There is a misconception out there that estate taxes are what trusts are there to avoid. In reality, the big expense for most children inheriting from their parents is probate. You can save your heirs a lot of money and time by having a proper plan in place.
What is probate?
First of all, what is probate? Probate is the official court supervised process of distributing the “estate” of a person who has passed away. Probate starts with filing the will (if there is one) with the court, notifying the potential heirs, and appointing an executor. The executor then follows through with taking an inventory of all the assets and notifying all creditors. Then, after all that is done, the executor can petition the court to distribute the funds and estate and close the probate case.
How long does probate take?
A typical probate case can easily take six or more months. Probate cases have set timelines for certain notices to go out. Because probate is very procedural, any hiccup in the process can cause additional delays.
What does probate cost?
There are court filing fees for the Petition ($435+), publication expenses ($100+/-), probate referee costs ($200 +/-), court filing fees for the Petition for Final Distribution ($435) and other costs. The big expenses are the statutory attorney and executor fees. These fees are calculated on the same scale, and are based on the gross value of the estate.
The probate code establishes a sliding scale:
• 4% of the first $100,000
• 3% of the next $100,000
• 2% of the next $800,000
• 1% on the next $9,000,000
• 0.5% on the next $15,000,000
• A reasonable fee thereafter
Say we have a house worth $180,000 with a mortgage of $144,000 and two cars worth $10,000. The total value of the estate is $200,000 ($180k house plus $20k in vehicles). The statutory attorney fees and executor fee will be $7,000 each, for a total cost of $15,170.
The above is a very simple example. More complex situations can arise, increasing the cost dramatically.
If you are ready to save your heirs $15,000 or more contact Estate Plan Pros to discuss creating your own estate plan.