value of the entire estate does not exceed $275,000. Of this, no more than $75,000 may be attributable to personal property and no more than $200,000 to real property. Valuation is computed without offset for liens or debt, but AS IF the property were owned free and clear.

(Title/Escrow Concern: An order is placed for a sale at $225,000; the recently filed Small Estates Affidavit includes representation that the FMV of the property is $175,000.We have a yellow flag; see senior underwriters ASAP, and preferably NOT as recordings come in.)

WHO MAY FILE: A Small Estate Proceeding is initiated and conducted ONLY by a person who is qualified under the statutes. The “affiant” who is allowed to make & file the S.E. affidavit must be qualified as a “claiming successor”, OR be the named personal representative under decedent’s will, OR be Department of Human Services HS or the Oregon Health Authority. (The state agencies file in order to recoup public assistance monies, most commonly Medicaid.) ORS 114.515.

As defined under ORS 114.505,a “claiming successor” is: 1. An heir or devisee of the decedent; 2. The person nominated as a personal representative in the decedent’s will. 3. A creditor of the estate who has not been paid within 60 days after the decedent’s death (And note: If the decedent died without a will OR heirs, the creditor must have written authorization form the Division of State Lands); 4. The Director of the Division of State Lands, if there is no will and no heirs.

WHAT IS FILED: The affidavit (see sample attached), PLUS a certified copy of the death certificate and the original will, if the decedent died testate.

(Title Tip: Look to see that the required items ARE part of the filing; look for contradictions between provisions of will and contents of affidavit, so those can be explored & understood before closing.)

WHEN TO FILE: The affidavit is not to be filed until 30 days after the death of the decedent.

WHERE TO FILE: The affidavit may be filed with the probate court for: 1. The County where the decedent died. 2. The County where the decedent lived or had a residence at the time of death. 3. Any county where property of the decedent is located at the time the affidavit is filed or any county where the decent held property at the time he died.

DUTIES OF THE AFFIANT/CLAIMING SUCCESSOR: 1. WITHIN 30 days of filing the affidavit, mail or deliver a copy of the affidavit, including a copy of the will, if any, to the following a) Heir and devisees; b) Each creditor who has not been paid in full; c) The Department of Human Services, Estate Administration Unit, P.O. Box 14021, Salem, Oregon 97301. 2. Take control of assets, including real and personal property. 3. Pay estate claims and expenses from estate property. (The Dear Liza problem: “With what shall I pay them…”) 3. If four months passes form the date the affidavit has been filed and no personal representative has been appointed, the affiant should transfer property to the heirs and devisees. The affiant may transfer property before the four months expires but, the affiant AND all heirs and devisees must convey by statute. After the four months the heirs & devisees SHOULD be in title and thus the ones to execute deeds; the affiant should have nothing left for the affiant himself to convey.

REQUIRED PAYMENTS: The affiant is required to pay the following expenses & claims: a. Expenses b) Claims shown on affidavit as undisputed; c) Claims presented to affiant by creditors at their own behest, unless disallowed by the affiant; (To disallow, the affiant must give the creditor written notice of disallowance in writing within 60 days of date on which a creditor has presented a claim); d. Claims which the probate court orders paid (typically as a result of a summary petition filed by a disallowed creditor)ORS 114.545

Creditors notified of the Small Estate Proceeding have four months from filing to present their claims. Claims go to the affiant who, without court oversight, allows or disallows them. (Note, though, affiant need not give creditor notice of the filing for 30 days after filing, so that shortens a creditors “four month” window for presenting a claim by thirty day);

CLAIMS DEEMED ALLOWED: Any claim presented on time and not expressly disallowed by written notice from the affiant to the claiming creditor within 60 days of presentation are deemed allowed;

CLAIMS DISALLOWED: Within 30 days of date of mailing of a notice of disallowance a creditor may file a petition for summary determination. After a summary proceeding, the court will enter an order allowing or disallowing the claim, in whole or in part. The affiant OR any claiming successor who has received money or property from the affiant can be directed to pay the creditor. ORS 114.545.

