Often, a client will call to say a relative died with a lot of debt and few assets: a checking account, maybe a small savings and a boatload of debt.

We go over the situation and I explain that we can collect up to $100k of assets in a deceased’s own name without a probate using a small estate affidavit.

Good, good…they say… tell me more.  But…  I say (there’s always a but)… there is a slight problem in that someone has to sign the small estate affidavit and swear that all debts already have been paid.

Usually this means that the heir has to use his own money to pay the debts.  No one wants to front the money to pay debts, so the heirs just abandon the account and do nothing to collect it.

The small estate affidavit works well to collect straggler assets left in a deceased;s name, but not when there is a lot of debt.

The small estate affidavit in Illinois was just amended. It now provides a listing of the priority of creditors and allows the creditors to be paid directly from the funds in the deceased’s name. But whoever signs the small estate affidavit is now REALLY on the hook for any unpaid debts because they have to agree to pay back any and every creditor who is NOT paid (including attorney’s fees). This is the language in the new small estate affidavit  (read this and weep):

  “I understand that the decedent’s estate must be distributed first to satisfy claims against the decedent’s estate as set forth in paragraph 7.5 of this affidavit before any distribution is made to any heir or legatee. By signing this affidavit, I agree to indemnify and hold harmless all creditors of the decedent’s estate, the decedent’s heirs and legatees, and other persons, corporations, or financial institutions relying upon this affidavit who incur any loss because of reliance on this affidavit, up to the amount lost because of any act or omission by me. I further understand that any person, corporation, or financial institution recovering under this indemnification provision shall be entitled to reasonable attorney’s fees and the expenses of recovery.”

 So those in Illinois signing a small estate affidavit to collect assets for a “negative” estate should be extra careful because there is big time liability should the debts not be paid.