Each individual’s situation is different; however, if you’re like me, you learn better by using and evaluating examples. Therefore, below, I’m going to go through a pretty standard example that we see and hear about. Please understand that this is meant to be a quick overview of the general process and is not meant or intended to be a step-by-step process on how this should be done. This is not legal advice on how to do an estate administration and the advice of a qualified estate administration attorney should be sought.
The first thing that will need to happen is that someone will have to apply, qualify, and be appointed Administrator of the Estate of the decedent. Second, an inventory, accounting and appraisal of the estate will need to be done. Attorneys and other professionals will likely need to be hired.
For this example, we will say that the decedent’s estate was made up of a home, savings, IRA, and some stocks as well as personal property such as jewelry which added up to $1,000,000.
Notices will have to go out to all potential interested persons as well as creditors. Taxes will need to be paid, property sold, and most significantly, fees will have to be paid. The attorney compensation is statutory which means that the law dictates (for the most part) what the legal fees will be. For this million-dollar estate, they break down as follows:
|4% of the first $100,000||$4,000.00|
|3% of the next $100,000||$3,000.00|
|2% of the next $800,000||$16,000.00|
|1% of the next $9,000,000||$0|
Thus, for a $1,000,000 estate, the attorney fees alone would be $23,000. That does not include the administrator fee to the administrator/representative that will be the same amount as the attorney fees as well as all the other court fees and financial services costs. Please note that for every additional million in the estate, the fees just mentioned would go up by $10,000.
Finally, the remaining funds will be distributed according to California’s intestacy succession laws. This could have a great result by having, for example, your children receive the remainder, or a terrible result by having an estranged sibling get everything.
As can be seen from the forgoing, failing to set up a living trust can end up having tremendous financial consequences that can dwarf the cost of setting up a living trust.
Attorney Ray Padilla is the founder and President of Ray Padilla Law, APC