A Revocable Living Trust Empowers Your Estate to Avoid Probate.
Probate is a court-supervised process, used to transfer assets from a deceased person to a living person. In California, probate is unavoidable if a person dies without the proper estate planning documents in place and owns more than $150,000 in assets. The only way to avoid probate is by implementing a well-designed estate plan, and many people are surprised to find out that a will does NOT avoid probate. You have probably heard that you should avoid probate at all costs, but do you know why? There are several reasons; most notably, probate restricts your family’s access to your assets, is expensive, time-consuming, public, and completely unnecessary.
…many people are surprised to find out that a will does NOT avoid probate.
Restricted Access to Assets.
During probate, your family has no immediate access to cash. Your assets will be frozen, and therefore unavailable to your spouse, children, or anyone who depends on you financially. There is petition that can be filed with the probate court to free up some assets, however, going through that process is expensive and time-consuming. It can take weeks or months to gain access to those assets; in the meantime, your family is forced to foot the bill for all of your final costs without using your money – funeral, utilities, property insurance, taxes, storage fees, attorney’s fees, etc. Avoiding probate allows your family to have immediate access to cash to pay bills.
Probate Is Expensive.
The fees for probate are set by law, and are calculated based on the GROSS VALUE of your estate, i.e., based on everything you own, but nothing you owe. That means that if you purchased a home worth $1 million, and you have a $990,000 mortgage, the probate fee will be calculated based on the $1 million value, not based on your $10,000 equity. The estimated probate fee would be $46,000 to transfer your $10,000 equity!
The following chart represents sample estate values and estimated probate fees.
|Gross Value of Estate||Estimated Probate Fee*||Probate Fee with Proper Estate Planning|
|$250,000 ||$16,000 ||$0 |
|$500,000 ||$26,000 ||$0 |
|$1,000,000 ||$46,000 ||$0 |
|$2,500,000 ||$76,000 ||$0 |
|$5,000,000 ||$126,000 ||$0 |
|$10,000,000 ||$226,000 ||$0 |
*The probate fee represents the fees authorized by the California Probate Code, and additional special fees may apply. The probate fee is split between the attorney that handles the probate of your estate and your executor/administrator. The probate fee is not a tax; it is charged in addition to any assessed estate taxes. These estimated probate fees are for informational purposes only and should not be considered nor relied on in place of legal advice; these fees are a general estimate based on California Probate Code Section 10810's general provisions and are not fact-specific.
Probate Is Time-Consuming.
In California, probate can last anywhere from nine months to two years, and as mentioned above, during that time, all of the assets are frozen, and therefore not available to your spouse/children/people you support. On top of this, most actions needed to wrap up an estate have to be approved by a judge. It can take months to get a judge's approval of the executor’s decision to continue or sell the deceased person’s business, repair or sale of real estate, and the abandonment of worthless assets (e.g., a timeshare with high annual maintenance fees). While the executor is waiting for approval, expenses associated with assets such as these eat away at the value of the estate. Avoiding probate saves your family time, money, and hassle.
Probate Is Public.
This means that anyone can find out what your assets were, what your debts were, and who is inheriting from you. Anyone can, at any time, go to the courthouse and obtain a copy of a deceased person’s probate file. Avoiding probate keeps your family and financial information private.
Probate Is Completely Unnecessary.
There is a much easier, faster, less stressful, less expensive, and completely private way to transfer your assets on your death. The best way to avoid probate is by creating and funding a revocable living trust. In particular, if you create a living trust and transfer ownership of your assets to your trust, your property is transferred at death by contract rather than under the laws of probate. Probate laws apply only if there is no living trust in place - that means that if you have a will but no trust, or have no will and no trust, your estate will go through probate.
The best way to avoid probate is by creating and funding a revocable living trust.