WHAT'S SO BAD ABOUT PROBATE ANYWAY?
- It's expensive. Probate always deals with “Gross value” of assets. For example, a $1 million house with $1000 in equity is a $999,000 asset for Probate purposes. As a result, fees, expenses, etc., will all be based off of a value of $999,000, not just the $1000 in equity. Attorneys' fees are statutory, meaning they are a percentage of the gross value of the estate. So the fees will be a percentage of the $1 million dollar gross value of the property, not the $1000 net value of the property. For an estate with a $1 million dollar gross value (which is most estates in California with property values as they are), the attorneys' fees alone will cost over $25,000.
- No step-up in basis. Not to get overly mathematical, but if you bought property or stock for say $100,000, and when you died it was worth $500,000, that is a $400,000 appreciation in value. With a Trust, your kids will pay $0 in capital gains taxes on the appreciation. With a Will or no plan at all, in Probate, your kids will have to pay the capital gains on the $400,000 in appreciation. Capital gains are paid at a rate of approximately 13%, depending on a few factors. In this example, your kids would owe $52,000 in capital gains taxes because there was no Trust and the matter went to Probate.
- Your family has no privacy. Probate is a matter of public record, meaning anyone can see the content of your estate.
- It takes forever! Even the smoothest and most straight forward of Probated matters will take 18-24 months, but often times it can take even longer. During this time, the assets of the estate are frozen so an accurate inventory and accounting can be made. As a result, assets cannot be distributed or sold during this time.