Question about Probate cost

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paulsiu
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Question about Probate cost

Post by paulsiu » Mon Apr 21, 2014 1:41 pm

My mom asked me to look into estate planning now that she's moved to a different state. It appears that in California, her estate will split equally among her children, so she wouldn't need a will unless she wants to change that distribution or indicate who it should go to if all her children passes away before her. On the other hand, I notice that the probate cost is rather high. According to the California site (and also Boglehead), the cost is

4% on the first $100,000
3% on the next $100,000
2% on the next $800,000
and so on.

So 1 million estate would end up with a probate cost of $23,000.

Question: Are these cost associated with hiring a lawyer? If someone were to fill out paper forms, would they have to pay the same cost?

Since her asset isn't all that large, hiring an estate lawyer for about $2-4K to create a living trust would be an overkill. I'll look into setting up TOD on her accounts.

Paul

chaz
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Re: Question about Probate cost

Post by chaz » Mon Apr 21, 2014 1:59 pm

Look at www.nolo.com and www.legalzoom.com for reasonable legal forms.
Chaz | | “Money is better than poverty, if only for financial reasons." Woody Allen | | http://www.bogleheads.org/wiki/index.php/Main_Page

Sparklebunny
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Location: East Coast

Re: Question about Probate cost

Post by Sparklebunny » Mon Apr 21, 2014 2:07 pm

No, those are not the costs for the lawyer. Lawyers cost extra if you need/want their help (disclosure that I'm an estate planning and probate lawyer).

Using a revocable trust will eliminate the need to pay those probate fees/taxes. And it shouldn't cost $23k to set up by any means. Spending $2-4k on a revocable trust will be well worth it.

sscritic
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Re: Question about Probate cost

Post by sscritic » Mon Apr 21, 2014 3:05 pm

Actually, they are.
(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 of 1 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.
That is, assuming we agree that the word lawyer can be used in place of the word attorney. That doesn't mean the same schedule isn't used for other purposes, but those are the statutory fees for the lawyer/attorney.

P.S. Just because they are statutory doesn't mean you have to pay them. :)

P.P.S. I could give you the actual reference to the CA Probate Code, but anyone with a serious interest should learn how to search for stuff like this.

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Eric
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Location: Texas

Re: Question about Probate cost

Post by Eric » Mon Apr 21, 2014 3:38 pm

sscritic wrote:P.S. Just because they are statutory doesn't mean you have to pay them. :)
Yes. I don't practice in California, but have also heard that some California lawyers will accept a lesser fee. For example, a quick Google search turned up this:
a California law firm wrote:Most attorneys charge the "statutory fee" for handling a probate. . . . Our firm's practice is to charge a reasonable hourly rate for the hours that we spend on the case which, in most cases, is less than the statutory fee. Our fees are negotiable and in almost all cases are deferred until the end of the probate proceeding.
(I know nothing about this firm, so do your due diligence first if you want to hire them. I cite this only to support sscritic's observation that the statutory fee isn't mandatory.)

bucksfan2
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Re: Question about Probate cost

Post by bucksfan2 » Mon Apr 21, 2014 3:49 pm

paulsiu wrote:My mom asked me to look into estate planning now that she's moved to a different state. It appears that in California, her estate will split equally among her children, so she wouldn't need a will unless she wants to change that distribution or indicate who it should go to if all her children passes away before her. On the other hand, I notice that the probate cost is rather high. According to the California site (and also Boglehead), the cost is

4% on the first $100,000
3% on the next $100,000
2% on the next $800,000
and so on.

So 1 million estate would end up with a probate cost of $23,000.

Question: Are these cost associated with hiring a lawyer? If someone were to fill out paper forms, would they have to pay the same cost?

Since her asset isn't all that large, hiring an estate lawyer for about $2-4K to create a living trust would be an overkill. I'll look into setting up TOD on her accounts.

Paul
If you could get a living trust for around $2-$4K and avoid probate all together, why not do it?

sscritic
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Re: Question about Probate cost

Post by sscritic » Mon Apr 21, 2014 3:51 pm

Eric wrote:I don't practice in California, but have also heard that some California lawyers will accept a lesser fee.
Not only that, but the code itself provides an exception: the will.
(a) Except as otherwise provided in this section, if the
decedent's will makes provision for the compensation of the attorney
for the personal representative, the compensation provided by the
will shall be the full and only compensation for the services of the
attorney for the personal representative.
But then there is an exception to the exception:
(b) The personal representative or the attorney for the personal
representative may petition the court to be relieved from a provision
of the will that provides for the compensation of the attorney for
the personal representative.

sscritic
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Re: Question about Probate cost

Post by sscritic » Mon Apr 21, 2014 4:07 pm

bucksfan2 wrote: If you could get a living trust for around $2-$4K and avoid probate all together, why not do it?
Because there is a small estate affidavit in CA that avoids probate. That's good for $150k (depending), so if you use beneficiary designations on everything else, you don't need to probate anything. Of course if you own a house in CA, $150k isn't that much. [My memory is that Paul's mom did buy a house, but I am not sure.]
The current gross fair market value of the decedent's real and personal property in California, excluding the property described in Section 13050 of the California Probate Code, does not exceed one hundred fifty thousand dollars ($150,000).
from the form

So here is my question for you: why pay $2-$4k for a trust when it might cost you nothing to avoid probate? Vanguard has a TOD* option, as do many of the places where you put your money.

