Last week I participated in a clinic to provide simple wills for seniors. One senior attended because her doctor recommended that she have a will prepared. She had a simple estate with only a condo and a few small bank accounts and wanted to ensure that her condo passed to her children.
We advised against doing the will even though her estate was worth only about $500,000. Why? Because in California, an estate worth over $150,000 in probateable assets MUST go through the probate process, so a simple will would actually cost a lot more than going to see an attorney.
The probate process is expensive. The government sets the cost of probate, and this year, probate costs 4% of the first $100,000 of the gross value of the probate estate. 3% of the next $100,000. 2% of the next $800,000. 1% of the next $9 million.
That means that for a $500,000 estate, probate fees are $13,000. That is just the state fee. The attorney and potentially the executor also need to get paid.
The estimated attorney and executor fees, in this case, are roughly equal to the probate fees, so passing the estate via simple will ends up costing well over $30,000.
For typical California homeowners with homes worth over a million, these fees can be over $60,000 easily, and even more expensive depending on the complexity of the assets involved.
Both the woman and her adult children didn’t understand why it would cost so much to pass on something she already owns. The answer is that there are much cheaper and faster ways to ensure your property gets to the those you love, but none of them are free. There are various ways to set up the transfer via deed and trust, all of which cost less than $5,000.
I’ll explain why probate is so expensive later this week, but for now, just know that a little preparation, even in the simplest of cases, can save a lot on the back end.
To sum up, even with just a small condo, failure to have an estate plan will cost your estate tens of thousands of dollars, where for a few hundred or thousand up front, you can be sure your property goes to your heirs quickly and efficiently.