“I don’t understand why hiring an attorney is so expensive.” This is a common statement uttered when faced with the initial sticker shock of having legal work performed. While it is definitely a valid concern, it’s also worth noting that the cost of legal work is relative. In this article we’ll look at the cost of probating an estate.
What is probate?
West’s Encyclopedia of American Law defines probate as “the process of proving a will is valid and thereafter administering the estate of a dead person according to the terms of the will.”
The “process” depends upon what state the person that passed away primarily resided in. The person who passed away is referred to as a “Decedent”. We’ll be using that term in this article moving forward. Many states adhere to a standardized process known as the Uniform Probate Code or UPC but California being California, is one of the states that has its own process. It’s worth noting that if the person in question owned property in multiple states, probating of those assets will fall under each respective state’s rules and multiple probate proceedings would likely follow. If that is a possible scenario in your future, please do yourself a favor and consider strategies such as creating and funding a trust, in order to avoid probate. This strategy will save you unneeded time and headaches in the future. In the meantime, let’s just focus on California probate rules.
The first question to answer is does the Decedent have assets subject to the probate process? If the asset has properly designated a beneficiary with the institution holding the asset, that asset will generally pass to the beneficiary without probate and without court involvement (exceptions to this are distributions to minor children and predeceased beneficiaries).
If there are assets subject to the probate process, is the gross value (regardless of any loans on the property) of those assets less than $166,250? If yes, they will avoid a formal probate process. The rules for this simplified process are different for different assets, for example, real property in particular has a more formalized process than tangible personal property.
Next, does the Decedent have a will? If a will cannot be located, then the Decedent’s property will be distributed pursuant to the “intestate succession” rules established in the California Probate Code. (Quick note – “intestate” means that a Decedent does not have a will, “testate” means the Decedent does have a will. Now go study for that bar exam, you understand legal language!) Intestate succession laws are why I always say “If you don’t have an estate plan, the state of California has one for you.” When you create your own estate plan, whether that be a will or a trust, you are choosing to opt out of the State’s estate plan of intestate succession.
At the 10,000 foot level, assuming the Decedent is intestate and has no will, the distribution of his/her property will play out differently based upon three different scenarios (attorney disclaimer – these are simplified examples to which there are always potential exceptions; do not rely solely on them to determine a course of action):
- Decedent is married: Community property subject to intestate succession will first distribute to the Decedent’s spouse and the Decedent’s sole and separate property will be divided in a specified process among the Decedent’s spouse and children.
- Decedent does not have a spouse: Property would go to the Decedent’s children. It is important to note that any distribution to minor children will likely require appointment of a guardian by the court, even if there is a surviving parent, and the property would be received by the children at age 18; not always an ideal situation.
- Decedent does not have a spouse or children: Property would go to his/her parents, then brothers and sisters, then nieces and nephews. It goes down the line of relatives from there.
Assuming that a will for the Decedent is located, the next question to ask is if the will is valid or not? Elements that would invalidate a will include: it was created under fraud or undue influence, it’s been altered such that its provisions have been revoked, it wasn’t witnessed properly, or the testator was legally incompetent at the time the will was created. The validity of the will is determined by the probate court after it has been submitted for filing. We’ll get to that step next.
So far so good? It’s time to head off to the courthouse! The person responsible for the disbursement of the Decedent’s assets (we’ll call this new person who would typically be related to the Decedent the “personal representative” just for simplicity sake but they could also be referred to as the “administrator” when the isn’t a will, or an “executor” when there is a will) will need to file with the probate clerk the Decedents original will (and codicils if there are any) and a petition to admit the will to probate and to grant Letters Testamentary (with a will) or Administration (without a will). Letters Testamentary or Administration is a document that the probate court will provide authorizing the appointed Personal Representative to take control of the Decedent’s estate.
We’ve simply completed a filing of the will with the probate court in the county where the Decedent resided with a request of said court to be given control of assets. Sounds fairly easy right? It actually can be if all of the rules, timelines, and notifications are followed. As an example: when a will is filed with the court, notification must be provided to persons having interest in the probate (i.e. – relatives of the Decedent) so that they can ensure that they are properly entitled to receive their share of the assets if appropriate or that they have the ability to contest the will if they have proper standing to do so.
However, this is just the beginning, the Personal Representative of the estate must follow very strict rules throughout the administration of the estate, or face economic or criminal repercussions if they do not. These steps include creditor notification, inventory and appraisal of all assets, requests for court approval for certain actions taken during the process, notices of proposed action, and an accounting of all transactions taken in the probate process, to name a few. The process generally lasts 9 months to a year. I have seen some probates finish in as little as 5 months and as long as 4 years. It is not a simple process to go through due to the potential for error and this is where it is cheap insurance to retain the assistance of an attorney to help navigate the ins and outs of the process.
When it comes to probating an estate, there are a number of costs associated with doing so: Probate fees – Aside from the court filing fees (a minimum of $870), newspaper publishing (at least $300), inventory and appraisal costs to a court appointed Probate Referee (one-tenth of 1% of the assets valued plus costs), there are also attorney (if one is being utilized to facilitate the probate process) and personal representative fees that will be owed. California Probate Code dictates the fees that are due in a probate process. The fee for the attorney and the personal representative in California is a percentage of the estate’s gross value. There are online calculators that you can play with to see what that fee might actually cost you but as an example, if we have a house worth $650,000 (regardless of whether there is a mortgage or not), the probate fee paid to the attorney AND the personal representative would be $32,000, with each party receiving $16,000 each. This fee is calculated as follows: 4% of the 1st $100,000 ($4,000), 3% of the 2nd $100,000 ($3,000), and 2% on the remaining $450,000 ($9,000). Adding the $4,000, $3,000, and $9,000 brings the total to $16,000. So yes, probating an estate is an expensive proposition that could have been financially mitigated by having a fully funded trust in effect upon death but sometimes that option isn’t available.
A Note on Privacy
Since a will is lodged into the court as a matter of public record, ANYONE can go request a copy of the will from the local courthouse to see who the beneficiaries are. Additionally, since the probate process is managed through the courts, a majority of the information from the probate case is available to the general public. This includes a detailed inventory of all assets of the estate, names and addresses of all beneficiaries, a listing of who you owed money to at your death, and the values of each of the assets in the estate. By contrast, when a Decedent’s assets are distributed through a trust, the process is private. Only the beneficiaries and certain interested parties are privy to the contents of the trust and the assets that it contains.
In summary, what are some of the key takeaways from this article?
- Probate is expensive – avoid it if at all possible!
- Inform yourself of notification timelines and adhere to them before attempting to probate the estate – this will save you from making mistakes down the road.
- Follow court orders related to the probated estate – they are in place for a reason!
- If you don’t have a will, you’re going to be subject to probate. If you only have a will, you’re still going to be subject to probate. The best way to avoid probate and maintain control of your assets, even after you die, is through a fully funded trust.