The Cost of Probate - A Comprehensive Guide
The cost of probate varies from state to state. In California, the cost can be quite high, not to mention, extremely lengthy. The cost of probate can be broken down into the following categories: 1. Court fees2. Publication fees 3. Bond fees 4. Appraisal fees 5. Personal Representative’s fees6. Attorneys’ feesSome of these fees are the same for all probates. Others are based upon the size of the estate (the fair market value of the assets).
While Court Fees can change from year to year, they are uniform across all probates. A probate will require at least two petitions (one to open a probate and a second to distribute the probate assets). Each of these petitions will cost approximately $500 in 2019. Additional petitions during the probate may also be required. Each petition is an additional $500. Besides petitions, there are other documents that must be filed with the Court. Most of these filings are $10 each. Most probates will have between $1,000 and $1,500 in filing fees, assuming it is straightforward.You will also need the court to certify the personal representative’s “Letters” which is another $25 each.
Before your initial hearing in your probate, you must give notice of the hearing to the entire world by publishing the notice of hearing in a newspaper of general circulation. The Orange County Superior Court keeps a list of the pre-approved newspapers. The cost of publication is typically $400-$600 depending on the newspaper.If you fail to give proper notice, or your petition is incorrect, you may have to republish and pay the fee again.
Before the court will appoint you as a personal representative, you will have to file a bond with a bond company. There are certain ways to avoid having to need a bond, but generally, without a Will, the Court will require a bond. The cost of the bond is like asking the cost of insurance. It depends on the size of the state, and the person being appointed. However, assuming the only asset of the probate is a single family home in Orange County, with a fair market value of $1 million, the cost is likely to be $2,000 to $5,000 per year. Most probates take more than one year in California.
Once you are appointed as a personal representative of a probate, you will have to inventory and appraise all estate assets. Some assets are appraised by you, such as cash. Other assets, such as stocks, bonds, real estate, jewelry, loans, etc. are appraised by a court appointed probate referee. The probate referee charges 1/10 of 1% of the total value of the assets he or she appraises. He or she will also charge for his or her costs, such as travel. Using the same hypothetical probate in Orange County, with a fair market value of $1 million, the appraisal fees will be approximately $1,000. Please note, it does not matter how much equity is in the property. The appraised fair market value of the home is the only thing that matters.
Personal Representative’s Fees
The Personal Representative (also known as the Executor or Administrator, depending upon the type of Probate) is paid a statutory fee depending upon the value of the estate pursuant to Probate Code section 10800. The fee is as follows:(1) Four percent on the first one hundred thousand dollars ($100,000).(2) Three percent on the next one hundred thousand dollars ($100,000).(3) Two percent on the next eight hundred thousand dollars ($800,000).(4) One percent on the next nine million dollars ($9,000,000).(5) One-half of one percent on the next fifteen million dollars ($15,000,000).(6) For all amounts above twenty-five million dollars ($25,000,000), a reasonable amount to be determined by the court.Assuming our $1 million probate, the personal representative would be paid $23,000.If the personal representative performs what the law deems “extraordinary” services, such as selling real estate on the behalf of the estate, the personal representative would be entitled to additional fees.
Like the personal representative, the attorney is entitled to a fee based upon the value of the estate. Pursuant to Probate Code section 10810, the fee schedule is the same for the attorney as it is for the personal representative. Therefore, using our $1 million probate, the attorney would be entitled to $23,000 in statutory fees. However, often times an attorney provides extraordinary services, such as assisting with the selling of a home in the probate. In that case, the attorney is entitled to fees for the additional hours worked for those extraordinary services. These fees would be on top of any fees associated with a typical real estate closing (realtor fees, title, escrow, etc.).
Although not considered fees, the attorney may also be reimbursed for various expenses related to the probate.
Based upon a $1 million probate in Orange County, the total cost of the probate could be more than $54,000. If you include the cost of selling the home, the cost could be in excess of $60,000, or 6% of the fair market value of the estate assets. As explained above, the cost is not based upon the net value of the Estate. For example, the cost would be $60,000 whether you had a $1 million home that was paid off, or a $1 million home with only $200,000 of equity. In the latter example, the probate cost would be 30% of the net value!
Avoiding Costs of Probate with Proper Estate Planning
The costs of probate can easily be avoided by proper estate planning. However, the keyword is proper estate planning. Specifically, hiring an estate planning lawyer to set up a strategy based on your needs and goals. Many of the low cost options do not assist clients with transferring assets to a Trust that avoid probate. Moreover, a poorly drafted estate plan may cost you more than the cost of probate! Always research the attorney you are working with on your estate plan. Is he or she a Certified Specialist in Estate Planning by the California State Bar? Does he or she devote his or her entire practice to Estate Planning? What is his or her experience working with clients such as yourself? These questions should all be asked in conjunction with the cost of Estate Planning.