Note that even if you put most of your stuff in the trust (see section 13050 for this and other exclusions), you still have room for $150k of "incidentals."

*
The Vanguard Transfer on Death Plan
Simple. Name individuals, trusts, or organizations/charities as your beneficiaries.
Probate. This is avoided.

sscritic
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Re: Question about Probate cost

Post by sscritic » Mon Apr 21, 2014 4:09 pm

P.S. While other states have TOD deeds for real estate, CA is not one of them.
https://www.nolo.com/legal-encyclopedia ... er5-1.html

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pjstack
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Location: Harbor City, CA

Re: Question about Probate cost

Post by pjstack » Mon Apr 21, 2014 4:35 pm

sscritic wrote:P.S. While other states have TOD deeds for real estate, CA is not one of them.
https://www.nolo.com/legal-encyclopedia ... er5-1.html
Yes, that's true. We almost had a law that permitted TOD for houses, but it became over-complicated in the legislature and failed passage.

I don't (now) have a trust but I have designated everything but the house as Transfer On Death which obviates the need for a trust. The house is Joint Ownership with my wife.

As a side note, in California you can also register your vehicles as transfer on death which can make disposition of same easy.
pjstack

Sparklebunny
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Re: Question about Probate cost

Post by Sparklebunny » Mon Apr 21, 2014 5:49 pm

You're right - I misread the initial post. I can't imagine that $23k would be an ethically reasonable fee for many estates. But better to avoid the issue all together.

sscritic
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Re: Question about Probate cost

Post by sscritic » Mon Apr 21, 2014 6:26 pm

Actually, I was holding out the best part. The real fees are double that, or $46,000. After you pay the lawyer, don't forget to pay yourself. Of course, if you use a professional executor, not yourself, that adds up to real money. [Did I forget to mention that if you want to know this stuff, you really have to read the code? :) ]
(a) Subject to the provisions of this part, for ordinary
services 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 of one 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 value 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.
However, if you are a lawyer yourself, you can't double dip.
Notwithstanding any provision in the decedent's will, a
personal representative who is an attorney shall be entitled to
receive the personal representative's compensation as provided in
this part, but shall not receive compensation for services as the
attorney for the personal representative unless the court
specifically approves the right to the compensation in advance and
finds that the arrangement is to the advantage, benefit, and best
interests of the decedent's estate.
P.S. I actually dropped a hint earlier:
That doesn't mean the same schedule isn't used for other purposes

Spirit Rider
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Re: Question about Probate cost

Post by Spirit Rider » Mon Apr 21, 2014 6:59 pm

I guess I will add this to another reason I am glad I don't live in California.

I have been unfortunate to have been involved in five probates over the past ten years. These have ranged from mid-five figures to mid-six figures. They have ranged from fairly simple with no real estate involved to fairly complex with charities, bequeaths, residual beneficiaries, real estate, and testamentary trusts.

In no case did we hire a probate attorney to run the entire probate. 90% of the effort is filing forms, mailings to interested parties, selling or transferring property, liquidating accounts, paying expenses, etc. In all cases the executor (a family member) declined compensation. The forms are all online in fillable PDFs. The probate clerks are very helpful with filling out the forms, procedural matters, and what the judges like to see. They can not and will not give legal advice. The local bar association produces a pamphlet describing the process and steps necessary. The local probate attorneys are very helpful about letting you do the leg work and providing legal advice as necessary. Legal fees have ranged from several hundred to a few thousand.

sscritic
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Re: Question about Probate cost

Post by sscritic » Mon Apr 21, 2014 7:05 pm

Spirit Rider wrote:I guess I will add this to another reason I am glad I don't live in California.

I have been unfortunate to have been involved in five probates over the past ten years. These have ranged from mid-five figures to mid-six figures. They have ranged from fairly simple with no real estate involved to fairly complex with charities, bequeaths, residual beneficiaries, real estate, and testamentary trusts.

