Can Your Loved Ones Afford to Go Through Probate?

You may have heard that it’s best to avoid probate because it's expensive and time-consuming. If you don’t have a proper estate plan in place, such as having a living trust, your estate may end up in probate. Probate in California is a court supervised process that is used to wind up a person's legal and financial affairs after death and is usually overseen by probate lawyers.  In general, the greater the value of your probate assets, the higher probate will cost. 

You want to make sure your loved ones are provided for and not have to worry about their inheritance being tied up in court and having to pay a big chunk of the inheritance to attorneys' fees, court costs, etc. But how much does it cost to go through the probate process? 

First of all, both the attorney and the personal representative (executor or administrator) are entitled to fees from your estate. The fees are determined by state law and based on a percentage of the gross estate value. (There are no deductions on loans or set-offs). Then, there are other fees such as court costs, publication costs, accounting, appraisal fees, bond fees and other expenses. A typical estate may incur $1,000 to $3,000 in court costs alone and other mandated fees. After adding all the fees and costs, probate can cost anywhere from 3% to 8% of your assets that could have been included in your distribution to your beneficiaries. 

How much are the fees paid to the attorney and personal representative?
In California, the statutory fees for the attorneys and personal representative are broken down as follows: 

• 4% on the first $100,000 in assets
  
• 3% on the next $100,000 in assets
  
• 2% on the next $800,000 in assets
  
• 1% on the next $9,000,000 in assets
  
• 0.5% on the next $15,000,000 in assets
  
• A reasonable fee thereafter
  

For example, if your only asset in your estate is a $500,000 house, the statutory fee would be $13,000 based on the full $500,000: 

• 4% of the first $100,000 = $4,000
  
• 3% of the next $100,000 = $3,000
  
• 2% of the remaining $300,000 = $6,000
  
• TOTAL: $13,000 
  

This total amount doubles to $26,000 if the estate has to pay both the attorney and the personal representative. 

Sometimes, the personal representative may waive his or her fees if it's usually a family member, but he or she may change their mind after they realize how much work and time is involved. And the fees are based on the gross value of the estate. So if there is a mortgage and the heir wishes to sell the property, the inheritance would be even less. 

On the other hand, a properly created and maintained living trust avoids probate. Your successor trustee winds up your financial matters, pay your last bills, and distributes your property according to your trust provisions without going to court and having to pay a significant amount in fees to the attorney and personal representative.