The Costs of Probate in California vs. Trust Set Up and Administration

Probate is the legal process by which a court oversees the distribution of a deceased person's assets to their beneficiaries. In California, the costs of probate can be significant, especially for those who own real estate. This is because of the high cost of real estate in the state and the fact that the threshold for a gross probate estate value requiring probate is relatively low ($184,500). In this blog post, we will explore the costs of probate in California and compare them to the costs of trust set up and trust administration. We will also discuss the benefits of having a trust, particularly if you own real estate, and how it can save you money in the long run.

Key Takeaways

In California, there are statutory probate fees that are based on the value of the deceased person's estate
The high cost of real estate in California can significantly impact the probate attorney fees
One of the best ways to avoid the high costs of probate in California is to set up a trust

STATUTORY PROBATE FEES IN CALIFORNIA

In California, there are statutory probate fees that are based on the value of the deceased person's estate. These fees are set by the state and are used to pay for the court's services, including the probate judge, court clerks, and other expenses. For example, if the estate is valued at $100,000, the statutory probate fee would be $4,000. If the estate is valued at $1,000,000, the statutory probate fee would be $40,000. These fees can add up quickly and can be a significant expense for the beneficiaries of the estate.

THE HIGH COST OF REAL ESTATE IN CALIFORNIA AFFECTS PROBATE ATTORNEY FEES

The high cost of real estate in California can significantly impact the probate attorney fees. This is because, in California, the statutory probate fees are based on the gross value of the estate, not the net value. This means that debts such as mortgages do not reduce the probate attorney fee. For example, if a person owns a $2,000,000 home with a $900,000 mortgage, the probate attorney fee would be based on the gross value of $2,000,000, not the net value of $1,100,000. This can result in much higher attorney fees for those who own real estate in California, particularly in high-value areas like Laguna Beach. Despite the recent pandemic-induced market downturn, real estate values in California, and particularly in high-value areas like coastal regions, are still historically high. According to the California Association of Realtors, the median home price in California was $715,010 in December 2020, a decrease of 2.6% from the previous year. However, it's important to note that these numbers vary depending on the region, and in coastal areas, such as Laguna Beach, the median home price is much higher.

This highlights the importance of considering estate planning options, such as a trust, to potentially reduce the costs associated with probate. A trust can help avoid the probate process and the costly statutory probate fees, attorney fees, and other expenses that come with it. It's important to consult with an estate planning attorney to discuss whether a trust is the right choice for you and your assets, particularly if you own real estate in California.

THE DIFFERENCE BETWEEN ESTATE PLANNING FEES AND STATUTORY PROBATE FEES

It's important to note the difference between probate fees and estate planning fees. Probate fees are the costs associated with the legal process of probating a will and distributing the assets of the deceased person's estate. Estate planning fees, on the other hand, are the costs associated with creating a plan for the distribution of your assets, including the creation of a will, trust, or other legal document. While both probate and estate planning fees can be costly, estate planning fees are generally about 10 times less than probate fees.

BENEFITS OF HAVING A TRUST

One of the best ways to avoid the high costs of probate in California is to set up a trust. A trust is a legal arrangement in which a trustee holds and manages assets for the benefit of one or more beneficiaries. Trusts can be used to manage assets during a person's lifetime or to distribute assets after death. One of the main benefits of having a trust is that it can help you avoid probate. When assets are held in a trust, they do not need to go through the probate process, which can save you money and time.

THE BENEFITS OF HAVING A TRUST IF YOU OWN REAL ESTATE

If you own real estate, particularly in high-value areas like Laguna Beach, setting up a trust can be a wise financial decision. The high value of real estate in California, combined with the low threshold for a gross probate estate value requiring probate ($184,500), means that many homeowners in the state may be subject to probate and its associated costs. By placing your real estate in a trust, you can avoid the probate process and the costly statutory probate fees and attorney fees that come with it.

Additionally, trusts can offer more flexibility and control over your assets than a will. With a trust, you can specify how and when your assets will be distributed, and you can also provide for special needs or contingencies. You can also change or terminate the trust at any time during your lifetime.

Another benefit of having a trust is that it can provide for asset protection. Trusts can be used to protect assets from creditors and lawsuits, which can be especially useful for those who own valuable assets such as real estate.

Furthermore, a trust can provide more privacy than probate. The probate process is a matter of public record, meaning that anyone can access the details of the deceased person's assets and beneficiaries. Trusts, on the other hand, are not a matter of public record, providing more privacy and security for beneficiaries.

TRUST ADMINISTRATION

Trust administration is the process of managing and distributing the assets of a trust. It can be less expensive than probate because it is typically a less formal process and can be handled by the trustee without the need for court involvement. However, it is important to note that there are costs associated with trust administration, including trustee fees and other expenses.

For more information on trusts, you can explore our estate planning practice and Resources.

CONCLUSION

In conclusion, if you own real estate in California, setting up a trust can save you money in the long run and provide more control, flexibility, privacy, and asset protection over your assets. It's important to consult with an estate planning attorney to discuss whether a trust is the right choice for you and your assets. Check our Resources for further discussion in this regard or schedule a strategy session today. Keep planning smarter.

Matthew Schlau is a co-founding principal of Schlau|Rogers and an estate and business planning lawyer practicing in Orange, San Diego, Los Angeles and Riverside counties. He is a husband, father, blogger, crossfitter, and really good at helping people achieve their goals.

At Schlau|Rogers, we do more than just estate and business planning, probate and trust administration. Our objective is to provide individually-tailored plans that allow you the opportunity to reach your goals, all while minimizing headaches and risk, and maximizing peace of mind.

On our blog, you'll find useful information about estate and business planning, probate and trust administration, as well as some tidbits on personal finance, taxes, and anything else we think will help minimize headaches, worry and risk, all while maximizing peace of mind.

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