The Hidden Costs of Probate
California law requires that unless in trust, all decedents' estates over $100,000 be administered through probate court proceedings. Most people know that both the executor's and attorney's fees are determined by the fair market value as of the date of death.
With a gross value of $100,000, your estate will pay the executor and attorney a total of $8,000. For a $250,000 estate, the total probate fees are $15,000. If the estate is appraised at $1,000,000, the fees total $42,300. In addition, the estate pays other costs, such as filing and appraisal fees. What most people don't realize however, is that probate costs your beneficiaries in many other ways.
Public Proceedings
As with all court proceedings, probate files may be inspected by any person. Often, these files are used to create leads for insurance and real estate salesmen. Creditors and people with potential claims against the estate can learn what the estate owns, and how much each item is worth. Your beneficiaries may receive unwanted contacts at precisely those times when they are most vulnerable.
Delays in Distributions
A probate proceeding must comply with many legal hurdles. Creditors and potential heirs must be notified, claims resolved, taxes paid. These proceedings take a minimum of six months before the court will allow final distribution. More typically, probate will last upwards of a year. In one famous case, Marilyn Monroe's estate, the probate took eighteen years. Until the final court order, your beneficiaries must wait for their inheritance.
Creditors and other claims
If someone claims that the decedent owed them money, the estate must resolve that claim before the probate is complete. Remember that those claimants will know how much the estate is worth. This gives the claimants an advantage in knowing how long and hard to fight. The estate may be at a disadvantage because the decedent's testimony is not available.
Probate also allows other types of claims, such as challenges to your proposed distribution. These may come from relatives or beneficiaries. Recently, a local widow was forced to distribute one-half of her husband's estate to his distant relatives. The husband did not even know of their existence.
Disputes over who is in charge
Family members often disagree over who should be appointed by the court to administer the estate. Competing petitions may be filed. Old family patterns of jealousy, mistrust, and envy can cause permanent damage. In many ways, this can be the greatest cost of all. Rather than creating a legacy that supports family relationships, the stress of court proceedings can cost families.
There are several ways to leave a legacy, and support your independence. Make sure that you learn of all of the costs and benefits in choosing the best avenue for you and your family.
