If You WILL it, they will WAIT and the assets will WILT

It amazes me when my children come home from school that they are singing the same enchanting rhymes that my classmates and I sung decades ago. These are likely the same that my parents sung when they were in school too. The fact is, over time, some things remain a constant and will be passed on between groups with little change. The same is true with the dissemination of legal knowledge. One person talks to another and that person talks to someone else and conceptions and principals are passed on. I have come across a very common misconception both with my clients and with my students when it comes to how a Will works.

Most people understand that if you do not prepare a will, or a trust or some other will-substitute regarding your estate then when you die, the government has a plan, known as “intestacy” and a probate proceeding is commenced with the probate court. A slightly smaller group understands that a fully funded trust or comprehensive will-substitute will bypass the probate court completely (barring fighting amongst the heirs). However, a surprising number of people cannot answer whether having a will bypasses the probate court or requires a probate action.

The answer is: if you only have a Will and nothing more, then a probate proceeding will be necessary. The probate court’s role is to ensure that the plan you have set out in your Will is followed in a timely and efficient process. Unfortunately, with budget cutbacks and a rise in the population in Los Angeles County, the probate courts are bottle necked and what took 12-18 months a couple of years ago to close an estate proceeding, now takes approximately 18-24 months. During that time period, access to assets within the estate are limited, if available at all. Bank accounts may be frozen, putting other assets at risk (such as real property that has a mortgage to be paid).

The other little known fact are the costs associated with a probate proceeding. The executor’s fee and the estate attorney’s fee are set by statute and therefore uniform across the state based on the gross value of the assets under administration. Further, the filing fees with the court are set in advance, as well as the fees paid to the court appointed probate referee (this is the person who completes the appraisal for the assets under management). Based on these relatively constant values, an estate valued at $1,000,000 (which is not uncommon in Los Angeles County once you figure in a house, a car, a brokerage or retirement account and bank accounts) would have approximately $48,120 in costs of administration. While there are other factors involved which may adjust the costs, such as a bond or need for intermediary filings to approve the sale of assets or preliminary distributions, this is by and large the minimum that would be eliminated from the estate and never touch the hands of the beneficiaries.

$1,000,000 – Gross Value of Estate (not counting any encumbrances)

$       435 – initial filing fee to open probate

$       250 – initial publication fee (this cost will vary)

$   1,000 – probate referee fee

$       435 – final filing fee to close probate

$ 23,000 – statutory fee to the executor

$ 23,000 – statutory fee to the attorney for the executor

$ 48,120

The bottom line, if you do nothing, or if you only have a Will, specifically focusing on Los Angeles County, your heirs will wait for their inheritance and the amount that they receive will wilt away. I understand there are exceptions to every situation, however isn’t it worth it to have your plan evaluated to make sure your estate is passed on to those you care about as opposed to going toward fees and costs.

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