The Perils of Probate
Ask anyone who has had to go through the probate experience what it was like and 9 out of 10 times you hear a groan and then complaints about delays and costs. The probate process is complicated even in the best of situations. However, if you do not have your property in a living trust, your property will have to go through the formal probate in order to be transferred to your heirs and this is true even if you have a will. Even if you already have a living trust, the information below is valuable. Pass it along to someone who does not have a living trust-they will thank you.
Probate Procedures & Delays
In order to probate an estate, a number of legal documents must be prepared and approved by the court. The procedure is set in the California Probate Code and requires that numerous petitions, notices and orders be filed and approved by the judge. A formal probate requires a notice of probate be published in a newspaper three times before the initial hearing date. Notice must be mailed to all heirs, beneficiaries, alternate executors as well as any person who is disinherited in the will. An inventory and appraisal must be prepared and a probate referee appointed to review the amounts declared and/or make his own appraisals of value. If assets are to be sold by the estate, often approval from the judge for the sales amount must be obtained.
Probate is Expensive
In addition to the documents and notice requirements that are set by the law, the costs of probate are also set by law. First, the cost of filing the matter with the court is $485.00, if other petitions are required there might be additional filing fees of up to $435.00. Additionally, the estate pays for the services of a “probate referee.” His fee can be hundreds of dollars or more depending on the size of the estate. Attorneys’ fees are set by the law, too. For the ordinary probate services, the attorneys’ fees are based on the value of the estate as follows:
- 4% of the first $100,000
- 3% of the next $100,000
- 2% of the next $800,000
- 1% of the next $9,000,000
- 1/2 of 1% of the next $15,000,000
So, the regular attorneys’ fees for an estate of just $1,000,000 are $23,000 and could be more if the probate required more work that what is considered normal.
Trust vs. Probate
A trust, established during a person’s lifetime to pass property to heirs that has most of the assets owned by the trust, will avoid probate. Although the successor trustee (who acts like the executor) will likely need the services of an attorney and a CPA to transfer the assets to the heirs when the person who established the trust dies, the costs and delays are much less than those associated with probate.