(TITLE/ESCROW CONCERN: None of this claims sorting activity is overseen by the court. And even disallowance activity, which suggests a disappointed creditor in the wings, would not show on the public record until a disallowed creditor filed with the probate court a “Petition for Summary Determination of their Claim”This Petition need not be filed until 30 days after the date of mailing of the notice of disallowance. Note the long period of150 days, for an adverse claim to surface: a) Affiant must send notice to creditor of filing of S. E. Affidavit-30 days after Affidavit filed; (30 days)(b) creditor has 30 days to file a claim (30 + 30 more= 60 days); the affiant need not send notice of disallowance for 60 more days (30+ 30+60= 120 days)AND ,then creditor has 30 days to file a petition for summary determination. (30+30+60+30+150 days in total before the record reflects a disputed creditor’s claim.)

GOOD NEWS FOR TITLE AND ESCROW: PROPER CONVEYANCING PROTECTS BFP’s

  1. Bona Fide Purchaser Protections under ORS 114.545(1) (f)

Any conveyance to a purchaser in good faith and for a valuable consideration is protected, regardless of how consideration is applied, IF made:

a)During the 4 month administration period following filing of the affidavit, by conveyances by(1) the affiant and (2) heir or devisee(s) who succeed to the interest conveyed; OR

b) After the 4 month period, by conveyance by the heirs or devises succeeding to the interest.

(COMMENTS: Deeds from affiants as affiants after the four month period, to anyone but the heir or devises entitled under the affidavit, would NOT be contemplated, though lawyers sometimes think that after the 4 month period it is the affiant who alone can deed.)

  • ORS 114.545 speaks of BFP protections kicking in after the administration period, when the deeds are given by succeeding heirs or devisees & NOT based on an affiant’s deed. This language is why deeds to estate assets really should come from the heirs or devisees once the 4 month administration period runs!
  • Note, this statutory language, too: ORS 114.555 says: If a Personal representative is not appointed within four months after the filing of the [Small Estates]affidavit, the interest of the decedent in all the property described in the affidavit is “transferred to the person or persons shown in the affidavit” , & except for filed claims, omitted claims, and spouses elective shares, other claims against the property are barred.
  1. 2 Years and Clear- ORS 114.550: Yes, creditors might NOT be known to the affiant. Or creditors who were known, but notproperly noticed or not paid, by the affiant might surface. These adverse claimants have 2 years from the filing of the S.E. Affidavit to petition the probate court to review estate administration and order payment of those claims.

Again BFP protections should shield arm’s length purchasers, but that would NOT necessarily protect heirs and devisees from having to turn over estateproperty still in their hands or otherwise pay the successful creditor.

TITLE PRACTICE SUMMARY ON SMALL ESTATES: CONSULT SENIOR UNDERWRITERS IF:

  1. The sale price in our transaction exceeds $200,000 and we are relying on a S.E. Affidavit (reciting value UNDER $200,000.)
  2. We have a request to insure not an arm’s length purchaser, but the heir or devisees or a sale by an heir or devises to a family member.
  1. We have any request to insure based on a Small Estates Affidavit not prepared by an attorney.
  1. The affidavit discloses numerous or sizable creditor’s claims, aside from secured ones to be paid at closing. We may want to insist on paying even unsecured claims out of escrow, bfp protections aside, in order to avoid title insurance defense costs of provingbfp status and/or creditor claims presented not as title claims but as escrow claims.(ORS 114.560 should be a fairly solid claims bar, though.)
  2. There are indications from the death certificate, an obituary or elsewhere that there are heirs or devises who are mysteriously absent from the S.E. Affidavit.
  1. You find judgments and/or pending divorces against the heirs or devisees listed in the Small Estates Affidavit. Those matters can sometimes only be “taken care of” by abandoning the Small Estates proceeding, in which those liens & matters do “attach”, in favor of a probate.

Attachments: Sample Small Estate Affidavit (Source Oregon Justice Department)
Small Estates Act