In estate planning circles, the word “probate” often comes with a starkly negative connotation. Indeed, for many people—especially those with larger estates—financial planners recommend trying to keep property out of probate whenever possible. However, the probate system was ultimately established to protect the property of the deceased and his/her heirs, and in a few cases, it may even work to an advantage. Let’s look briefly at the pros and cons of going through probate.
While in certain situations a probate proceeding can be the most effective manner of distributing a decedent’s estate [for instance, if there is a large amount of contention between beneficiaries, it may be advisable for a successor trustee to commence a court-controlled probate process to limit personal liability], in California, it generally should be avoided absent extenuating circumstances.
The Pros:
For some estates, especially those in which no will was left, the system works to make sure all assets are distributed pursuant to state law. Here are some potential advantages of probating an estate:
1. It provides a trustworthy procedure for redistributing the property of the deceased if no will was left.
2. It validates and enforces the intentions of the deceased if a will exists.
3. It ensures taxes and claimed debts are paid on the estate, so there’s a finality to the deceased person’s affairs, rather than an uncertain, lingering feeling for the beneficiaries.
4. If the deceased was in debt, probate gives only a brief window for creditors to file a claim, which can result in more debt forgiveness.
5. Probate can be advantageous for distributing smaller estates in which estate planning was unaffordable.
The Cons:
While probate is intended to work fairly to facilitate the transfer of property after someone dies, consider bypassing the process for these reasons:
1. Probate is a matter of public record, which means personal family and financial information become public knowledge.
2. There may be considerable costs, including court, attorney, and executor fees, all of which get deducted from the value of the estate.
3. Probate can be time-consuming, holding up distribution of the assets for months, and sometimes, years.
4. Probate can be complicated and stressful for your executor and your beneficiaries.
5. You have no control over the distribution of your property after you pass, whereas by planning for distributions during your lifetime you have full control over where your assets ultimately end up.
6. In California, because the fees paid to the Probate Attorney and Executor are defined by the California Probate Code, you do not have much control over the cost of settling your estate once you pass away.
7. Probate is generally more expensive than creating and maintaining a revocable trust during your lifetime. As way of example, the following asserts the combined fees paid to the Probate Attorney and Executor in California for taking your estate through the probate proceeding after you die.
a. If on the date of your death the value of your gross estate (“Gross Estate”) is:
i. $150,000
1. The Statutory Attorney & Executors Fees are:
a. $11,000
b. Gross Estate:
i. $250,000
1. The Attorney & Executors (“Probate”) Fees are:
a. $16,000
c. Gross Estate:
i. $500,000
1. Probate Fees are:
a. $26,000
d. Gross Estate:
i. $750,000
1. Probate Fees are:
a. $36,000
e. Gross Estate:
i. $1,000,000
1. Probate Fees are:
a. $46,000
f. Gross Estate:
i. $1,250,000
1. Probate Fees are:
a. $51,000
g. Gross Estate:
i. $1,500,000
1. Probate Fees are:
a. $56,000
h. Gross Estate:
i. $1,750,000
1. Probate Fees are:
a. $61,000
i. Gross Estate:
i. $2,000,000
1. Probate Fees are:
a. $66,000
j. Gross Estate:
i. $2,500,000
1. Probate Fees are:
a. $76,000
k. Gross Estate:
i. $3,000,000
1. Probate Fees are:
a. $86,000
l. Gross Estate:
i. $3,500,000
1. Probate Fees are:
a. $96,000
m. Gross Estate:
i. $5,000,000
1. Probate Fees are:
a. $126,000
As you can see, the cost of creating your estate plan during life is almost always going to be less than the cost of the fees that will ultimately be paid to the Probate Attorney and Executor if when you die you do not have an estate plan, or you solely have a Will without a properly funded revocable trust. Remember, a Will is not effective until after it goes through a probate proceeding.
Bottom line: While probate is a default mechanism that ultimately works to enforce fair distribution of even small estates, it can create undue cost and delays. For that reason, many people prefer to use strategies to keep their property out of probate when they die.
A talented attorney whose practice focuses solely on estate planning can help you develop a strategy to avoid probate, ensure that your post-death desires are realized, and make life easier for the next generation. If you want to ensure that your family is cared for, please click here to schedule your complimentary Estate Planning Strategy Call with San Francisco’s premier estate planning attorney, Matthew J. Tuller.
