The REAL Cost of Probate!
An extremely common, perhaps the most common, question we receive in our office is how much does probate cost? While the question itself is simple, the answer can become complicated very quickly and may even shock some people if they are not already familiar with probate or dealing with court systems already. While most people are primarily asking about attorney fees, the truth is that there is a lot more that goes into determining the real cost of probate.
Included Fees
Firstly, we need to establish what goes into the calculations to determine the cost of probate. There are typically 5 categories of fees in a probate action:
1. Court Fees
These are fees one need to pay to a court while going through the probate process. This includes the opening filing fee to begin the probate (which is hovering around $465 in California at the time of writing and can change from county to county), a fee too close the probate that typically matches the opening filing fee, and fees to file and obtain certified copies of official court documents – something you will need to do as you will need a certified copy of the court order granting authority to someone to manage the estate as the court will not provide one outright free of charge.
2. Fees Paid to Third Parties
These fees encompass any costs required to utilize the services of others besides the court or the attorney. The most common of which are a notice of publication of death fee, probate referee fee, and escrow fees if real property is sold during the probate. Keep in mind, probate requires a public notice of the first hearing and requires the services of a probate referee to appraise assets in a probate meaning these costs, while not paid to the court directly, can be considered required court costs in practice.
3. Attorney Fees
Attorney fees are handled differently based on the state in which the probate is undertaken. However, in California, attorney fees are set by the California Probate Code and determined by a formula based on the gross value of the estate – something we have illustrated below. Just know that no matter what attorney you go to for a probate in California, their fee will be the same whether they be in Yorba Linda, San Francisco, or Redding.
4. Executor/Administrator Fees
Executors and Administrators serve the same function on a probate – they are the court-appointed managers of the estate who are granted the authority to consolidate the assets, whether it be closing accounts, selling property or distributing various assets. The legal distinction between the two is not relevant here however, as regardless of their title, they are entitled to a fee for their services. In California, this fee is the same as what the attorney is entitled to.
5. Creditor Fees
Finally, while not necessarily a fee, if the decedent, whose estate is going through probate had outstanding debt, then those creditors are entitled to repayment from the estate. While this process will be overseen by the court so long as they file a creditor claim, it is another instance where the value of the estate will be decreased before any distributions can be made to the family.
Attorney & Executor/Administrator Fee Calculations
As discussed, attorney and executor fees are determined by a formula based on the gross value of the estate as illustrated below:
4% of the first $100,000
3% of the next $100,000
2% of the next $800,000
1% of the next $9,000,000
.5% of the next $15,000,000
Reasonable fee by court approval of estates over $25,000,000
Keep in mind, this is how the attorney’s fee is calculated. The Executor is entitled to receive the same fee the attorney receives, not a share of what the attorney received. This means that the fees could double very quickly. Additionally, please note that while an estate needs to be worth over $166,250.00 in California to be subject to a probate (as of the date of this article), the fee calculation still begins at $100,000.
Below are some example calculations:
Estate Value: $500,000
Attorney Fees: $13,000
Executor Fees: $13,000
Approximate Court & Third-Party Fees: $1,500
Potential Fees: $27,500
Estate Value: $350,000
Attorney Fees: $10,000
Executor Fees: $10,000
Approximate Court & Third-Party Fees: $1,500
Potential Fees: $21,500
Estate Value: $1,000,000
Attorney Fees: $23,000
Executor Fees: $23,000
Approximate Court & Third-Party Fees: $1,500
Potential Fees: $47,500
Estate Value: $750,000
Attorney Fees: $18,000
Executor Fees: $18,000
Approximate Court & Third-Party Fees: $1,500
Potential Fees: $37,500
Gross vs. Net Value
Finally, as indicated above, these calculations are based on the gross value of the estate, not the net value. Creditor payments do not reduce the fee calculations for attorneys and executors. For example, if a home valued at $350,000 has a mortgage thereon for $250,000, then the net value of the estate is $100,000. However, as the gross estate value is $350,000, the attorney and executor would both still be entitled to a fee of $10,000 each. Those fees, along with the court and third-party fees would leave only $78,500 to be divided among the family, after payments to any other outstanding creditors.
The Takeaway
This brings us back to the question posed to us of is how much does probate cost? The short answer is a lot. There are many parties who will need to be paid in a probate case and those various fees and costs can significantly impact the final inheritance to loved ones. Aside from matters such as time (probates can take approximately 9-12 months at minimum), privacy (probates are public hearings), and headache, cost is the principal reason our office strongly encourages our clients to plan their estates by utilizing a revocable living trust at the center to avoid probate entirely. A revocable living trust can avoid all the trappings of a typical probate at only a fraction of the cost.
