Probating a Will can be a lengthy and expensive process. Many people are surprised by not only the time the process takes, but the various costs involved. We’re going to examine the costs of probating a Will and some ways to reduce and even avoid the expense.
What is Probate?
In a nutshell, probate is the legal procedure to settle your estate after you die. Your will needs to go through probate in order to have your executor (also known as a personal representative) appointed and your Will allowed by the courts.
Related Article: Tips for Writing Your Online Will
When you die, the Will is filed with the probate court in the county where you lived. The process then begins to validate the document, appoint or confirm your Executor (also known as a Personal Representative), compile and value assets, and authorize the Executor to distribute the assets and pay final bills and taxes.
Keep in mind that all creditors have first dibs on your estate’s funds. If you have outstanding loans or bills, they, and any taxes, must be paid before any assets are dispersed. Once everything is paid up, what’s left is distributed to the named beneficiaries in accordance with the terms of the Will.
Related Article: What Happens After I Die? Your Will and the Probate Process
Probate can take anywhere from several months to a year or even longer depending on the complexity of the estate and whether there are any challenges to the Will. If you have assets in other states, you would likely need separate, ancillary probate proceedings to settle those assets.
A Breakdown of Costs for Probate
The cost to probate a Will ranges from 4% to 7% of the total value of the estate. For an estate valued at $500,000, the cost would run between $20,000 to $35,000. The Uniform Probate Code, adopted by 18 states, regulates the probate process and fees.
Actual costs of probating a Will vary – it depends on:
- The value of assets
- Your estate plan
- If you hire an attorney
- Legal challenges
- The state you reside in
However, there are some basic costs with the probate process regardless of the state in which you reside. They include:
- Filing Fee – This is the initial fee to file a petition with the court for your Will to start probate. The fees range from as low as $50 and may cost up to $1,200.
- Certificates – Known as the Letter of Testamentary, this is an official document bearing the probate court’s seal that authorizes the Executor to act on the decedent’s behalf to settle the estate. Several of these are typically needed to correspond with financial institutions, insurance companies, and the Department of Motor Vehicles. The cost for each certificate ranges from $5 to $25 In some cases, an original – not a photocopy – is required. Additional certificates can be ordered from the court if needed.
- Surety Bond – This is like an insurance to protect the estate against any possible improprieties by the representative. The cost of the bond is usually based on the value of the estate, but on average can run up to $1,000. Most Wills state that a bond is not needed. If so, the court usually honors the provision.
- Notifications – A notice to beneficiaries, heirs, and creditors is required when a Will is filed. A legal notice must be published in a local newspaper alerting anyone that may have a claim against the estate. Publication costs usually run between $250 and $500. Certified letters should be mailed to named beneficiaries. Notifications should cost well under $100.
- Executor Fees – Estate representatives can be reimbursed for any expenses such as mileage, travel, supplies, tax preparation, and any other out-of-pocket costs. They can also charge a fee for their time administering the estate, depending upon the state, they can either charge by the hour or 2-5% of the estate’s value.
- Attorney Fees – If you hire a probate attorney to oversee the process, expect to pay anywhere between $2,000 to $20,000 or more, with a complex estate likely running on the higher end. Most attorneys charge a flat fee of $2,000 to $5,000 while others charge by the hour. In most cases, attorneys that charge an hourly rate may be the most cost-effective. Arkansas, California, Florida, Iowa, Missouri. Montana, and Wyoming limit probate attorney fees to a certain percentage of the estate’s value.
- Accounting/Tax Preparation – The decedent’s final federal and state tax returns must be prepared and filed. The cost averages $200 to $500. However, if a return for an estate tax must be filed, it can cost about $1,800. The latter is for estates worth $11.7 million or more in 2021.
Related Article: Tax Implications of Estate Planning
- Additional Costs – Postage, notary fees, appraisals, and storage are other typical costs of finalizing the probate process. Costs can range up to a few hundred dollars.
Can Probate Costs be Avoided Altogether?
In most cases, yes! A Revocable Living Trust is the way to go to avoid probate and its costs.
By placing assets in this Trust, you no longer own them since they belong to the Trust. But you retain control of the assets while you are living.
A Trustee that you appoint, legally holds the assets on behalf of beneficiaries you named in the Trust. When you pass, the assets go directly to the beneficiaries – no probate required. Also, unlike a Will, a Trust is not made public, so your estate remains private.
Related Article: How Much Should a Revocable Living Trust Cost?
Other options to avoid probate are:
- Transfer on Death – You can have a financial account or property transfer directly upon your passing to a person you name by creating a Transfer on Death account or deed. A death certificate is usually the only legal document required.
- Life Insurance – The payout goes right to a beneficiary you name on the policy.
- Right of Survivorship – Property jointly owned would pass to the surviving person named on the title or deed when you die. Some states have Common Property laws where a married couple automatically jointly owns property they acquired during marriage that transfer to the surviving spouse when the other passes.
- Small Estate – Most states offer an exemption from probate if the entire estate’s value is less than a set amount, in cases under $50,000, and/or no real estate is involved.
You May Still Need a Will
If you are married or single with minor children, you should have a Will. The Last Will and Testament allows you to name a guardian to take care and custody of your minor children if something should happen to both of you if you are married or if you are a single parent.
Also, in the Will, you can provide directives about your funeral arrangements and instructions of how you want any assets distributed. If you die without a Will and assets are not in a Trust, the state takes control of the estate and decides how assets are dispersed per your state’s laws of intestacy. A judge would choose a guardian in the case of minor children left behind.
Create Your Estate Plan
A Will and maybe a Trust should be part of your estate plan. Gentreo has the resources and tools to help you create and securely store your online documents. Protect your wishes, your assets, and your loved ones with a Gentreo estate plan.