You have probably heard a lot about avoiding probate, and using other estate planning tools instead of a will. There are some very good reasons to keep your estate assets out of the probate process if possible, and with some planning it is fairly easy to avoid.
What is Probate?
The first thing to understand is that probate is a court supervised process of distributing the assets in your will. If you have a will, you must have it probated in order to legally transfer your assets after death. You name an executor in the will who will oversee the asset distribution once it is approved by the court.
This can be contrasted with setting up a trust for your assets, which is actually a present transfer with distribution controlled by the terms of the trust. The legal transfer already took place, so there is no need for any court proceedings.
How Much Does Probate Cost?
There are some court fees associated with probate, but the real cost is the attorney’s fees and executor fees. In California, those fees are generally determined by statute based on a percentage of the estate’s value:
Estate Value % for attorney’s fees Up to $100,000 4% Next $100,000 3% Next $800,000 2% Next $9 million 1% Next $15 million .5%
So, for an estate with $300,000 in assets, the attorney’s fees will be $9000, even if it is just a matter of filling out some simple forms and showing up in court. Since many Californian’s main assets are real estate, it is not too hard to imagine attorney’s fees of $10,000 or more when it goes through probate.
As you think about the cost of probate, you can see that setting up a trust instead can save your heirs a lot of money by avoiding these fees. Of course, you still have to pay an attorney to draft the trust, but that will be far less that the mandatory probate fees.
The other thing to remember is that the probate process can take from 12-24 months, and during that time the heirs will not have access to estate assets. This is one good reason to set up an estate plan for any real estate when possible.
If you have questions about avoiding probate, setting up trusts and other estate planning techniques, please contact the attorneys at Shoup Legal.