The West Virginia West Virginia Small Estate Act (the Act) provides an alternative to traditional probate and became effective July 1, 2021. Although from the heirs’ perspective, the Act simplifies the process for transferring the deceased’s assets, it will provide complications and liabilities for financial institutions if these institutions do not update their probate policies.
The Act can be used to administer “small” estates. Small estates are those in which the deceased had probate personal property assets collectively valued at no more than $50,000 and West Virginia real property assets collectively valued at no more than $100,000. It is designed to be less expensive as there is no bond required. It is also designed to be faster, not subject to a claims period and has less paperwork.
When reviewing the Act, a reader will note that although it has some similarities to traditional probate, the process and the language used is different. For example, instead of heirs or beneficiaries, the persons to receive the deceased’s assets are the “successors.” The definition of successors also includes persons named as personal representative or beneficiary under the deceased’s will.
In the small estate process, there is no personal representative of the estate. Rather, the equivalent of the personal representative is the “authorized successor.” The authorized successor has many of the same powers as a personal representative, such as filing tax returns and pursuing litigation. Regarding who acts as the authorized successor, they are simply the successor who has qualified with the clerk for the position. Notably, the authorized successor’s term and authority are limited to six months unless otherwise extended.
The authorized successor’s primary obligation is to collect the small assets, pay creditors, and then distribute those small assets to the successors. A “small asset” is any probate personal property owned by the decedent that has a value of less than $50,000. Specifically included in the definition of small assets are several assets controlled by financial institutions, including cash, bank accounts, savings accounts, credit union accounts, certificates of deposit, brokerage accounts, stocks, mutual funds, securities, bonds, notes, proceeds of life insurance payable to the estate, deposits, and overpayments.
The Act does not change the probate and non-probate distinctions. Therefore, to the extent of a payable on death or other beneficiary designation, such asset remains a non-probate asset. As a nonprobate outside, the asset will fall outside of the scope of the Act.
Financial institutions have an obligation to pay over the small asset to the authorized successor. The Act is clear that any entity having possession of a small asset shall deliver the same to the authorized successor. To trigger that duty, the authorized successor need only present the authorized successor’s certificate and authorization issued by the county clerk. An authorized successor may institute a civil action against the holder of a small asset if the holder refuses to pay the same over. Based on such power and authority, a financial institution refusing to pay over the asset creates its own liability.
The change in the administrative process may create a problem for some financial institutions. Normally, one expects to receive letters of administration. After receiving the same, the financial institution will normally want to pay the funds to the estate of the deceased and may require the creation of an estate checking account. Neither of those actions is necessarily possible under the Act. The authorized successor does not have a letter of administration but instead has the certificate and authorization. In terms of payment, the financial institution should not simply pay or transfer the funds to the estate. Rather, to fully comply with the Act, the financial institution should pay or transfer the asset directly to the authorized successor in the authorized successor’s name.
The financial institution does have liability protection for paying the asset over to the authorized successor to the same extent as if the person was the personal representative. The financial institution also has no obligation to see the application of the small asset or inquire into the truth of any statement in the certificate and authorization.
The financial institution does have liability protection for paying the asset over to the authorized successor to the same extent as if the person was the personal representative. The financial institution also has no obligation to see the application of the small asset or inquire into the truth of any statement in the certificate and authorization.
A financial institution could likely comply with its obligation by paying the money to the “Estate of the Deceased,” but this could ultimately create liability. Such payment would work because the authorized successor has the authority to endorse any check that is payable to the decedent or the decedent’s estate. Because of the power to endorse, other financial institutions have to honor that check and endorsement under the Act. The concern is if that second financial institution will not honor the check, then is it creating liability for both financial institutions? Put another way, consider what happens if ABC Bank issues a check to “Estate of John Doe” and then the authorized successor tries to deposit it in his own bank account at XYZ Bank, which is allowable under the Act. However, if XYZ Bank ignores the Act and refuses to deposit an estate check in a personal account, would the authorized successor have a claim against both banks for refusing to pay over the small asset and accept the endorsement? XYZ Bank would clearly be in violation of the Act, and, arguably, ABC Bank is as well because it had not paid the money over to the authorized successor instead of the estate.
The Act provides a simpler and faster way to administer the estate of a deceased. By simplifying the process, the Act changes some aspects of the traditional method of probate. Those changes, such as the ability of the authorized successor to forego an estate bank account, can create confusion and ultimately liability for financial institutions. However, by following the Act, a financial institution will have the same protections as if it was dealing with a personal representative and will further assist in simplifying the administrative process.
Richard Marsh is an attorney with Flaherty Sensabaugh Bonasso PLLC in Clarksburg, West Virginia. His practice focuses on estate planning and administration and corporate representation. He can be reached at rmarsh@flahertylegal.com.
