On a $500,000 probate case, fees paid to attorneys, the court, and third parties would probably add up to between $13,890 and $26,890. Probate is often more complex, more stressful, and more time consuming in cases involving large estates (say $5M or more).
“Probate” comes from one of those Latin words that lawyers love to use. Basically it means “to prove.” When you leave a will, someone has to prove to a court that the will is valid. (It’s possible to avoid probate by putting your estate into a living trust. But I discussed that in several 2010 and 2011 blog articles.)
There are three key ways a California probate attorney like me helps clients:
- By consulting with family members
- By going to court with clients or on their behalf (and preparing all of the necessary court paperwork and consulting with the executor on a range of issues that may arise)
- By providing administrative help such as arranging for maintenance or sale of a property (note: this is not one of our “duties” so we bill extra for this service)
Some fees in probate cases are paid to us, some are paid to the court, and some are paid to outsiders. Here is a breakdown:
Fees paid to the Court
- There is a $395 fee payable to the Court for each petition you have to file. In simple probate cases you only have to file two petitions: the initial “Petition to Probate” the estate and a Petition for Final Distribution.
- For more complex cases, you may have to file additional petitions.
- You’ll also have to file a Notice of Probate in a newspaper. You are required to use only certain newspapers, and their charges will vary. Expect the notice to cost anywhere from $100 to $450.
Fees paid to the attorney
Our ordinary attorney’s fee -- called a “statutory” fee -- is based on the fair market value of the assets in the estate. The fee doesn’t take liabilities into account. The probate code establishes a sliding scale:
- 4% of the first $100,000
- 3% of the next $100,000
- 2% of the next $800,000
- 1% on the next $9,000,000
- 0.5% on the next $15,000,000
- A reasonable fee thereafter
Say the only asset in an estate is a $500,000 house, and there is a $400,000 mortgage on it. The statutory fee would be $13,000 based on the full $500,000 value:
- 4% of the first $100k = $4,000
- + 3% of the next $100k = $3,000
- + 2% of the remaining $300,000 = $6,000
- Total: $13,000
Fees paid to the executor
The executor is entitled to charge the same fee as the probate lawyer charges. Often the executor is a family member who will waive the fee. (Most family members start out saying “it’s my family; I’m not going to charge." But in many cases they change their minds after they see how much work is involved and that no one else is helping.)
All of the assets that the decedent owned need to be “inventoried” and “appraised”. The Court appoints the appraiser, whose fees are 0.1% of the value of the appraised assets (so in a $500,000 estate the appraisal fee would be $500).
Here’s how the fees would add up on a simple $500,000 probate case.
- $395 Court filing fee
- $100 publication fee
- $500 appraisal fee
- $395 fee to file Petition for Final Distribution
- $13,000 attorney's statutory fee (see above example under "statutory fee")
- Possibly a
$13,000 executor’s statutory fee
- Total: $14,390 to $27,390
Special circumstances or needs
The above example assumes that everything goes smoothly. If problems pop up, it will take extra money to deal with them. For example, it may turn out that the decedent hadn’t filed any tax returns in years. Or it may be necessary to sell the real estate. For dealing with extra matters, the attorney and the executor are allowed to each charge “extraordinary fees.”
(The difference between “ordinary” services and “extraordinary” services is that the court gets to decide whether the “extraordinary” services were necessary or not and also whether the proposed fee for them is reasonable or not.).
Hiring an experienced probate attorney
If you need probate legal services, consider hiring my firm. Please ring my office at 650.325.8276, or get started here at this website.
If you need free resources, check out the answers I post on Avvo, the items in our Resource Room, and more articles on probate at this blog.
All the best,
I frequently answer questions on other sites about estate planning, wills, trusts, and probate law. Here is one question I recently answered.
Q: Can creditors force me to sell dad's assets to pay off his debts? Specifically:
- Can the bank holding the mortgage force me to sell his car and give them the money?
- Can the credit card companies that he owes force me to sell his car to pay off his debt?
A: If your father's "probate estate" -- that is, the assets that do not have beneficiaries named on them or are not held in his trust -- are worth less than $100,000 then you can transfer title to yourself by using the "small estates affidavit".
The California DMV has its own small estate affidavit. As you will see when you read the affidavit, you are required to "indemnify" anyone who transfers property to you against all claims. That means that if a credit card company sues to get the car or the proceeds from its sale after the DMV has transferred it to you, you are agreeing that you will "assume" responsibility for the debt.
So, yes, it is possible that the credit card companies can force you to sell the car to pay off the debts. The mortgage company may or may not be able to do the same thing... in California, the answer depends on whether the mortgage loan was:
- "Recourse" - meaning that the borrower is personally liable for repayment, or
- "Non-recourse" - meaning that the borrower does not have any personal liability.
By law in California, the loan your father took out to purchase the house originally was "non-recourse". If he refinanced, though, the loan is probably (but not necessarily) a "recourse" loan.
Getting legal help
Talk with a Bay Area attorney experienced in fiduciary counseling to determine what’s right for your situation. I am a board certified estate planning and probate attorney specializing in asset protection for Palo Alto -area clients, and the surrounding areas -- and can help you develop the best strategy.
Additional resources that may help you
Here are related blog articles that might help you:
All the best,
Here is another example (adding to the one in my last post and pulled from several in my newest guide) of a person with relatively complex financial circumstances, who would benefit from hiring an experienced estate planning attorney.
Meet Edna, mother of four with a $7M family home in Portola Valley
Edna wants all four of her children to share equally in her estate. But she wants her son to have the $7 million family home.
