What is Probate, and Why Is Avoiding It In California So Important?
Probate is a legal proceeding which is used to wind up a person’s legal and financial affairs after they pass away. If you haven’t done any estate planning, your estate may have to pass through probate. If you have a will, your estate may still have to pass through probate. Why is this such a bad thing?
Probate is expensive, often difficult, and may take a long time. California Probate Code Section 10810 sets out the maximum fee attorneys can charge for probating an estate. This fee is:
Four percent on the first one hundred thousand dollars ($100,000). Three percent on the next one hundred thousand dollars ($100,000). Two percent on the next eight hundred thousand dollars ($800,000). One percent on the next nine million dollars ($9,000,000). One-half of 1 percent on the next fifteen million dollars ($15,000,000). For all amounts above twenty-five million dollars ($25,000,000), a reasonable amount to be determined by the court.
What’s that all mean?
- $100,000 estate will pay a $4,000 fee
- $200,000/$7,000
- $300,000/$9,000
- $400,000/$11,000
- $500,000/$13,000
- $750,00/$18,000
- $1,000,000/$23,000
The first kicker to all of this (yes there is more than one kicker!) is, the fee is calculated without regards to any loans or liabilities on the assets. If you are single and pass away owning a house worth $500,000 with a mortgage of $250,000, it does not matter. The fee will be calculated on the $500,000 amount. The second kicker? The executor and the attorney is each entitled to the full amount of the statutory fee. So that $500,000 estate may be subject to a maximum of $26,000 in fees for the executor and attorney alone. Of course either party may waive that amount and accept a lower fee. Or they may not.
There are several ways to avoid probate, establishing and funding a revocable living trust is one of them. Also, estates of less than $100,000 may skip probate as long as no real estate is involved. If there is real estate, it must be valued at less than $20,000 – good luck with that in California. You may also transfer property to a surviving spouse outside of probate, and there are certain assets which are not included in your estate which include retirement plans (IRA, 401(k), pensions), life insurance not payable to the estate, and any joint tenancy accounts.
There may be some unique exceptions where probate would be desirable, such as disputes between heirs whereby a Judge’s oversight and control may be needed. In most cases however probate in California is a very onerous, public and costly process.
