What is Probate and How Much Does it Cost?
Articles,  Blog

What is Probate and How Much Does it Cost?


Hi. Today I wanted to talk about what probate
is. Probate is the Court process to monitor the
payment of your debts and the distribution of your property to your heirs or beneficiaries
by a court-appointed personal representative. There are three things I wanted to point out
about probate. One, it’s time consuming. Often it takes a year or more to finish the
probate process. Two, it’s expensive. I’ll briefly go over the costs involved in
the following slides. And three, it cannot be avoided simply by
having a Will in place. Let’s talk a little bit more about the cost
of probate. Fees for probate are set by law. The personal representative and the lawyer
are each entitled to the following amounts based on the value of the property being probated. 4% of the first $100,000. 3% of the next $100,000. 2% of the next $800,000. 1% of the next $9,000,000. 0.5% of the next $15,000,000. And a “reasonable amount” determined by the
Court for anything above $25,000,000. I think the best way to understand this is
to go through an example. Let’s say Jane dies with a house worth $1,000,000
that has an $800,000 mortgage on it. How much are the fees payable to the personal
representative and the lawyer? You can pause the video now if you want some
time to think about it. The answer is, up to $46,000. Let’s take a little bit of time to understand
the calculation. Let’s first look at the personal representative’s
fee. 4% of the first $100,000 is $4,000. 3% of the next $100,000 is $3,000. 2% of the next $800,000 is $16,000. All of that put together accounts for the
$1,000,000 value of the house. And that means the personal representative
is entitled to $23,000. Remember though that the lawyer is also entitled
to the same amount, so all together it’s $46,000. This fee doesn’t include the court filing
fees and things of that nature and also does not account for the fact that there’s an $800,000
mortgage on it. So, how can we avoid probate? One, it’s important to review the title to
all of your property. Certain ways of holding your assets can help
you avoid probate. For example, through joint tenancy or using
a living trust. Two, you should check the beneficiary designations
on assets such as your life insurance and retirement accounts. Without having these updated, it’s possible
that those assets could be part of your probate estate. Finally, if you have assets of relatively
little value. Let’s say you own $50,000 or less in real
estate or $150,000 or less in other types of property, you might be able to avoid probate. Thanks for watching.

Leave a Reply

Your email address will not be published. Required fields are marked *