The other day, someone asked me, “What happens to my home when I die?” In other words, “Why do I need an Estate Plan?”
This is why. Assuming that the home is not in a trust, this will be the eventual outcome:
1. If you have a will, there will be a probate, and the probate court will follow the instructions given in the document (will).
2. If you do not have a will, there will still be a probate, and the probate court will distribute the home, or sales proceeds, to your statutory heirs.
In both scenarios listed above, there will be considerable cost. In California, Probate Attorney Fees and Executor Fees are determined by the gross value of the estate based upon the following fee schedule:
Executor Fee Schedule
|4% of the first $100,000|
|3% of the next $100,000|
|2% of the next $800,000|
|1% of the next $900,000|
|.5% of the next $15,000,000|
Attorney Fees are the same as Executor Fees. So, the typical cost of probating a home worth $1 million, excluding filing and appraisal fees, would be $46,000 (see below for detail)
|Total Executor Fees||$23,000|
|Total Attorney Fees||$23,000|
That is $46,000 that could otherwise be distributed to your loved ones. An estate plan allows the estate to avoid probate, thereby, saving $46,000 off that bat. And, this doesn’t include the various other economical advantages an estate plan affords.