Probate is the legal process that takes place after someone dies. It involves court proceedings that prove that a deceased person's will is valid, it identifies and inventories the deceased person's property, verifies the value of property through appraisals (if needed), it pays the deceased person's debts and transfers the deceased person's assets to the people who inherit them. This process can be long, costly, and confusing.
Typically, probate involves paperwork and court appearances by a lawyer. The lawyers, personal representative (executor), and court fees are paid from the estate property, which would otherwise go to the people who inherit the deceased person's property.
Some states, like California, have statutes (laws) that determine what the attorney and the executor of an estate may charge. Other states, like Colorado, simply state that the fees must be reasonable, without specifying what the reasonable amount would be and that the rate is determined based on several factors, including attorney's expertise and experience, the novelty and difficulty of the case, the results obtained, and the costs involved.
As an example, California Probate Code Section 10810-10814 states:
10810. (a) Subject to the provisions of this part, for ordinary services the attorney for the personal representative shall receive compensation based on the value of the estate accounted for by the personal representative, as follows:
(1) Four percent on the first one hundred thousand dollars ($100,000).
(2) Three percent on the next one hundred thousand dollars ($100,000).
(3) Two percent on the next eight hundred thousand dollars ($800,000).
(4) One percent on the next nine million dollars ($9,000,000).
(5) One-half percent on the next fifteen million dollars ($15,000,000).
(6) For all amounts above twenty-five million dollars ($25,000,000), a reasonable amount to be determined by the court.
(b) For the purposes of this section, the value of the estate accounted for by the personal representative is the total amount of the appraisal of property in the inventory, plus gains over the appraisal value on sales, plus receipts, less losses from the appraisal value on sales, without reference to encumbrances or other obligations on estate property.
In addition to the attorney fees, the personal representative can also charge the same amount.
To more clearly illustrate this, let us assume the following facts:
A person dies with a will, owning:
Home value: $1,000,000
Cash/Investments: $ 250,000
Personal Property: $ 100,000
401k/IRA: $ 500,000
Probate Assets: $1,350,000
Non-Probate Assets: $500,000 (401k/IRA typically have a designated beneficiary and avoid probate)
$100,000 ... 4% for the Attorney; 4% for the Personal Representative ($8,000)
$100,000 ... 3% for the Attorney; 3% for the Personal Representative ($6,000)
$800,000 ... 2% for the Attorney; 2% for the Personal Representative ($32,000)
$350,000 ... 1% for the Attorney; 1% for the Personal Representative ($7,000)
Total probate fees for the Attorney and the Personal Representative (not including court costs) would likely be $53,000.
Different states offer different methods to avoid probate before a person dies, not after. Probate rarely benefits your beneficiaries, and it always costs them both money and time.
Deemer Law Group can help in California, Colorado, Missouri, Montana, Nebraska, North Dakota, and Wyoming with your probate questions.