All have experienced the loss of a loved one. Whether it’s due to heart disease, cancer, a car accident, or the basic flu, the loss is often tragic, unexpected, and leaves a hole in the family’s heart.
The funeral service is over. The true mourning is beginning. But wait, what are we supposed to do with all of our loved one’s stuff?
2.8 million deaths are reported annually. In some situations, you can avoid formal legal processes to handle your loved one’s estate.
In others, the probate process will have to take over. What is it?
How do I go about it? Keep reading for some probate piece of mind.
What is Probate?
In basic terms, probate is a legal process that occurs after a person’s death. The probate process may include the following steps:
- Obtaining court verification of a valid will
- Inventory of the deceased’s belongings
- Appraisal of physical properties
- Handling the deceased’s owed debts or taxes
- Divvying out the property according to the will or state law, if no will is in place
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Walking Through the Process
In cases where a will is present, a specific person is listed as the executor. If there isn’t a legal will, after filing court documents, the court will appoint an estate administrator. The executor or administrator will be who is responsible for the above-outlined steps.
Verification of the will is as simple as bringing a copy of the legal document to your assigned court hearing and having the Judge verify that it is, indeed, a legally recognized document. Next, the executor will be in charge of securing and protecting the deceased’s belongings.
After an inventory is completed and the estate is secured, the examination of debts will be performed. Don’t fret.
Not all debts should be paid immediately. Debtors are to be notified that the deceased’s estate has entered into probate.
Once notified, it is up to the debtor to file a claim against the estate for the amount owed. The total process from beginning to end for probate can last anywhere from a couple of months to over one year, with the average being 16 months.
With probate tying up the income for the executor and consisting of many financially binding tasks, you will want to ask the courts to allow for short-term release funds from the estate.
Speaking of the estate’s funds, let’s jump into the probate fees.
Fees Associated with Probate Attorneys
An attorney will take payment for probate following one of these three different fee structures: hourly rate, fixed fee, or a percentage of the estate’s value.
- Hourly Fee
The first, and most common, is when fees are charged on an hourly rate. Ranges for these fees can vary dramatically. Small towns may see rates as low as $150/hour, whereas major metropolitans can see rates up to $400/hour. Typically, the more expensive hourly rates are associated with attorneys who are specialized in probate in estate planning law. The lower rates are normally seen among general practice attorneys.
The number of hours will vary depending on the complexity of the probate case. Between attorney and accounting fees, the average estate can plan to spend $12,400 with an average hourly rate of $225. The average executor spends 570 hours on a probate estate, so one can understand why the fees add up quickly! Fortunately, this payment comes from the estate and not directly from the executor’s wallet.
- Flat rate
The next popular method for probate attorney fees is charging a fixed flat rate. Many attorneys will have an idea of the approximate amount of time a probate case will take in reference to its contents. With this being said, they may charge a flat rate, so they do not have to maintain a record of billable hours. Believe it or not, attorneys don’t like keeping track of billable hours just as much as you don’t like to pay!
Very small estates can see a fixed billing of approximately $1,500. However, these estates typically have minimal to no assets.
More complex cases can increase exponentially, depending on each attorney.
- Percentage of the estate’s value
It’s very uncommon that probate attorneys charge a percentage of the estate’s value. This is the most expensive and unrecommended method of payment. Even though it is probably the worst-case scenario for you to pay a percentage of the estate, keep in mind that it’s legal in seven states (Arkansas, California, Florida, Iowa, Missouri, Montana, and Wyoming).
Percentage values are based on the total value of the estate. For example, if the estate is valued at $250K and the mortgage still holds a $125K balance, the percentage is based on the full $250K, not the remaining $125K after paying the mortgage balance. The average percentages charged legally across the county are:
- 4% of the first $100K gross value
- 3% of the next $100K
- 2% of the next $800K
- 1% of the next $9M
- ½% of the next $15M
- A reasonable percentage of anything exceeding $25M
Other Costs Associated with Probate and State Comparisons
Now that you a general idea for how probate attorney fees break down, let’s examine other costs accrued throughout the probate process.
In addition to attorney fees, you can expect expenses such as:
- Court fees
- Accounting/Appraisal fees
- Payment to the executor
Court costs will consist of fees charged for filing paperwork, administrative costs, and more.
The average fee for filing a probate claim varies depending on which state and area of the county you reside in. For example, in California, the cost to file a probate claim is $320, whereas, in Massachusetts, you can expect to pay $375.
Additional court filings can cost anywhere from $75-375, depending on the document being filed.
Accounting and appraisal fees are typically bundled with the total costs of the attorney’s fees. As mentioned previously, one can expect to spend an average of $12,400 in accumulated attorney and accounting fees.
Last, the executor is entitled to payment for their work divvying all components of the estate. The amount received varies due to the amount of work required in each specific estate.
In California, the executor can claim up to 4% of $100K, and the respective percentage declines as the estate value increases. On a $1M estate, the executor will receive $23K. However, in Texas, the executor is entitled to 5% of the estate, with very loose limitations to what is exempt.
All in all, the average payment an executor will receive across the states is equal to %2-4 of the total estate value.
Accumulated, one can expect the overall probate costs to equal %2-7 of the total estate value. Accordingly, this value varies by state and region.
For example, in New York, one can expect to spend %2.5-5 on executor fees, and spend $215 to over $1,200 in court costs. Whereas, in North Carolina, one can expect to spend $40 plus $4 per $1K estate value over $10K. Florida has set a limit on attorney fees that can be charged for probate.
The range a Florida attorney can expect to receive for payment is $1,500 to $165K.
Hopefully, you will enlist the help of a probate attorney that will help you cope with this daunting task. The mourning process is enough of a struggle; let’s try and simplify the probate process.
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