Probate

What is Probate?

     Probate is the legal process initiated after the death of a person by which the court appoints a representative for the estate of the deceased person and then supervises the taking of an inventory of the deceased person’s assets, the payment of creditors and taxes due, and oversees the ultimate distribution of inheritance to the beneficiaries under the will or to the deceased’s heirs.

Probate Challenges:

   ·   Probate Costs

        The costs for a typical probate include:

          1.   Attorneys’ Fees
          2.   Personal Representative’s Fees
          3.   Court filing fees (about $190);
          4.   Publication of Notices in Newspaper (about $100-$200);
          5.   Appraisal of non-cash assets ($1 per $1,000 of assets);
          6.   Bond for the Administrator (or Executor) of the Estate.

          1.   Attorney’s Fees

          Attorney’s fees for ordinary probate services are based on the gross value of the assets in the estate (before deduction for debts, mortgages, taxes, etc.) plus income and other gains received on sales during probate. Under California Probate Code Section 10810 the attorney fees are calculated as follows:

          1.   Four percent on the first fifteen thousand dollars ($15,000);
          2.   Three percent on the next eighty-five thousand dollars ($85,000);
          3.   Two percent on the next nine hundred thousand dollars ($900,000);
          4.   One percent on the next nine million dollars ($9,000,000).

           In addition to these fees, the court may allow additional compensation for extraordinary services performed by the attorney or attorney’s paralegal. Very common services such as the time spent to negotiate and close escrow on the sale of a house in probate or litigating claims of creditors are considered “extraordinary services” and subject to additional attorney fees.

         2.   Personal Representative’s Fees

               The personal representative of a deceased person (called administrator or executor) is also entitled to compensation based on the value of the estate in an amount equal to the attorney’s fees.

Example: An estate consists of a house with the fair market value of $600,000 (which has an existing mortgage of $400,000) and $200,000 in stocks, cash and other assets. In order to calculate the attorney’s fees, the court will ignore the mortgage, credit cards balances, and other debts. Therefore, the “gross value” of this estate is $800,000.00. Attorney fees for ordinary services for probating this estate is about $17,150. The ordinary fees for the personal representative will also be about $17,150. The Probate costs will be an additional of approximately $1,200, or more. Therefore, total fees and costs for probating this estate may run over $35,000, or close to 10% of the net value of the estate.

The following graph provides examples for attorney fees, executor fees, and estimated total probate costs (only for ordinary services not including extraordinary services) for estates ranging in gross value from $100,000 to $2,000,000:

Example: Aunt Sally has passed away leaving only her house worth $400,000.00 and the money in her bank account which is about $10,000.00. The outstanding mortgage balance on her house is $300,000. Aunt Sally also owes $15,000 on her Visa. The gross value of Aunt Sally’s estate is $410,000. The fees and costs for probating her estate is based on this gross value and will be approximately $20,000.00. This is true even though Aunt Sally’s net estate is only $95,000.00. Therefore, close to 21% of Aunt Sally’s estate will be spent on probate fees and costs, instead of going to her kids or other beneficiaries.

·   Time Delay

     The time required to complete a probate will typically range from approximately six months to over a year. During this time period, there may be restrictions on the distribution of any assets to the beneficiaries and a court order may be required for any partial distributions. This restriction could bring severe havoc to the lives of your survivors, if they have immediate need for money to pay rent, food, education, etc.

·   Privacy

     Probate court files are public record. Any person may be able to read your will and find out about the assets and wealth you have left behind. The names and addresses of the people who will receive those assets are also generally available in the files. For these reasons, the probate court files are often a source of potential customers for solicitors, telemarketers and others selling products and services. Unfortunately, unscrupulous con artists also have access to these records and they may target vulnerable widows, widowers, or young adults who have received substantial assets from a loved one.

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