Affidavit of Small Succession in Louisiana
What is an Affidavit of Small Succession in Louisiana? It can avoid probate in certain cases. Read on.
This is an affidavit, signed by at least two (2) people, before two (2) witnesses and a Notary Public, that can, in certain circumstances, be used in instead of a Louisiana succession (probate).
In my practice, I most often use the Louisiana Affidavit of Small Succession when someone has died, and the only thing owned of substance by the decedent was a house or other modestly valued real estate. The Affidavit of Small Succession must be signed under penalties of perjury, so you can’t lie on the form just to avoid probate. It is generally no longer than about 3 pages, and it can save a lot of time and expense, if you qualify.
The Louisiana Affidavit of Small Succession is authorized by statute in La. C.C.P. art. 3421.1. Since we have quite a high percentage of poor people in Louisiana, its obvious purpose is to help small estates avoid the costs and expense of probate. Other statues may apply, such as La. C.C.P. art. 3432, and La. C.C.P. art. 3431, etc.
How would you qualify? First, under current law (2021) the decedent must have died with assets less than $125,000 in value. If the decedent’s assets exceed $125,000, you will have to go the normal probate route. Note that this is gross value, not net value. Now, before you start saying, “Can’t I just do a Louisiana Affidavit of Small Succession and say that daddy’s $200,000 house was worth only $125,000?” Well you can, but keep in mind that if the IRS (or the Louisiana Department of Revenue) audits you after you sell daddy’s house for $200,000, they will take the position that the house had a tax basis of only $125,000, when in fact if you had gone through the regular probate process you would have said it was worth $200,000 (thereby stepping up its tax basis). After all, you said in the Louisiana Affidavit of Small Succession, a signed statement under oath, that it was worth $125,000. So, bingo, you just created a $75,000 capital gain that you and the other heirs would be taxed on. The moral of the story is: don’t lie.
The second big requirement is that all heirs who are available to sign the Louisiana Affidavit of Small Succession must sign it. So if there are 5 hears, all 5 must sign to avoid a probate proceeding. Note that at least two (2) people have to sign the Affidavit of Small Succession in Louisiana. If there is only one heir, then another person familiar with the decedent’s estate must also sign.
The third big requirement, although not mentioned in the statute, is generally that the succession should be free (or relatively free) of debt. This is because if there are relatively substantial debts of the decedent, the succession will be obligated to pay those debts. A probate proceeding is the normal route needed to pay off debts, because if there are debts, the heirs who inherit pursuant to the affidavit will be obligated to pay those debts (to the extent of the property they inherit). Another way to put this is that you don’t want a creditor of your father or mother hounding you.
There are many other things that must be sworn to in the Louisiana Affidavit of Small Succession, but the three big things above are the important ones for purposes of this article.
Sounds like a good deal to avoid probate, doesn’t it? Well it can be a good deal to avoid a Louisiana probate in certain narrow situations. But in my experience, the Affidavit of Small Succession’s application in Louisiana is limited. Most importantly because the Affidavit of Small Succession is used most often for a small home worth less than $125,000, and little to nothing else.
That is because most banks or investment account custodians will never accept a Louisiana Affidavit of Small Succession. Even though the affidavit is authorized in Louisiana in lieu of a succession proceeding (a probate proceeding), banks want the signature of a judge in a probate proceeding authorizing you to be put on a decedent’s bank account in your name (unless you happen to be the surviving spouse, then some banks generally relax their own internal rules). This is their approach even if the bank account balance is very small. So if the decedent had a bank account of any size, or had an out of state bank or brokerage account, a Louisiana Affidavit of Small Succession is not going to work for you. Generally, I would put the bank account size at no more than about $800 – $1,000 to do the affidavit procedure (because this is cash you will lose; the banks generally won’t give you access to the account with only the affidavit). There are no bright lines here, this is just my estimate.
Another reason the Louisiana Affidavit of Small Succession’s application to avoid probate is limited is that if that home needs to be sold (remember, this procedure is generally for a home under $125,000 and little else), this affidavit is a poor choice. That is because if all heirs are now owners of the home made possible by the Louisiana Affidavit of Small Succession, and one of those heirs is living in the home (or is not living in it but wants to), the only way for the other heirs to get their share of the home’s value would be to sue the heir(s) that does not want to sell (because he or she is typically living in it rent free) in a Partition by Licitation proceeding. The remedy in a Partition by Licitation is almost always the home is sold at a sheriff’s sale for cash. That cash price is usually a fraction of the home’s real value. That is, the value that someone who is purchasing on credit would pay for the home.
The only way to avoid this horrible situation is to go through the normal probate procedure and petition the judge to list the house for sale and eventually sell the house. In my experience, most judges will grant this petition (even if it is opposed) if the alternative is siblings suing one another in a Partition by Licitation proceeding, part of which is the eventual sheriff’s sale of the home.
The bottom line is that the Affidavit of Small Succession to avoid probate in Louisiana can be a useful tool in certain narrow circumstances. But don’t let your estate planning revolve around it eventually being used. It’s not a planning device. It’s a cost avoidance mechanism if the situation is right. I usually draft Louisiana Affidavits of Small Succession for those clients at rates much lower than a full blown succession, and court costs are usually saved as well.