What is Probate?

Put simply, probate is the formal court process of collecting a person’s belongings, paying their outstanding debts, and distributing the assets that are left over to their heirs. When someone dies all of their assets need to be collected and distributed to the people that will inherit them. Certain assets, such as real estate and bank accounts with a certain amount of money, generally cannot be distributed without a court order. It is during this probate process that the court will issue an order providing for the distribution of the property.

In a probate process, the court will first appoint a person that is in charge of understanding all of the assets that a deceased person leaves. That person will also be in charge of paying any debts that the deceased person may have had using the assets left behind. Finally, the person will distribute the assets and provide an accounting to the court.

Why Should I want to Avoid Probate?

There are two main reasons why it is advisable to create a plan so that your estate can avoid probate: 1) the length of time it takes to go through probate; 2) the expense involved with probate. Of course, there are other reasons that you may want to consider. The reasons for avoiding probate are not so much for you as they are for the people that you leave behind- they are the ones that will have to deal with the time and expense associated with probate, but you can help them avoid it.

Probate can take anywhere from six months to multiple years (if there are issues with the probate). This is because probate is a court procedure and multiple filings and hearings are necessary to go through probate. While the probate procedure is happening the assets may not be sold.

The second reason for probate avoidance is the expenses involved. An executor must be appointed to be in charge of the procedure. And, usually an attorney needs to be involved because this is a court procedure that has specific rules and statutes that must be followed. Both the executor and the attorney are entitled to fees. These fees are set by law – meaning the State of California has already decided how much the fees will be and this is what the court awards. The fees are taken from the assets of the deceased person before any of the assets can be distributed.

The fees are a percentage of the total amount of assets the estate owns without consideration of any debt on the property. Lets take for example a simple estate that consists of just one house. The house is worth $400,000.00 and there is a $200,000.00 dollar mortgage on the property. In this case, the debt that is on the property is not considered. The required fee for the attorney and the executor would be $11,000.00 for each.

Specifically, the fees are 4% of the first $100,000 in assets, 3% of the next $100,000, 2% of the next $800,000, and 1% of the next $900,000. Additionally, court fees and expenses are usually several thousand dollars and appraisal fees can also add up.

Here are some examples: (note that these are just examples and do not include the court fees or other costs involved).

Gross Value of the Estate	Attorney Fees	Executor Fees	Total
$100,000	$ 4,000	$ 4,000	$ 8,000
$ 250,000	$ 8,000	$8,000	$ 16,000
$ 400,000	$ 11,000	$ 11,000	$ 22,000
$ 500,000	$ 13,000	$ 13,000	$ 26,000
$ 750,000	$ 18,000	$ 18,000	$ 36,000
$ 1,000,000	$ 23,000	$ 23,000	$ 46,000
$ 1,250,000	$ 25,500	$ 25,500	$ 51,000
$ 1,500,000	$ 28,000	$ 28,000	$ 56,000
$ 2,000,000	$ 33,000	$ 33,000	$ 66,000

As you can see, these fees can get costly. The best way to avoid them is to plan ahead!

Another reason why you may want to avoid probate – probate is a court process and all of the filings are public! That means that people can go to court and look up all the information regarding this estate, information which your family may not want to disclose!

There are ways to avoid the cost and expense of probate and an estate plan can help you find the best way for your particular situation. Of course, there are people for whom avoiding probate may not be an issue because they do not have enough assets or their assets are already titled to avoid going through a court process. I will give more of this information in future blog postings.