Live in Southern California? Having an Estate Plan is Cheap
The cost of an estate plan is much lower than you think. Let’s take a look.
Key Takeaways
Probate is expensive for the average estate in southern California
An estate plan and resulting trust administration is much cheaper than you think when compared to probate
The simple math is clear, but it doesn't take into account complications from potential taxes, creditors and other issues
For a point of reference, let’s consider the cost of going through probate for an average homeowner living in southern California.
According to CoreLogic’s Home Price Index, the median home value in southern California is $507,500. Probate fees are set by statute. They are as follows: 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; and .5% of the next $15 million. For an estate larger than $25 million, the court will determine the fee for the amount in excess of $25 million.
For an estate worth $507,500, the math is as follows:
4% of 0-100,000 = $4,000 in fees
3% of 100,001-200,000 = $3,000
2% of 200,001-507,500 = $6,149.98
So probate fees for an estate that consists of nothing more than a home at the current median home value for southern California would amount to $13,149.98. (Debt is not considered in determining the value of an estate for probate purposes, so having a mortgage and owning your home outright does not change the result.)
This assumes your estate consist of no assets in excess of the median home value. This is unlikely as over a lifetime of earnings, your estate likely holds some cash, and perhaps some combination of savings, retirement accounts, brokerage accounts, 529 accounts, life insurance policies, vehicles, personal items like jewelry, collectibles or computers, a business, and all assets that come along with that business. You might even own a rental property or two.
Maybe you don’t. The point is over a lifetime, you are likely to accumulate an estate that is valued in excess of the median home value in southern California. Not having an estate plan will require probate, which by statute will likely cost you at least $13,149.98.
A basic, but comprehensive estate plan for a married couple will cost you $2,000. A basic plan could cost as low as $1,000. You might have guessed that while you won’t have to go through probate because you have a trust, attorneys charge fees for trust administration. While you could handle administration on your own, we recommend hiring a professional to address administration because it can be complicated, there are timing factors involved, and it comes at a stressful time.
Trust administration fees for a basic estate on average are around $3,500.
So, this means doing some estate planning for a basic estate will cost you about $5,500, while putting that same estate through probate will cost you $13,145.98. That means, in our example, planning in advance will save you $7,649.98!
If you require more complex planning and a trust-based estate plan costs more than $2,000, the savings on the back end are even bigger since the cost to probate your estate will vastly exceed the cost of administering a properly planned out estate.
This is because our analysis totally ignores the cost that having no planning at all can have on your estate and beneficiaries. Here, think of estate taxes, income taxes, capital gains taxes, etc. Your beneficiaries will also have no opportunity to shield the assets left for them from their own creditors.
The other thing to consider is that chances are you have an estate valued in excess of the median home value for southern California. Being a California resident, you likely know that it takes little more than a house with a mortgage and a checking account to get there.
If you have a good idea of the value of your estate, which will consist of assets like real property, bank or brokerage accounts never transferred into a trust, death beneficiary proceeds without proper beneficiary designations, you can get a general sense of the probate fees for your estate by checking this chart:
Value of Estate Compensation to Attorney/Personal Representative
$100,000 $4,000
$200,000 $7,000
$300,000 $9,000
$400,000 $11,000
$500,000 $13,000
$600,000 $15,000
$700,000 $17,000
$800,000 $19,000
$900,000 $21,000
$1,000,000 $23,000
$1,500,000 $28,000
$2,000,000 $33,000
$3,000,000 $43,000
$4,000,000 $53,000
$5,000,000 $63,000
$6,000,000 $73,000
$7,000,000 $83,000
$8,000,000 $93,000
$9,000,000 $103,000
$10,000,000 $113,000
$15,000,000 $138,000
$20,000,000 $163,000
With fees this high, the chances of your beneficiaries having to liquidate your estate after death (and perhaps sell the family home and/or business) to pay probate fees are great.
Instead, some trust-based estate planning during your lifetime can save your family a great deal money and stress down the line.
As estate planning attorneys, we’re happy to go through probate. We know the process and are happy to make it easier for families. But for anyone with a home in southern California, or assets nearing or above the $166,250 mark (the statutory threshold for settling estates without formal probate proceedings), do your family a favor and get in touch.
If cost or cash flow is a factor, we have a solution for you. Ask about our Layaway Payment Plan, which is a pay-as-you-go option for those on a tight budget. If you’d like guidance and assistance with creating comprehensive estate plans, schedule a strategy session today; we're happy to help.
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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