Probate: The Final Insult to Injury

Most of us find it difficult to admit the term of our lives is finite. The topic of deteriorating health and death is one that is typically avoided by most Americans. Can we blame anyone for avoiding such a discussion involving themselves ceasing to exist as they know it?...Not at all. But what happens when the inevitable occurs? Is your estate plan in place to plan for such an occurrence? Will your assets be handled as you have intended?

Think of an estate plan as a form of insurance which guarantees your health, finances, family, and property are taken care of and/or distributed per your wishes at incapacitation or death. However, this insurance is far cheaper when compared to paying a lifetime of monthly premiums. What’s even better is that each and every one of us guaranteed to need it one day. You could pay home and auto insurance premiums each month for the rest of your life and never make a claim. So wouldn’t it make sense to pay a relatively small fee for an estate plan you’re guaranteed to use later. It’s a no-brainer right?!

But there are far too many examples of what happens to individuals and families who neglect the need for a proper estate plan. When a death occurs and a proper estate plan is not in place, an avoidable financial toll can often compound the emotional toll. Allow us to introduce a little thing called probate. Probate is a friend to no one unless that someone happens to be an estate attorney or the court appointed estate administrator.

Many of those who come to us may have heard of probate and why it’s important to avoid it. However, we find the majority of those who may be familiar with probate are entirely unaware of the costs. Let’s have a closer look at how probate fees are determined, using the probate compensation guidelines of the California State Legislature. For this example, let’s assume an estate value of $1,000,000 in the state of California. This estate contains the CA median-valued home of $540,000 and $460,000 in all other assets (investments, bank accounts, cars, furniture, etc.) It is important to note that the fees outlined below will be charged by both the estate attorney and the estate administrator.

The fees shown serve as an example of how probate fees are assessed and are for illustrative purposes only.

Take the recent death of Aretha Franklin (a.k.a The Queen of Soul) as an extreme, but not so uncommon, example. It has been reported her $80 million estate is without any trust or will. An $80 million estate plan would likely cost someone a bit more than the typical $1,200 - $2,800 but it is an absolute certainty it would cost less than the her state’s probate fees. Franklin’s estate will go through probate court in Michigan and may cost about $100,000 when considering the cost of the estate attorney and estate administrator, according to the Michigan State Probate Fee Schedule. Had her estate been in California, it would be subject to about $200,000 or more in probate fees. Aside from the fees, the distribution of her estate’s assets will occur at the direction of others.

It’s safe to assume, if given the choice, each and every one of us would like to have a say in where our assets go at our death. Of course this means admitting we’re all mortal, but we all knew that already. It is once we have planned out each step of how we would like our affairs to be handled, that we have truly become master of our own fate.

The opinions and forecasts expressed are those of the author, and may not actually come to pass. This information is subject to change at any time, based on market and other conditions and should not be construed as a recommendation of any specific security or investment plan. Securities offered through Securities America, Inc., member FINRA/SIPC, Betsy Merritt & Tyler Aubrey Representatives. Advisory services offered through Securities America Advisors, Inc. New Break Financial and Securities America are separate companies. Securities America and its representatives do not provide tax or legal advice. It is important to coordinate with your tax or legal advisor regarding your specific situation.