The Switch from Wills to Trusts

When I first started practicing law in 1972, most people who prepared an estate plan used a will as their primary estate planning document.  Now, the primary estate planning document is more likely to be a trust.  As explained in the wills and trusts article, the switch to a trust was caused primarily by the fact that if one leaves their assets through a will, a probate is required.  If assets are left through a trust, there is no probate. The older attorneys I knew at that time all had drawers full of wills they had drafted.  This was looked on by them as a kind of retirement account, because typically the attorney who drafted the will, or that attorney’s firm, would be hired as the attorney for the probate.

There are still estates that go through probate because the estate planning document was a will, or because there was no  estate planning document, and the assets passed as set up by the law of the State of California. The wills in these estates were generally drafted years ago, or they were drafted by the testator ( the person whose will it is).  The self-drafted wills tend to be either holographic, meaning in the handwriting of the testator, or fill-in type wills, where the basic will is printed and there are blanks left for names, specific assets, and so on.  In all of these cases a probate is usually necessary.  I say usually, because if the value of an estate is not more than $150,000 gross value, there are simpler ways to transfer the property to the next generation that through probate. Gross value means the value of the asset without any deduction for the amount of money owed on it.  For example, there must be a probate for an asset valued at $151,000, but which has a debt of $150,000.

The person who is to be in charge of the probate is usually named in the will.  If that is the case, the person is called an executor.  If the person is not named in the will or there is no will, the person in charge of the estate is called the administrator.  The generic term for both is personal representative.  In either case, the person in charge must file a petition with the court requesting that a probate be opened and that the petitioner be named as executor of administrator, as the case may be.  I’ll use executor from here to mean either.  The petition must be published in a local newspaper.  The filing fee for the petition, and the cost of publication tend to come to about $1,000 in this area.  There will also be a “probate referee” appointed who, for a fee, appraises the estate property, except for property that can be appraised by the executor. The property appraised by the executor is generally the cash, which can be appraised merely by looking at the account statement that shows the date of death value of an account.

When appointed, the executor is then charged with identifying and valuing all estate assets, receiving estate income, paying estate bills, accounting for his or her actions in a formal account, generally prepared by a CPA, and getting a court order for distribution of the assets and payment of the attorney’s and executor’s fees. In each of these steps there are often complications, especially if there are several beneficiaries and they are not getting along well. There can be fights over the validity of the will, or the valuation of assets, or the time it is taking to finish the process, or who gets which of the family memorabilia.  The issues that come up when there is money on the table are endless. It is very important in getting through the process as easily as possible that the executor have an experienced attorney, who understands the process and who is adept at solving problems.

Attorney and Executor Fees

The biggest cost of the probate is the attorney’s fee and the executor’s fee.  The court will approve a base fee for each the attorney and executor based on the gross value of the estate. Again, that word gross.  You don’t subtract the debts from the value of the asset to determine the value of the estate when calculating the fees.  The fee is 4% of the first $100,000 in value, 3% of the next $100,000, 2% of the next $800,000, and sliding down from there.  For example, if the only asset with value in an estate is a home worth $500,000, regardless of how much is owed on it, the fee will be $13,000 for each the attorney and the executor. The court can also approve extraordinary fees, if requested, for things such as operating a business or selling real estate. Often if the executor is one of several siblings, and all of the siblings get along well, the executor will waive the fee, but that is not required.

Length of Probate

Probate can be completed in as short a time as about 6 months, but that rarely, if ever happens.  Typically, a simple probate should be completed within a year. Most people would like to avoid probate, but if you end up being named as executor of an estate, the experience will be best if you have an attorney who cares about helping you get the job done right.