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California Probate is Expensive, This is Why

Caliornia probate is expensive, this is why. In California, attorney fees for ordinary services provided in probate court are set by law and are referred to as statutory fees. The statutory fees depend on the dollar amount of assets in the decedent’s estate. The statutory amount does not include extraordinary legal services in a California probate court. Statutory and extraordinary fees require a court order for payment and are paid at the conclusion of the probate case.

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Other costs

In addition to attorney fees, there are filing fees paid to the court. At the beginning of the probate notice in newspapers must be published adding another cost. Another cost is the appraisal of tangible assets by a court appointed appraiser. In probate this appraiser is called the probate referee.

Statutory fees

California statutory fees for ordinary services in probate court are calculated as a percentage of the appraised value of the estate property as of the date of death. This amount is adjusted for any increase from the gain on the sale of an asset and reduced from the loss on the sale of an asset. If the asset is sold in probate court, the reality is the appraised value does not matter, instead the actual sales proceeds are used to determine attorney fees.

Reduction for mortgages or other debt obligations are not considered in computing the fee base. Asom disbursements for debts or expenses are also not factored into the calculation. At first, this may appear counterintuitive or unfair. One would think the attorney’s fees should relate to the amount the heirs receive.

An Example

An example is a home with an appraised one-million-dollar value ($1,000,000). The formula for calculating the fee is as follows: 4% of the first one hundred thousand dollars ($100,000), plus 3% of the next one hundred thousand dollars ($100,000), plus 2% of the next eight hundred thousand dollars ($800,000). Total attorney fees under California law are twenty-three thousand dollars ($23,000.)

If the decedent had no debt whatsoever, the attorney is paid twenty-three thousand ($23,000), and the heirs receive the remainder of nine hundred seventy-seven thousand dollars ($977,000). This appears reasonable.

However, if the decedent had a nine hundred fifty thousand dollars ($950,000) mortgage on the property, the attorney still receives twenty-three thousand dollars ($23,000). But the heirs receive only twenty-seven thousand dollars ($27,000). This may seem unfair, but the attorney’s work is the same regardless of the debt. In fact, debt-ridden estates tend to require much more work.

Statutory fees are set by statute, and even if requested by the heirs, the Court cannot reduce the fees. Although the attorney for the estate is entitled to the statutory percentage as a fee, the client can negotiate with the attorney for a reduced fee. 

Extraordinary Services

The attorney may request an order from the probate court to pay for extraordinary services. These services may include the sale of California real property in probate court, litigation of claims against the estate, tax matters, and will contests. The court can approve, reduce, or deny an attorney’s request for extraordinary fees. The courts look hard at these fees and demand support and reasonableness.

Summary

California has a two-tiered attorney fee structure in probate court: statutory and extraordinary fees. California statutory fees are for ordinary services and are calculated as a percentage of the appraised value of the estate property as of the date of death, adjusted for the sales price of any property sold. The attorney may request fees for extraordinary services. Examples of extraordinary services are real property sales, litigation of claims against the estate, tax matters, and will contests.

Additional costs are filing fees paid to the court. At the beginning of the probate notice in newspapers must be published adding another cost. Another cost is the appraisal of tangible assets by a court appointed appraiser.

Mark W. Bidwell, an attorney in Orange County, California, authored this post. The office is at 4952 Warner Avenue, Suite 235, Huntington Beach, California 92649.

Email is Mark@BidwellLaw.com. Telephone is 714-846-2888.