Frequently asked questions

LUCAS A. WOODWARD

Esq., LL.M. Taxation

CALIFORNIA
ESTATE PLANNING
PROBATE
TRUST ADMINISTRATION
TRUST AND PROBATE LITIGATION

1.  What is probate?

If you die in California with assets titled in your name, and the assets don't have beneficiary designations, then your heirs (or beneficiaries of your will) will have to probate your estate, unless all of your assets are non real property and total value less than $150,000, or if your assets include less than $50,000 in real estate, and total less than $150,000 all together. The point of probate is to gather all of the decedent's assets, pay all of his or her creditors, and legally transfer ownership from the decedent (the person who died), to his or her heirs, or beneficiaries if he or she had a will.  Keep in mind that assets that have a beneficiary designation, and the decedent designated beneficiaries before he or she died, will not be subject to probate.  So life insurance, retirement plans, even your house now if you use a transfer on death deed or have it titled in joint tenancy or  other survivorship titling, will not be subject to probate unless you don't designate a beneficiary, or you designate your estate as the beneficiary.  Further, trust assets (discussed below) are not subject to probate.


As with all things in life, you do not legally need a lawyer to probate a decedent's estate, however, as every client I've ever worked with will attest, you will definitely want a lawyer.  The requirements, deadlines, and procedures, that a good lawyer knows will not only save you time and effort, but will give you peace of mind to know that it's done right.


2.  What are the fees in probate?

First, some terminology.  An executor is the personal representative of the estate if there is a will and the person serving was nominated in the will.  An administrator is the personal representative is there isn't a will, or if there was a will but the person wasn't nominated in it.  A fiduciary is an independent third party that can serve as administrator if no one else is available or there is a conflict between other proposed administrators.  Whether there is an executor or administrator, that person can always be referred to as the personal representative.


Second, the personal representative is allowed by the Probate Code to take a fee which is based off of percentages of the total gross value of the estate, plus receipts during the administration, plus gains on sales, and less losses on sales.  The personal representative does not have to take this fee if they don't want to (e.g. they are the sole beneficiary).  Most representatives do take the fee though.


Third, the attorneys fees are exactly the same as the personal representative's fees, and it does not matter one iota if you hire a big firm, small firm, really experienced, or total rookie. Both fees are based on the following formula, found in Probate Code §§10800 and 10810:

Personal Representative and Attorney's Fees
Percentage Paid
Portion of Gross Estate that the Percentage is Paid On
Maximum Possible per Portion
4 %
$0 - $100,000
  $            4,000.00
3 %
$100,001 - $200,000
  $            3,000.00
2 %
$200,001 - $1,000,000
  $          16,000.00
1 %
$1,000,001 - $10,000,000
  $          90,000.00
½ %
$10,000,001 - $25,000,000
  $          75,000.00
court discretion
everything above $25,000,000
                unknown


Finally, there are court costs associated with probate as well.  In San Diego, you will likely have around $1,000 to $2,000 in costs in order to probate an estate.


A good example of a probate in San Diego would be a decedent with a $500,000 house, and $100,000 in bank accounts.  The fee for the administrator will be 4% of the first $100,000, plus 3% of the next $100,000, plus 2% of the next $400,000, which equals $4,000 + $3,000 + $8,000, or $15,000.  The attorney will get the same amount.  Add in costs of probably $1,500, and the total fees and costs to probate the estate will be $31,500.  This cost of probate is one of the primary factors that a client chooses to create a trust instead of simply having a will.  Trusts still have fees and costs associated with administering them, but they will typically be less than probate, and a client can better dictate where and when assets are distributed to beneficiaries through a trust.


3.  How long does probate take?

A typical probate takes 12 to 18 months.  They can sometimes be as short as 8 or 9 months, but typically the combination of slow government entities, overloaded court calendars, and mandatory waiting periods (e.g. the 120 day creditor cutoff) nearly always drive a probate over the year mark.  If the probate is taking more than 2 or 3 years, there are either special circumstances, or someone is asleep at the wheel.


4.  What is a trust, and does it avoid probate?

If you create a revocable trust and fund it whiles you are alive, it is more of an agreement with yourself (and your spouse if created by both of you) until you die or become incapacitated. When you (or your spouse) die or become incapacitated, the trust may become irrevocable at that point if it wasn't already, and that can vest some beneficiaries' rights in the trust.  Up to that point though, you can typically amend or revoke the trust, and the beneficiaries have little to no rights to contest the changes.  That said, once you die (or the surviving spouse dies if a trust for both spouses), the trust is considered a separate entity from your estate, and all assets that are titled in the trust will not be considered to be part of your estate, and won't have to go through probate in order to pass title.


5.  What is trust administration, and what are the fees associated with it?

Trust administration is similar to probate in that the purpose is typically to title the trust assets in the name(s) of the beneficiary(ies).  However, some major differences exist.  First, the probate court doesn't review the trustees actions unless the trustee asks the court for approval of a proposed action, or the beneficiaries object to the trustee's actions, and petition the court.  Second, the trust may require the trustee to hold assets for certain beneficiaries for a number of years, and sometimes even for a beneficiary's lifetime (if a special needs trust is established for example).  This gives the party that sets up the trust much more leeway to design a scheme for his or her assets that can provide for his or her beneficiaries in the specific ways they need.  Another big difference is that a trust administration doesn't have the statutory timing requirements, so an efficient trustee can easily wrap up an easy trust administration in a year or less.  Fourth, the last difference I'll mention is that in trust administration, the trustee and trustee's counsel typically receive 1 - 1.5% of the gross value of the trust estate per year, versus the statutory fee for probate. So if you have $600,000 in assets as used in the probate example, the trustee will receive $6,000 - $9,000, and the trustee's attorney will receive $6,000 - $9,000, for a total of $12,000 - $18,000.  If the trustee is efficient, this means a potential savings of up to $18,000. 


6.  Which produces more guaranteed results, probate or a trust?

This is actually a very difficult question because there are so many variables that go into determining what results you want.  If your goal is to simply give your two kids equal shares in your estate, and the kids don't fight, then the results will likely be the same in a probate or trust.  Depending on the value of your estate, the costs may be similar as well.  However, if your goal is to hold monies going to your children in trust while they are minors, then a trust will be the only way to achieve that result.