Costs of Probate
An example of many estate plans in California:
Harry and Wendy own a modest home in San Diego, CA. The value of the home is $600,000.00 with a $350,000.00 mortgage. Harry and Wendy have two children, Steve and Debbie. Harry and Wendy have a
bout $200,000.00 in retirement accounts and another $100,000.00 in various stocks and bonds. They each also have $300,000.00 life insurance policies for each other. Harry and Wendy do not have any estate planning documents. Harry dies and shortly thereafter, Wendy passes away as well. What happens with the estate?
After Harry’s death, all the property was transferred to Wendy because they were married. At her death, Wendy now owns a $600,000.00 home with a $350,000.00 mortgage, $300,000.00 in retirement benefits and various stocks and bonds and $300,000.00 from the life insurance. Since there was no estate planning, her estate will now go into probate.
Costs for probating an estate are set by the California laws and are a percentage of the gross asset value of your estate. For example, the value of Wendy’s home for probate purposes would be $600,000.00 (the value of the home), not $250,000.00 (the equity in the home). As such, Wendy’s estate would be worth $1.2 million. The probate fees are as follows: 4% for the first $100,000.00, 3% for the next $100,000.00, 2% for the next $800,000.00, 1% for the next $9 million and 1/2 % for the next $15 million (court determines the fees for any estate over $25 million). Using this formula, Wendy’s probate fees would be $25,000.00 just for the attorney. The executor or administrator of the estate is paid using the same scale. This means that Wendy’s estate would have to pay $50,000.00 just in statutory fees which do not include special fees for the sale of assets, tax preparation and/or litigation fees. After these fees, the court will then determine who will get the money from the estate. With a property estate plan, however, the probate fees would be $0 and Harry and Wendy would decide who would inherit their estate.
Probate fees are easy to avoid. Creating a proper estate plan will save Harry’s and Wendy’s family thousands of dollars not to mention the headaches involved in probate. If you or someone you know needs an estate plan, please call us at 888-688-4363 or visit our website at www.thecplawfirm.com.