Optimize your Money: Calculate the Cost of Probate
Below, we outline the costs associated with the probate process in California to demonstrate the cost saving benefits of creating an estate plan. By creating an estate plan, you can preserve funds for your intended recipients and avoid unnecessary estate administration costs.
In California, when a person dies with a will or without an estate plan, their assets are subject to the probate process. During the probate process, a personal representative is appointed by the court and is responsible for managing the estate and adhering to the California Probate Code. Typically, the personal representative retains counsel to guide them through the intricacies of probate administration.
Both the personal representative and the attorney for the personal representative are entitled to statutory fees for the services performed during the probate administration. The formula to calculate the cost of the fees in probate administration is set by law.
For ordinary acts of probate administration, such as locating assets of the decedent’s assets, paying outstanding debts, and handling day-to-day details such as disconnecting utilities, the fees to the attorney and the personal representative are based on a percentage of the total estate. The percentage breakdown is found in California Probate Code section 10810 and 10811 and is as follows:
ESTATE VALUE | COMPENSATION |
|---|---|
First $100,000.00 | 4% |
Next $100,000.00 | 3% |
Next $800,000.00 | 2% |
Next $9 million | 1% |
Next $15 million | .05% |
Next $25 million | Reasonable amount to be determined by the court |
To determine the estate value, the value of property subject to probate administration must be calculated. Property subject to probate administration includes real estate, bank accounts, investments, business interest, and personal property. Certain assets, such as retirement accounts and life insurance, are not typically included in probate administration.
To provide an example, if your residence is worth $600,000.00 and you have a bank account with $200,000.00 your estate is valued at $800,000.00. Using the estate value of $800,000.00, the probate fees for ordinary services would be calculated as follows:
FEE COMPUTATION | |
|---|---|
4% of first $100,000.00 | $4,000.00 |
3% of next $100,000.00 | $3,000.00 |
2% of the remainder | $12,000.00 |
Total Fee | $19,000.00 |
Based on this example, the personal representative and the attorney for the personal representative would be paid $19,000.00 each, resulting in an automatic loss of $38,000.00 in fees that could have gone to your loved ones.
In addition to the statutory fees, the attorney and the personal representative can request extraordinary fees. Extraordinary fees are calculated on an hourly basis in an amount that the court determines to be “just and reasonable.” For example, extraordinary fees may be awarded in relation to legal services in connection with the sale of real property, estate litigation or a successful defense of a will contest, or coordination of an ancillary administration.
By creating an estate plan, you can save on the cost of probate and help ensure your money goes to your intended recipients, rather than to statutory fees. Talk with our estate planning attorneys today to discuss how to maximize your money and avoid unnecessary administration costs.