Top 3 Reasons Why YOU Want to Avoid Probate
When you pass away, your family may need to visit a probate court in order to claim their inheritance. This can happen if you own property (like a house, car, bank account, investment account, or other asset) in only your name. Although having a will is a good basic form of planning, a will does not avoid probate. Instead, a will simply lets you inform the probate court of your wishes – your family still has to go through the probate process to make those wishes legal.
Now that you have an idea of why probate might be necessary, here are 3 key (albeit not the only) reasons why you want to avoid probate if at all possible.
1. It’s all public record.
Almost everything that goes through the courts, including probate, becomes a matter of public record. This means when your estate goes through probate, all associated family and financial information becomes accessible to anyone who wants to see it. This doesn’t necessarily mean account numbers and social security numbers, since the courts have at least taken some steps to reduce the risk of identity theft. But, what it does mean is that the value of your assets, creditor claims, the identities of your beneficiaries, and even any family disagreements that affect the distribution of your estate will be available, often only a click away because many courts have moved to online systems. Most people prefer to keep this type of information private, and the best way to ensure discreteness is to keep your estate out of probate.
2. It can be expensive.
Thanks to court costs, attorney fees, executor fees, and other related expenses, the price tag for probate can easily reach into the thousands of dollars, even for small or “simple” estates. These costs can easily skyrocket into the tens of thousands or more if family disputes or creditor claims arise during the process. This money from your estate should be going to your beneficiaries, but if it goes through probate, a significant portion could go to the courts, creditors, and legal fees, instead.
By the way, statutory fees are calculated on the gross value of your estate, not the net value. To illustrate, if you own a home worth $300,000, even if you still owe a large amount to a mortgage company (say, $200,000), the statutory fees would be calculated based upon the $300,000 value.
3. It can take awhile.
While the time frame for probating an estate can vary widely from state to state and by the size of the estate itself, probate is not generally a quick process. It’s not unusual for estates, even seemingly simple or small ones, to be held up in probate for 6 months to a year or more, during which time your beneficiaries may not have easy access to funds or assets. This delay can be especially difficult on family members going through a hardship who might benefit from a faster, simpler process, such as the living trust administration process. Bypassing probate can significantly speed the disbursement of assets, so beneficiaries can benefit sooner from their inheritance.
If your assets are located in multiple states, the probate process must be repeated in each state in which you hold property. This repetition can cost your family even more time and money. The good news is that with proper trust-centered estate planning, you can avoid probate for your estate, simplify the transfer of your financial legacy, and provide lifelong asset and tax protection to your family. To learn more, call us for an appointment. Jonathon L. Petty is an experienced Estate Planning and Probate Attorney; he will be happy to strategize with you. Below you will find a California Statutory Chart surrounding the cost of Probate. Please contact our office to set up a consultation (559) 374-2223.
Cost of Probate
Executor fees and attorney fees are based on California state statute—Probate Code 10810. They are based on the gross value of the estate, regardless of the mortgages due on real property or debts owed by the deceased. With some exceptions, the value of the estate is the total of real property, cash, Certificates of Deposit, stocks and bonds, promissory notes, other investments and other personal property (jewelry, collections, household furniture, tools, etc.). Any asset that requires a beneficiary designation, e.g. retirement accounts or life insurance, that lacks a beneficiary is also subject to probate.
|Estate Value||Executor Fees||Attorney Fees||Filing Fees||Other Costs/Fees||Total Estimated Cost of Probate|
Remember that probate fees and costs are payable, even if, because of outstanding debt, the estate has a negative value. This is especially relevant in the current real estate market when the value of your home could easily be less than your mortgage balance. Additional executor and attorney fees may be ordered by the Court in the case of “extraordinary” time and effort to close the estate.