• Shawna Murray, Attorney

A Will Does Not Avoid Probate

A Will alone does not avoid probate because the probate court is required to oversee the transfer of property if you do not have a properly funded Trust. Some of the pitfalls of probate are discussed, including the possibility of multiple probates, and the actual cost of probate is detailed in this blog post.

Numerous times I have been asked, “Does a Will keep your estate out of the probate court?” The answer is a surprise to many who ask this question.

The answer to the question is “no,” a Will does not avoid probate. Unlike a properly funded Revocable Living Trust, having only a Will requires that a probate be opened in the county and state where the deceased person's property is located.

In California, a Will alone does not avoid probate (unlike funded trusts) because the Probate Court is required to oversee the transfer of property that is left in the name of the decedent. The property left in the name of the decedent requires a court order to be put into the name of the beneficiaries. The court oversees the process and this is why probate is costly, time consuming, and public.

You May Even Need Multiple Probates

If you have property only in California, then you will only need one probate. However, since probate laws are state specific, you may need more than one probate. So, if you own real estate property in other states and you only have a Will, your personal representative will have to open petitions in those other states as well. This is because California courts can only transfer the real estate located inside of California.

In addition, this need to open multiple probate cases will increase your loved one's court costs, plus it will create higher administration fees for the estate. However, a properly funded trust (i.e., where the real estate titles have been changed from your own name to the name of your trust) works nationwide. There are administrative fees that the Trust needs to pay after your death, but in California, they are significantly less than the cost of one or more probates.

Your Information Becomes Public

A Will must be lodged (i.e., filed) with the court, creditors get notified and an inventory of your estate has to be filed with the court. Court records are accessible to the public for no more than a minimal fee. Since public information has become a valuable commodity, this lack of privacy can allow anyone to look up your probate case and read your Will, find out who your beneficiaries are, and analyze all of the property left behind.

Creditors Come Out Of The Woodworks

Wills invite creditors/debt collectors to come out of nowhere. This can be very problematic for your beneficiaries who may have old, unpaid debts. Many beneficiaries with debts that are no longer collectible by lawsuit can become susceptible to new attempts at collection from debt collectors.

Since probate is not a private process, the creditors comb through the public records.  When creditors see that your beneficiary (the debtor) is going to come into an inheritance, the creditors use that information to help their debt collection of unpaid debts. Some unscrupulous debt collectors will even attempt to convince your beneficiary that they can take his/her inheritance to pay on the unpaid debt, even when the debt is so old that a court would not permit a lawsuit.

Beneficiaries who have current financial problems when your Will enters probate may be susceptible to inheritance loans. These lending companies can solicit business once the Will enters probate. The promise of a quick payment of cash in advance of the probate closing is going to cost your beneficiary dearly.

Probate Is Expensive

Trusts allow your estate to avoid unnecessary professional fees and court costs. However, you must fund the trust. This funding is accomplished by transferring your assets from your own name into the name of the trust. For example, you will need to transfer your personal residence from your name into the name  of your revocable living trust. You will also need to change beneficiary designations on annuities, life insurance, brokerage accounts, bank accounts and more. Properly funded trusts avoid probate.

However, if you only have a Will (or no will at all), then Probate Code Section 10810 has provisions for maximum allowable probate fees that can be paid to attorneys and to the personal representative/executor. The Probate Code takes into account the value of your probate estate without accounting for any liens, mortgages, or other encumbrances when determining the value of your estate. This list shows how the attorney fees and fees paid to the personal representative are based on the value of your estate. It demonstrates how probate is significantly more expensive than a trust. The maximum allowable fees are determined as follows:

4% of the first $100,000               = $4,000

3% of the next $100,000               = $3,000

2% of the next $800,000              = $16,000

1% of the next $9,000,000           = $90,000

0.5% of the next $15,000,000       = $75,000

Of course, most people do not even have $10,000,000 estates but many people in California who own a nice home and have other valuable assets so many people could easily have a $2,000,000 estate.

The Fees For a $2,000,000 Estate:

4% of the first $100,000    = $4,000

3% of the next $100,000   = $3,000

2% of the next $800,000   = $16,000

+ 1% of the next $1,000,000 = $10,000

TOTAL                      $33,000 for attorney's fees

+  $33,000 for executor/personal representative fees

GRAND TOTAL        $66,000 in probate fees

The $66,000 in probate fees does not take into account other expenses which include, but are not limited to: appraisal fees, court fees, publication fees & realtor fees (if a house needs to be sold) plus additional attorney’s fees for extraordinary services, such as litigation between beneficiaries.

I bet you would agree with me that California's probate fees can add up quickly and will cost your beneficiaries a big chunk of their inheritance.

Avoid Probate With An Estate Plan

You can avoid the high cost of probate and the other problems associated with having only a Will (as discussed above), if you have a complete Estate Plan package, which includes a properly funded Revocable Living Trust as the focus of your planning. Your beneficiaries will save a substantial amount of money and the Trust allows for privacy plus provides very important Incapacity Planning, along with many other benefits. If you would like to start a conversation about the benefits of Estate Planning, please call me or use the contact form on this page for a free consultation.

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