How to avoid huge fees and leave your heirs with most of your Will…
If you create a will with clear and reasonable intentions for your heirs, your estate can be lawfully charged enormous fees leaving your heirs with only a portion of what was originally intended.
When a person dies, estates go through a court system called probate which is an estate administration process for distribution as adjudicated by the Probate Court where fees, charges and systematic processes become mandatory.
In addition to extensive fees and charges, the length of time for probate depends on the size and complexity of the estate, and the local rules and schedule of the probate court.
Save tens of thousands of dollars …
A well drafted and properly funded living trust via Estate Planning is not likely to require this same managed process through the Probate Court. And a successor trustee will administer the distribution of the assets on behalf of the estate – saving up to tens of thousands of dollars in fees and charges.
If you elect for a simple will, the most common steps for the probate process are as follows:
- filing of a petition with the probate court;
- issuance of notice to heirs under the will or to statutory heirs if no will exists;
- issuance of a petition to appoint an executor in the case of a will, or an administrator for an estate;
- creation of a comprehensive inventory and an appraisal of estate assets by the executor or the administrator;
- assess and disburse payments of any estate debt to rightful creditors;
- engage the sale of estate assets;
- pay outstanding and applicable estate taxes;
- proceed to final distribution of assets to heirs.
What happens if someone objects to a will?
A will contest often occurs during the probate proceedings and is costly to litigate. Contesting a will requires legal standing in order to raise objections. This often applies to children, friends, relatives or anyother prior will agreements. Sometimes contests occur over the selection of the executor.
Does probate administer all property of the deceased?
Probate is the process of title transfer from the name of the deceased to the names of beneficiaries, and some assets are ‘non-probate assets’ which includes property in which you own title as joint tenants with right of survivorship. Such property passes to co-owners by operation of law and are not required to proceed through probate.
Other non-probate assets include retirement accounts such as IRA and 401(k) accounts where there are designated beneficiaries; life insurance policies also with defined beneficiaries; and bank accounts with “Pay on death” (POD) declarations or noted as ’in trust for” with designated beneficiaries.
Any property owned by a living trust is exempt from probate because legal title passes to successor trustees and avoids probate.
Can an executor be paid?
Executors can be reimbursed for legitimate expenses directly incurred by managing the estate and statutory fees are available in various states including California. It is possible that an executor can be held liable for mismanagement of estate assets and so executors are advised to engage an attorney and an accountant to assist with procedures and the appraisal of assets for the Probate Court.
Does probate cost?
Costs vary according to the value and the complexity of the estate, the will, the location of property, and if any disputes over debt should occur. Other fees arise from professional accounting, attorney charges, executor reimbursements, appraisals costs, and court fees. A rough guide is around 2% to 7% of the estate value, but this is only a general estimate.
Statutory compensation: Attorneys and executors may each be entitled the following statutory compensation in the state of California.
Reference: California Probate Code section 10810-10814
Oct 27th, 2015.
Assets valued to the first $100,000: 4% statutory compensation applies;
second $100,000: 3%;
next $800,000: 2%;
next nine million dollars: 1%;
next fifteen million dollars: 0.5%;
above twenty-five million dollars: a reasonable amount as determined by the court.
As an example: An estate consisting of a home to the value of $300,000 would result in statutory attorney fees of $9,000 and if an executor is entitled to statutory fees, another $9,000 for the executor.
Extra fees may also consist of probate filing fees, probate referee fees for property appraisals and newspaper publication fees.
How long can probate take?
Most estates are settled in 9 to 18months but litigation and complications based on locations of assets and time for appraisals will extend the process.
How can I avoid probate and lengthy disputes and court processes?
A living trust through Estate Planning will clearly define your estate and when properly documented, will easily pass all assets on to your chosen trustees. Trustees can be family or other beneficiaries.