An experienced estate planning attorney will recognize some of the pitfalls in that scenario, such as the financial burden of taking over a mortgage and property taxes on an expensive home.
Unless Edna has a $28MM estate, after estate taxes she’s not going to be able to give one son the home and treat the other 3 children equally ($7MM x 4 = $28MM) – unless:
- The son can qualify for a $5,250,000 mortgage (and then, by the way, only the 1st million would be income tax deductible interest), or
- She has a boatload of other assets
The planner also will talk to Edna to find out how each of the children handle money, making sure that the plan specifies ways to distribute the estate that help each child do his or her best.
Few estate planning lawyers have the knowledge and expertise to avoid the pitfalls in these situations
There is a great deal that must be considered in situations like this. Fortunately, Edna carefully chose the right estate planning attorney. That meant making an investment, since top shelf legal guidance is not cheap. But she gained the peace of mind that comes with knowing that distributions from her estate will help her children.
Getting a plan tailored to your needs
Edna is a made up person. But if your circumstances are anything like hers, I do recommend that you retain an attorney familiar with helping families protect their assets and do advanced estate planning.
Here are guides I've published that might help you:
All the best,
Many parents, in planning their estates, add an adult child's name to the title of their home, bank account or other assets.
"Joint tenant" approach
The most common way to do this is to make the child a “joint tenant with full rights of survivorship”. This mean that when one joint owner dies, the other joint owner automatically acquires sole ownership of the property.
Theoretically, adding your child's name to the deed to your home or to bank accounts is a good move because it's a way to avoid probate. But doing so could create problems for you for a number of reasons.
Gift tax problem
If you make your child the joint owner of your home, for instance, the IRS could treat this transfer as a gift. IRS guidelines permit you to make a gift of $13,000 a year to one person (note that this is the amount you can gift in 2010 and 2011). If the half interest in the home is worth more than $13,000, which in 99.9% of cases it is, the gift tax provisions of the IRS code will be triggered and your child will be required to pay gift taxes.
Attacks by creditors
If your child has financial problems or develops financial problems at any time after you add his name to the title, his creditors may be able to levy on (take) the house to satisfy the debt. Because you are joint owners, your child's creditors could only get at his half interest in the equity. However, if one of your child's creditor's levies on the house, it will be sold at auction, you'll be paid one half of the net proceeds, and the balance will go to pay down or payoff the debt.
If your child files bankruptcy, there's a chance that you could lose the house. If the home has a substantial amount of equity, the bankruptcy trustee can seize the house and sell it. You and your child would receive the cash equivalent of whatever exemption you're entitled to under the laws in your state, any mortgages on the property would be paid off, and the balance would be distributed to your unsecured creditors on a pro rata basis.
If your child is married and you transfer an interest in your home or bank accounts to her, it's quite possible that her spouse will have a marital interest in the property. If your daughter gets divorced, you may be required to buy her spouse out of his interest in order to maintain ownership of the house. He might even be able to force the sale of the house.
If your child is involved in an accident and is uninsured or under-insured and gets sued, the plaintiff in the lawsuit may be able to get a lien against your house. If this happens, you'd be unable to sell or refinance the property without paying off the lien. If the lien is sizable, it could potentially eat up all of your equity. If your house is free and clear, the judgment creditor could have the sheriff levy on the house. If this happens, the house will be sold and the net proceeds distributed to the judgment creditor.
Loss of control
If you add your child to the deed or financial accounts, you lose control of your property and your money. If you want to sell or refinance your home, your child will have to consent. Moreover, if you decide you want to remove your child from the deed, he will have to sign a quitclaim deed. If he refuses to sign it, you may find yourself embroiled in a legal battle that could cost you thousands of dollars.
When it comes to bank accounts, remember that joint account holders have equal access to the account. This means that your child could withdraw money from the account without your permission. We'd all like to believe that our children would never do this, but I've seen it happen and it can wreak havoc on the parent's finances and on the parent-child relationship.
On the opposite end of the spectrum is the child who is so concerned about the parent's finances, that she begins policing the parent's spending. Whether or not your child's concern is justified, it's your money and you're entitled to spend it in any way you see fit.
A revocable living trust can help avoid probate
If one of your goals is to avoid probate, the best way to do it is to establish a revocable living trust. A revocable living trust is an agreement or contract between the settlor (the person who establishes the trust) and the trustee (the person who manages the trust). The trustee has a fiduciary duty to manage the trust according to the terms of the trust document and must not act in a way that would harm the trust or the beneficiaries of the trust. If you name yourself as the trustee, you will maintain control of your property during your lifetime and will also be able to provide for the distribution of your property after your death. You will also name a successor trustee who will take over management of the trust upon your death. You will have the ability to change the terms of the revocable trust or to revoke it in its entirety at anytime during your lifetime.
Consider the worst that can happen
As you can see, the choice you make could truly impact your home and bank accounts. In deciding whether to add your child's name to the deed to your house or to your bank accounts, it's important to consider the worst thing that happen – losing your house or your money because of your child's bad credit, negligence, or divorce, fighting with your child over your desire to refinance or sell the property, or having your child “borrow” money from your account without your consent. A little consideration and advanced planning will save you a lot of stress and heartache. Remember estate planning requires prudence and practicality, rather than shortsightedness and sentimentality.
Getting an expert in your corner
Before making any estate planning decisions, it's important that you consult with an experienced estate planning attorney. Because there may also be tax consequences associated with your estate planning decisions, you should also consult with an experienced tax attorney.
All the best,