You might think you can save on estate planning costs by skipping the lawyer and writing your own will, or forgoing a will altogether. While a good estate planning attorney does cost money, their fees pale in comparison to what your loved ones will have to pay if your assets get tied up in probate court.
Probate is the process through which a deceased person’s estate is divided and distributed among his or her named beneficiaries if there is a will or to the heirs, as defined by statute, if there is no will. If a person dies intestate (without a will), a probate court will approve an administrator to manage the distribution of the deceased person’s estate as well as the payment to the administrator for providing these management services under the court’s supervision. Assets where no will exists or where a will is improperly drafted may pass to persons you might never have intended to benefit from your estate. In addition, if there are not sufficient assets passing through the will, your beneficiaries therein may not (due to improper planning) receive all that you might have otherwise desired.
Even if you write a will and designate your beneficiaries, a probate court still needs to review and accept the document before your beneficiaries receive their inheritance – and you can be certain that the court will take a percentage of it before passing it on.
What are some common probate fees an estate has to pay?
Like any court proceeding, the probate process will incur certain fees that are taken out of your estate, thereby reducing the total value of assets received by your beneficiaries or heirs. Here are a few common probate costs your loved ones may have to deal with upon your death:
- Court fees. The probate court takes its fees out of your estate’s total value, as dictated by state law.
- Appraisal fees. To determine the value of your property (both real and personal) and any business interests you owned at the time of your death, your estate will need to pay an appraiser.
- Executor/Administrator fees. The executor of your will, whether appointed by you or the court, is entitled to a “reasonable fee” paid by your estate for carrying out their responsibilities. However, it is common for executors to waive this fee if they are already receiving a substantial inheritance from your estate.
- Attorney’s fees. Like your executor or administrator, the attorney representing your estate in the probate process is entitled to receive payment for their services consistent with their hourly rate.
- Accountant fees. Depending on the value and complexity of your estate, your executor/administrator may need to hire someone to file the proper tax forms, if not prepared by the attorney.
Your estate will also likely be subject to the probate tax. In Virginia, this tax is imposed on the probate of wills and grants of administration for estates worth more than $15,000. The tax applies to most estate property in Virginia, except: jointly held property with rights of survivorship; payable-on-death bonds; insurance proceeds paid to a named beneficiary; and property passed through a trust (see below).
How to reduce probate costs
The easiest way to lessen the financial burden of probate is to create a living trust. This estate planning tool allows you to place certain property and financial assets in the care of a designated trustee. While you may be your own trustee during your lifetime, your successor – an appointed family member, friend, or corporate bank entity, for instance – will inherit the assets in your trust upon your death, and manage them on behalf of your beneficiaries (trust beneficiaries are often minor children or grandchildren). If it is a revocable living trust, the terms can be changed at any point during your life.
Because ownership of property held in a trust does not go through the probate process, your family will not have to pay the court fees to receive their inheritance. It’s also faster and more direct than passing property solely through a will, since the court will not challenge or interfere with your decisions. As an added bonus, a trust can even help your family save on estate taxes.
Speak with an estate planning attorney
An experienced estate planning attorney knows the ins and outs of probate law, and will be able to tell you the most cost-effective ways to distribute your assets based on your circumstances. Your lawyer will ensure that your trust is properly created and legally valid, so that when the time comes, your family can receive their inheritance efficiently, and with the least costs incurred.
For more than 15 years, The Law Office of Patricia E. Tichenor, P.L.L.C. has assisted Northern Virginia families with their estate planning needs. Contact us today to learn how we can help you create the best plan for your family’s future, and potentially reduce probate court costs for your loved ones.