As you prepare to deal with the death of your loved one, you will encounter many responsibilities with the estate. One of the most important is the cost of the process and the various fees which occur throughout. It’s helpful to be educated and aware of these costs before you begin.
Your fees typically begin when you file the will and petition for probate with the court. You will need to pay this fee for the documents to be recorded. The first fee is the filing fee, which is based on the value of the estate. You probably won’t know the exact amount until you become executor and begin inventorying the estate. However, you will need to make an educated guess.
The court will also charge a fee for providing official documents to the executor, often referred to as letters of testament. These certificates include the seal of the court and allow the executor to act on behalf of the estate. You will most likely need to provide copies of the certificate to show to banks and other entities where you will need access to information on the deceased or their assets. You may need to request more certificates from the court if you have numerous assets and accounts to deal with.
The executor is entitled to charge a fee for handling the estate. Some don’t do this, especially if they are family or will be included as a beneficiary. However, if you choose to hire someone for this job, you’ll need to be prepared to pay the fees.
If you hire an attorney, you will need to pay legal fees for their services. A probate attorney is a valuable resource if the estate is complicated or if you have questions. The cost will vary widely based on the size of the estate and the tasks you require of them. It will be less costly if you use an attorney in a consulting role rather than hiring them to do all the paperwork and other tasks of an executor. Some attorneys charge a flat rate based on the value of the estate. However, you should expect to pay more if a beneficiary disputes the will or for other delays.
You may want to hire an accountant to handle the financial aspect of the estate, especially the taxes. Some states have an estate tax which is based on a percentage of the estate’s value. You may also need to file federal and state tax returns and pay any taxes owed. To ensure that all financial paperwork is handled correctly, a certified accountant can review or cover the entire process.
Some states or courts require a surety bond while a will may waive this requirement. The surety bond is basically insurance in case the executor deals fraudulently for the estate or if they are sued for misconduct. The size and cost of the bond will often depend on the value of the estate.
You will encounter various fees during your job as executor. One will be the cost of notifications to creditors and beneficiaries. Some states require you to send separate letters to each known creditor and heir while also putting a notice in the local newspaper. Other states are satisfied with just the newspaper notice. If you do need to mail out notices, it is best to use certified mail.
Other costs may be necessary for handling the estate. For instance, you may have to pay fees to maintain the property, especially if it is located at a distance from other assets or where the executor lives. You may need to pay travel costs to locate assets or to conduct other business for the estate. These costs may come out of the estate as they occur or reimburse the executor after the fact.
As you take inventory of what the decedent owned, you may need to hire an appraiser to determine the value. You will need to pay a fee for their services, which may be based on the value of the estate. You may also have to pay someone to sell personal and household items as well as other assets, such as vehicles and real estate. Each one of these people will usually work for a fee or commission based on the value or sale price of what you choose to sell.
Planning to Cover Costs
You will need to think about how to cover these costs upfront. Some fees, such as the court fees, will need to be paid at the time services are rendered. Others may be willing to wait for the payment until the estate is settled. However, they may have a contingency of how long they are willing to wait in case delays should arise and probate goes on for months or even years.
If the estate has liquid assets, such as bank accounts, you can usually use this money to pay for the fees. You will need to keep a record of accounting to prove how the money was spent. You may also need to get the court’s permission before you pay the fees.
Adding up the Costs
As you can see, these costs can add up quickly and must be calculated into the value of the estate before the heirs receive their portion. If an heir contests the will, it can cause delays and create a situation that will cost thousands of dollars in legal fees and other costs. You must continue to maintain all assets until they are sold or dispersed, which can be an additional expense when there are delays.
Not All Estates Require Probate
As you add up the costs, you begin to see how expensive it can be to go through probate. Fortunately, not all estates must go through probate, which could save hundreds or thousands of dollars in fees. Some states allow for an affidavit or simplified probate process if the estate is considered small.
The definition for small estate varies based on state. For example, the estate can’t be more than $50,000 in New York to file for a simplified probate. In California, you can have probated assets worth up to $166,250 to qualify.
If your estate fits these requirements, you will need to find out what is required to avoid probate. You may need an affidavit which you can show to banks and other entities that hold the estate assets. If you must go through a simplified probate process, you will likely still need to fill out a form and go through the court, but it won’t take as long and there won’t be as much oversight.
Some fees will need to be paid regardless of whether you can avoid probate or not. For example, you must pay the court filing fee to file the will. Other fees won’t be necessary, such as attorney fees if you don’t need to hire a probate lawyer.
You can often talk to an accountant or lawyer who specializes in probate and estates to get an estimate of the costs you will encounter. It pays to be prepared since you will be responsible for paying these fees if you are the executor.
If you place your assets into a living trust, they won’t need to go through probate. This is an option if your assets amount to more than what would be allowed with a small estate. The time to talk to a loved one about their estate is while they are still in good health to avoid these issues later on.
Now that you are aware that various fees and costs exist for managing an estate and moving it through the probate process, you can be better prepared to pay these costs or avoid them altogether with a living trust.