Basic Court Fees
Let’s get the boring things out of the way first. For the most straight forward probate, there largest filing fees are incurred at the beginning and end of the process. The 2015 fee charged to file a probate petition is $450. There will be a $435 filing fee to file the petition for final distribution of the estate assets. Of course, there will be miscellaneous fees for items such as publication of the probate notice, fees associated with the probate referee, and fees for certified copies of court documents.
How Much Will the Executor and Attorney Be Paid?
I expect this will be the more interesting topic for most people. Small California estates with assets worth $150,000 or less may be settled without formal probate proceedings, using relatively simple transfer procedures. However if you’re here, you have probably already been to the bank and have been told you need “Letters Testamentary” or a “Court Order” to gain access to your deceased spouse’s checking account or you’ve been named executor of your rich uncle’s estate and you’d like to decide whether to put the down payment down on that cabin in Tahoe. For everyone’s sake (except your late uncle), I hope the latter scenario is what led you here. Sadly, dealing with financial institutions following the death of a loved one is the more likely scenario. In any case, budgeting for probate has been simplified due to California’s decision to define statutory fees for compensation of both the personal representative of the estate and the attorney representing the estate.
California Probate Code § 10810 sets the maximum fees that attorneys and personal representatives (i.e. executors, administrators, etc.) can charge for a probate. Higher fees can be ordered by a court in special circumstances and for more complicated cases. As of 2015, the fees are four percent of the first $100,000 of the estate, three percent of the next $100,000, two percent of the next $800,000, one percent of the next $9,000,000, and one-half percent of the next $15,000,000. For an estate larger than $25,000,000, the court will determine the fee for the amount that is greater than $25,000,000.
For your reference, the fees chart below is a quick breakdown of California statutory compensation for attorneys and personal representatives in probate cases for different sizes of estates. It is important to stress that both the attorney AND the personal representative are paid under this statute. Thus, if both the attorney and the executor elect to receive a fee, the amount paid will be double that shown below. This can be an important point with regard to budgeting.
|Value of Estate||Compensation to Attorney/Personal Representative|
Do I Accept the Fees or Should I Waive Them?
Often the personal representative will be a spouse and will elect to forego the compensation. Let’s take a quick look at why this might be. Let’s say Mary survives her husband John and is the sole beneficiary of his $500,000 probate estate. If Mary accepts compensation in the amount of $13,000 as the executor of John’s estate, in general, Mary just incurred $13,000 of taxable income. However, if Mary foregoes compensation as executor, she will receive the entire inheritance from her husband income tax free.
The decision whether to accept compensation can become much more complicated when there are more beneficiaries. For example, let’s say Jennifer leaves her $500,000 probate estate to her two sons, Jerome and Liam in her Will. Jerome is named executor and spends a great deal of time working with his trusted attorney to take the estate through probate. Meanwhile, Liam just sits back watching A-Team reruns and waits for his inheritance to roll in. When it comes down to it, Jerome may feel he really earned the additional $13,000 and that he should get paid before distributing the remaining estate 50/50 with Liam. However, Jerome will need to sit down and examine whether the negative income tax impact will outweigh the gratification of being paid to do the job. Jerome should sit down with a tax professional to crunch the numbers and figure out which options make the most fiscal sense.
How Much Is in The Probate Estate?
All of the above is all well and good, but in order to determine the probate fees I need to know what is in the probate estate; how do I figure that out? In general, the value of the estate is determined by performing an inventory of the estate assets. It is a little easier to describe the probate estate in the negative – the probate estate will be comprised of assets that are not distributed by other means. Items that should avoid probate include assets held in a revocable or irrevocable trust, an IRA or life insurance policies (with properly executed beneficiary designations), or real property held either as community property with right of survivorship or as joint tenants. These assets pass by operation of law without the need for a court to oversee the transfer. Commonly, the probate estate will be comprised of assets such as real property, bank or brokerage accounts that were never transferred into a trust, or of death beneficiary proceeds that did not have a properly designated beneficiary.
If an accounting of the estate has been waived, the total value of the estate for attorney’s fees purposes is the inventory, plus gains on sales, minus losses on sales. This is important – debts are not included in determining attorney’s fees. Thus, if a house has a fair market value of $1,000,000, for example, and it has a mortgage of $800,000, it is considered an asset with a value of $1,000,000 for the purpose of calculating executor and attorney’s fees. Thus, it is quite possible that your spouse or your children could be forced to liquidate or borrow against the family farm to satisfy the probate fees.
A Little Estate Planning Can Help You Avoid These Fees
You can see that a little estate planning during life, including the use of a revocable “living” trust, could save your family a great deal money and stress down the line. When you think about it, it doesn’t take much to have an estate worth a great deal more than $500,000, especially in the San Francisco Bay area. It takes little more than a house with a mortgage and a checking account and you’re probably there. As attorneys, we love probate. We know the procedure and we are happy to guide you through the process and collect our statutory fee at the end. But for anyone with assets nearing or above the $150,000 mark, do your family a favor and give us a call or send me an email to sort this all out during life.
That being said, promise that, if your absurdly rich uncle dies naming you executor and you need to take his estate through probate, you’ll give me a call! Seriously, 415-781-4000.