In no case did we hire a probate attorney to run the entire probate. 90% of the effort is filing forms, mailings to interested parties, selling or transferring property, liquidating accounts, paying expenses, etc. In all cases the executor (a family member) declined compensation. The forms are all online in fillable PDFs. The probate clerks are very helpful with filling out the forms, procedural matters, and what the judges like to see. They can not and will not give legal advice. The local bar association produces a pamphlet describing the process and steps necessary. The local probate attorneys are very helpful about letting you do the leg work and providing legal advice as necessary. Legal fees have ranged from several hundred to a few thousand.
Why do you think it is different in CA? What part of "Just because they are statutory doesn't mean you have to pay them" was confusing?

[OK, maybe not the fillable PDFs.]

The fact that you wrote the following indicates that there is an expectation of compensation for an executor.
the executor (a family member) declined compensation
Are there statutory fees in the states in which you operated (although I guess it wasn't you, it was the uncompensated family member)?

sscritic
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Re: Question about Probate cost

Post by sscritic » Mon Apr 21, 2014 7:24 pm

My guess is that probate lawyers in rural CA cost less per hour than probate lawyer in LA or SF. The same may be true where you live. CA lawyers may indeed be more expensive than lawyers in your state(s) (for divorce, for criminal defense, as well as for probate), comparing rural to rural and major metro to major metro. But if you want to compare costs, compare non-statutory costs to non-statutory costs, not statutory costs to non-statutory costs (apples, oranges, that sort of thing).

indexmeasap
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Re: Question about Probate cost

Post by indexmeasap » Mon Apr 21, 2014 8:56 pm

A similar question was asked about CA probate costs vs. revocable trusts - bsteiner and Eric (estate planning lawyers) gave their responses:

http://www.bogleheads.org/forum/viewtop ... r#p1911498
bsteiner wrote:...Probating the Will is generally a small part of the work in an estate administration. Most of the other work is the same either way. You still have to value the assets, select appraisers, deal with the appraisers, review drafts of appraisals, deal with the assets, deal with the beneficiaries, decide which assets to distribute to whom and when, decide how best to use the deduction for the administration expenses, select a fiscal year for the estate, review drafts of fiduciary income tax returns, coordinate with the accountant regarding the fiduciary income tax returns and the final income tax return, if there's a revocable trust decide whether to make the election to treat the trust as part of the estate for income tax purposes, deal with the retirement benefits, deal with the IRA custodian, prepare the estate tax returns (though not in California on $2 million), deal with any U.S. Savings Bonds, etc. You still have to pay for the other work.

We handle estates on a time basis. Whether $33,000 to administer a $2 million estate is high or low depends on the particular estate, and the people involved.

It might be helpful if someone in California could comment on how much work is involved in probating the Will and on any tasks directly related to the probate of the Will (not counting any of the other work that has to be done as a result of the decedent's death).
Eric wrote:I completely agree. When people say "probate costs X," they really mean "everything required to settle a deceased person's affairs costs X." Most of the latter costs will be incurred with a living trust, too -- at least in most states. I've handled complex estates where the total legal fees were into the six figures, of which only a few thousand might have been avoided by using a living trust.

That said, an attorney friend in California, whose ethics I trust (I used to practice with him), tells me that the California probate system is fairly expensive. Not because of the supposed "statutory fee," which is negotiable, but because it's cumbersome and takes more effort to navigate than what you find in most states. He generally recommends that his clients get living trusts. By contrast, when he practiced with me here in Texas, he generally told his clients not to bother.
As stated by other posters, it appears there are fees in addition to the probate costs/living trust creation costs if you hire a lawyer to help with the estate administration process.

Spirit Rider
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Re: Question about Probate cost

Post by Spirit Rider » Mon Apr 21, 2014 9:35 pm

sscritic wrote:Why do you think it is different in CA? What part of "Just because they are statutory doesn't mean you have to pay them" was confusing?

[OK, maybe not the fillable PDFs.]

The fact that you wrote the following indicates that there is an expectation of compensation for an executor.
the executor (a family member) declined compensation
Are there statutory fees in the states in which you operated (although I guess it wasn't you, it was the uncompensated family member)?
The general custom here is for executors/personal representatives who are family members or friends not to accept compensation, only expenses.

Actually, I was executor for three out of the five. The only probate fee that applies in most cases is a $220 filing fee.

There are no statutory executor or attorney fees, only that they be "reasonable and customary", and must be approved by the probate court.

Topic Author
paulsiu
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Re: Question about Probate cost

Post by paulsiu » Tue Apr 22, 2014 7:17 am

Thank you everyone for your help. Currently, my mom do not own any real estate, and currently no car. She owns some of the usual bank accounts, brokerage accounts and IRA's. Based on what I read, she should be able to set up transfer upon death on most of the account and I believe IRA skips probate as well if beneficiaries are named.

Paul

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