The Costs of Probate Court

We’ve had a few articles in our newsletters this year covering the potential disadvantages of having an estate end up in probate court. First, let me remind you what probate is with a quick definition.

“Probate is the process of validating a will. At its core, it is a legal procedure that takes a deceased person’s assets and retitles them to someone else. If the deceased person did not have a will, then their property is distributed via their state’s intestate or inheritance laws. If the person who passed away executed a legally valid will that clearly expresses their desired distribution of their estate, then probate is supposed to provide a court-supervised, orderly change of title according to their wishes. (Rethinking65, “Probate is a Four-Letter Word”, Seth Bier)

 Some of the disadvantages of probate that we haven’t discussed in detail are related to cost: financial, time, and privacy. Did you know that the costs of probate vary from state to state, and range from 3% to 7% or more of the fair market value of the estate (Investopedia, Avoiding Unnecessary Probate Costs). You can find information about probate costs for all 50 states here.

In Michigan, for instance, attorney fees can range anywhere from four to eight percent of the estate value. So, for an estate of $500,000, attorney fees alone could range from $20,000 to $40,000. Though those fees can be pulled from the estate, the attorney fees associated with hiring an estate planning attorney in advance of death would likely be quite a bit less on an estate of that size.

As it relates to time, in Michigan, it is reported that very simple cases can take at least 7 months and sometimes a year or longer. Therefore, more complex cases would likely be tied up in court for more than a year. The real costs here are the inaccessibility of the estate’s proceeds for bill payment, funeral costs, etc. and the engagement of heirs in drawn out proceedings. This can leave beneficiaries in the uncomfortable position of having to pay expenses out of their own pocket, money they may or may not have available.

From a privacy perspective, you may have noticed that everything that happens in probate court is open to the public. That means anyone can attend probate court hearings, and probate files are open to the public. In addition, wills become public record once they are admitted to probate.

If you don’t have an estate plan have a conversation with your advisor about whether it might be helpful in your situation. There is no one right or wrong answer, but it is important to understand some of the potential pitfalls of probate – the avenue your heirs would likely have to take in the absence of required documents.

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