Estate planning attorneys love to talk about the need for a plan “in order to avoid probate.” You might wonder, why? What is so bad about probate? After all, probate is just the court process after death where a judge oversees the administration of an estate.
While probate isn’t awful in every state, there are generally two main reasons you don’t want your estate to end up in probate court: time and money.
Probate Takes Longer Than You Think (More Than a Year)
The court process can take anywhere from 9 months to, well, decades, with an average estimated timeline of 1.5-2 years. While a probate spanning decades is obviously an extreme case, it does happen (and it’s not just the famous celebrity cases. I have a personal friend who tells me that the probate of her mom’s estate took eight years and was a nightmare). In California, while there are definitely exceptions depending on the particular county and court where the case is opened, it’s safe to say that you’re likely looking at a timeline of at least a year.
Why does it take so long? The simple answer is that probate is very paperwork-heavy, all required forms and documents need to be filed with the court on certain deadlines, and if something isn’t done properly or there is a mistake, you need to fix those mistakes before moving on to the next step. Court hearings are often scheduled months out due to their heavy caseload and even when you do have a hearing, often you show up only to have your case “continued” to a later date. Sometimes hearings get continued because you failed to fix an error that the court asked you to fix and sometimes hearings get continued for what seems like the dumbest or unfair reason. That’s just how it goes.
Probate Costs your Estate a Lot of Money Because of the Fees
In California, probate fees are statutory, meaning the cost to probate an estate is set by law. In other states, it may be either statutory or based on the attorney’s hourly rate, or in some cases I believe the attorney can choose.
In my experience there are three sources of probate fees: (1) the attorney fee, (2) the personal representative fee, and (3) court and other required costs.
Attorney Fee
First, there is the attorney fee. In California, the statutory attorney fee is calculated based on the size of the net market value of the estate being probated. It starts at 4% of the first $100,000, plus 3% of the next $100,000, plus 2% of the next $800,000, 1% of the next $9 million, and .5% of the next $15 million. A reasonable amount will be determined by the court for an estate worth over $25 million.
For a moderate estate of $1 million (which is very typical if you own your house in Southern California, regardless of the mortgage), your attorney fees would amount to $23,000 by the following calculation:
- 4% of the first $100,000 = $4,000
- 3% of the next $100,000 = $3,000
- 2% of the next $800,000 = $16,000
- $4,000 + $3,000 + $16,000 = $23,000
The attorney is often also entitled to extraordinary fees, which is usually an hourly fee on top of the statutory amount, for work on the probate that is considered “extra.” Extraordinary fees need to be approved by the judge. Attorneys often will request extraordinary fees when the probate involves the sale of real estate. If real estate needs to be sold in your case, expect the attorney to earn thousands of dollars more, payable by the estate.
Personal Representative Fee
The personal representative is the individual who petitions the court to open probate to administer your estate. If you nominated or appointed them in your will, they are called the Executor. If there was no will, they are called the Administrator. This is the person who often hires the probate attorney to assist them with the case, so they are usually the “client.”
The Executor or Administrator is entitled to the same statutory fee as the attorney. It is based on the same percentage calculation.
In the example from above of the $1 million dollar estate, the personal representative will be entitled to $23,000. They don’t have to take this fee if they don’t want to. Keep in mind that serving as a personal representative in a probate case can be a lot of work on top of your day job– hence the fee.
Court Costs and Other Required Expenses
Opening a court case costs money. To file the first petition for probate in Orange County costs $435. Subsequent petitions cost either $435 or $200 depending on what it is.
If Bond is required, that is an additional expense to the estate. Bond is calculated on a percentage of the estate as well. In a recent case of mine, my client got a $100,000 bond and the premium was around $500 a year.
Paying other professionals, such as a CPA to file the tax return, is an additional expense. This is not probate specific, however, as even estates that are administered through a trust instead of probate will need to pay for this.
Lastly, as with anything, ordinary administrative expenses like postage, paper, notarizations of signatures, etc. all add up.
How Do I Avoid Probate
You avoid probate by making sure all of your assets are either held by a trust or have a designated surviving joint tenant or beneficiary.
Alternatively, you avoid probate if your estate is small enough. There is a value threshold amount that pushes you into “probate” territory. In California, at the time of this writing in 2022, that threshold amount is $166,250. If your probatable estate is valued less than $166,250, it will not need to be probated at your death. In that case, your heir or beneficiary will be able to access and distribute your assets using a small estate affidavit.
