Could I save you $112,000? I was sitting in a San Diego Probate Court several months after taking the California Bar and waiting for the results. I was astounded at the fact that a piece of property owned by the Decedent was being assessed statutory probate fees based on its fair market value (f.m.v.) of $1.3 Million. The reason being is that it had mortgages against it of a total of $850,000– an equity of about $450,000. As I sat there I came to personally realize and exclaim to myself “California doesn’t deduct debt in determining statutory probate fees!” No wonder these lawyers were anxious to probate an estate. This particular estate had been in probate about thirteen months. There were some estate tax issues to resolve so the attorneys were also asking for additional exemplary fees which were burdensome on the estate. The heirs sat in dismay as the Court granted request after request for attorney fees, CPA fees, appraisal fees, etc. This was only one of numerous probate accountings being heard by the Court that day. It goes on and on, almost every week of the year. Millions in probate fees being tallied annually. Unbelievable! But why? Why are the dockets filled with probate matters? Oh yeah, of course– we are dealing with the real world here and the Estate Planning cancer called PROCRASTINATION.
The estate in question had a gross value of $2 Million a net value of $550,000 and sustained probate fees of $78,000. Wowsie! That’s mucho moolah!
Why didn’t this Decedent and many more like her, utilize a Living Trust and direct all the savings from probate fees to the heirs — in this case three adult children who needed the money. To make matters worse, if possible, the Decedent had been incompetent for three years prior to her death. As a result, a Conservatorship was ordered by the Court who gained jurisdiction of her assets while she was living. In a Conservatorship, the Court appoints a Conservator, who must account to the Court regarding any significant decisions regarding the incompetent person (known as the Conservatee) for health or finances. The Conservatorship fees had eaten up about $34,000 of the estate by the time the Conservatee died. Now let’s see, $34,000, plus $78,000 in probate fees equals $112,000.
What if this Decedent had done some estate planning prior to her incompetency. She would have spent about $2,500 on an estate plan which would have included a Trust for her assets and Health and Financial Durable Powers of Attorney. These documents, if adequately prepared and administered, would have avoided Probate and Conservatorship proceedings. Oh, and that $112,000 would have been available for the three children.
As I write this estate planning article, I know some people will not finish reading it. Others, who read it, with all of their great intentions, will not act. Why? Is it the nature of some just to create waste, even if it is to their own estate? Sadly, yes. The question is: Will YOU allow procrastination to eat up your estate to the detriment of your loved ones.
CONTROL– you WANT it, now TAKE IT.