THE HIGH COST OF PROBATE
In other articles, I have discussed the many benefits of estate planning and why it should be done to avoid probate. This article will give you an idea of just how costly probate court is, in terms of time, money, loss of control to make decisions about your assets and public exposure. The term Probate is used to describe a court proceeding to distribute the property of a deceased person. Probate can occur when someone dies intestate (without a will) or testate (with a will but no trust). Here is a very, very brief overview of how a probate action in court works (in a basic scenario) there are, of course numerous issues and complications which can change a probate proceeding:
First papers must be filed with the court opening up the probate. There is of course, a filing fee that must be paid (presently, in Los Angeles County as of 2020 that fee is $465);
Next, the court will set a hearing to determine an administrator or executor–often this is not contested, but there can be a dispute between various persons as to who gets to hold this position;
After an administrator is appointed, he or she will have numerous responsibilities, including an inventory and appraisal (gathering all the information and assets as to what the decedent owned). Often times assets have to be appraised by a court-appointed appraiser who must be paid by the estate. The administrator is also required to publish notice in a newspaper and notify those relatives, heirs and possible beneficiaries of the probate proceeding (and they may have a right to appear and contest various proceedings), as well as finding potential creditors of the decedent and giving them notice of the probate proceeding as well. In many circumstances, the administrator/executor is also required to post a bond to protect the assets of the probate estate;
In a perfect scenario, the inventory and appraisal is done right, there are no creditors and nothing is contested by any party. Also issues such as the sale or real property occur (in a court auction), and the whole process sails through smoothly. Then the court issues an order to the administrator to distribute the remaining assets after payment of the administrator and attorney’s fees (see below).
In reality, opening and closing a probate in a one year period would often be considered a perfect, everything goes right situation, and rarely happens.
Now that we understand what happens (assuming no bumps in the road, as a contested probate matter can take years to resolve), let’s examine some of the costs involved:
1. A filing fee of $465 (LA County 2020)
2. Payment to a court appointed appraiser (cost can vary [0.1% of gross property appraised])
3. Costs of sending notice and publishing in a newspaper (cost can vary typically $200-$700)
4. Cost for the administrator/executor to post a bond
5. Administrator an legal fees paid by statute (California Probate Code §§ 10800-10801) as a percentage of the value of the estate are as follows (as of 2020):
4% of the first $100,000 of the gross value of the probate estate
3% of the next $100,000
2% of the next $800,000
1% of the next $9 million
.5% of the next $15 million
For example, an estate of just $100,000 in value would result in an attorney/executor fee of $ $8,000 ($4,000 to the executor and $4,000 to the attorney), while an estate of $500,000 would result in an attorney/executor fee of $26,000 ($4,000 + $3,000 + $6,000 x2) ($13,000 to the attorney and $13,000 to the executor). An estate of $1,000,000 (not all that hard to do in Los Angeles County) would result in an attorney/executor fee of $46,000 ($4,000 + $3,000 + $16,000 x2) ($23,000 to the attorney and $23,000 to the executor).
Understand, this is a statutory fee, guaranteed by law whether there is one hour or one hundred hours of work. Also, the attorney and executor can also be entitled to special fees (known as extra-ordinary fees) for doing work over and above what is typically required (for example selling a home or defending a creditor lawsuit all entitle the attorney to additional special compensation as well). Put another way, the probate of an estate with a home valued at $1,000,000 and nothing else could easily generate $50,000 or more in probate fees, taking that value directly out of the pocket of your heirs.
Unfortunately, court proceedings are often slow. There are hundreds, if not thousands of probate cases and each one needs review by the court. There are also statutory time frames involved regarding notice and the simple need to have your case placed on calendar before the court. Errors, delays and appearances by other interested parties can slow the proceedings down even further. There is no other way to say it, your heirs will have to wait a long time to finally receive their inheritance, when the court finally issues the order for the administrator or executor to pay what is left of the value of the estate.
Court files are public documents. Your administrator/executor is required to list your assets on the inventory and appraisal filed with the court. Often times, property like real estate is sold by the court at a public auction. Much of your life and many of your assets are placed in a public court file which anyone can access at any time. Most people would prefer this information not be made public.
Probate is also often a loss of control as to where your assets are distributed. While a probated will can often solve this issue, an improperly done will, or dying with no will at all (intestate) will result in the court applying legal statutes to determine where and to whom your property should be distributed (California Probate Code § 6400 et seq.). Usually your property is distributed to a spouse, children and/or grandchildren, else, your closest living relative. This is a distribution you might not want, but barring proper legal documentation, this is how the law determines to whom your property will be distributed.
But, This Can All Be Avoided With Proper Estate Planning
A proper trust and will, prepared by a licensed, experienced attorney, as part of an overall estate plan can wholly avoid probate, saving your heirs time, money and allowing you control over how your assets are distributed and keeping your information private and out of public files. My other articles discuss this process and its many uses.
There are many other benefits of estate planning. Schreiber & Schreiber offers free consultations allowing you to speak with a licensed attorney to discuss the many benefits of preparing your estate plan to protect your loved ones.
Eric A. Schreiber is a partner of the law firm of Schreiber & Schreiber, Inc., and is a licensed California attorney (SBN 194851). This article is for informational purposes only and should not be construed as legal advice or the creation of an attorney-client relationship. Copyright 2020 all rights reserved.