Avoiding Probate: The Key to Protecting Your Estate
Probate is often shrouded in myth, evoking images of endless bureaucratic hurdles and piles of money disappearing in legal fees. Unfortunately, these myths aren't far from the truth—probate can be both time-consuming and costly. The good news? There's a simple and affordable way to avoid it: set up an estate plan.
What is Probate?
Probate is the court-supervised process used to settle your financial matters after you die. In California, probate is required if your estate has more than $150,000 in assets passing through a will or if you die intestate (without a will or any estate plan). During probate, assets are identified, inventoried, and appraised. Debts and taxes are paid, and the remaining assets are distributed to the beneficiaries.
At first glance, this might seem fair and straightforward—after all, the court is involved to ensure everything is done properly. However, the issues with probate quickly become apparent:
The Two Major Problems with Probate
Lengthy Process
Probate is slow. Depending on the size and complexity of your estate, it can take months or even years to complete. In California, a simple probate proceeding usually takes 8 to 12 months.Expensive
Probate is costly. Attorney and court fees add up quickly. Fees are set by statute and are based on the gross value of the assets in the estate. For example, if your home is worth $1 million (even if the equity is only $100,000), probate fees are calculated on the full $1 million value. The fees are as follows:4% of the first $100,000
3% of the next $100,000
2% of the next $800,000
1% of the next $9 million
Additionally, both the attorney and executor are entitled to these fees, so you essentially multiply them by two. Don’t forget about filing and appraisal fees. For a $1 million estate, even if there's a sizable mortgage, probate fees can easily reach around $46,000 or more. That's a hefty sum, especially when these costs can be avoided with a simple estate plan.
Additional Complication: Ancillary Probate
If you own property in another state, a separate "ancillary" probate proceeding may be required in that state, further complicating and delaying the process.
How to Avoid Probate
Probate is time-consuming and expensive, but it's easy to avoid with a well-structured estate plan. A revocable living trust, when funded with your valuable assets, typically allows you to bypass probate altogether. In addition to a trust, your estate plan may include beneficiary designations on accounts and other tools designed to keep your estate out of probate. The more you can reduce fees, the more your heirs will receive.
Get Help Protecting Your Estate
Don’t let probate eat up your estate. Read more about the services we offer or contact our office for a free consultation. We can review your assets and help determine which estate planning tools will best protect your estate from unnecessary probate proceedings.