0:00 and welcome to trust and Estates weekly I'm your host Kevin bemel and we're here every Monday at 10: a pacific time and we talk about all things related to trusts Estates probates both from an estate planning an Administration standpoint whether you're planning your own um doing your own estate planning or whether you're a professional like me who helps people in the planning and administration of their Estates and so today I'm going to talk about um a um an
0:37 an issue that um I think a lot of people um care about um and and is is somewhat opaque and so hopefully this will give you a sense of how this works and that is what does it cost to administrate a probate okay now I'm going to be talking about specifically about a probate um which this would this will exclude trusts per se okay and and that's because um when it comes to the
1:12 costs of administrating trusts um the a trust is a private agreement so generally speaking the the state in which the trust is formed um doesn't have a hand in how that trust is administrated so um I've served um both as a um paid and as an unpaid trusty of a trust okay and that typically is dictated by the terms of the trust itself so if you
1:47 um um if you are um if you have a trust or if you're contemplating um having a trust drawn up so one of the issues you'll need to decide is who is going to be or who are going to be my trustees and are they going to be compensated okay now if you choose a trust company or a professional fiduciary like me so then compensation will be an issue um and that's something you'll want to check on um in advance um before you know you you work that out in your trust
2:24 um with respect to a probate whether it's the probating of a b or whether the person dies intestate and so it's it's a um uh you know an intestate uh Administration um the the probate laws in each particular state will um Define uh how much the administrator um will get compensated okay now I'm going to go through an example of a couple of states
3:00 um where I have administrated probates and you you'll see they're they're very different um and then I'm going to I'm G we'll come back and I'll I'll talk about some additional issues um that that play into um uh the the the the you know the cost of probating or of of administrating a probate okay so let's see first of all we're going to take a look at um we'll take a look at Alabama first okay so um this happens to I just found this on a website of this fellow Brenton C
3:36 McWilliams i' I've never met um M Mr McWilliams um but I I happen to know what the law is um in Alabama because like I said I I um administrated a probate there okay so you see here in Alabama by Statute the maximum compensation for an executive or administrator otherwise known as a personal representative of estate in ordinary cases is 2 and a half% of the value of the estate property received by the executor or administrator and two and a half% of the
4:12 value of the dispersements from the estate okay and then within this maximum amount the executive administrator is entitled to reasonable compensation for services based on consideration of fairness including the following we'll talk about those factors in a minute now you might say well wait a minute isn't that just 5% of the value of the Assets in the estate and the answer is maybe okay so um if if the estate if there's no expenses in administrating the estate
4:47 then the value of the assets coming in and those being distributed are going to be for all intents and purposes the same having said that it would be very unusual for there to literally be no expenses to the estate for going through Administration first of all there's going to be some legal fees okay so the lawyer will have to be paid uh for filing um the the probate action secondly even if the administrator uh well the even if the administrator is working for free that
5:23 administrator will probably have some expenses so unless the administrator is going to absorb the expenses of administrating the estate as you know as well as not get paid um it would be unusual um for the the assets distributed to be the same as the assets come in now if the heir and let's say you have an estate where there's one Heir okay and that Heir is the executive or the administrator so then to a certain extent it doesn't really matter he's not he probably doesn't care about
5:58 reimbursing himself he's getting all the money anyway okay and if that Heir happens to be a lawyer you know who knows probate so then you know you know in theory um you know it's going to be 5% of the value of the estate but again he's probably not going to charge that because he's getting all of them he's getting all of it anyway and so then it doesn't really make any difference so um while you will hear people talk about the cost of administrating an estate in Alabama is 5% that's not really correct because
6:33 almost inevitably the value of the assets being dispersed from the estate is is going to be different than the value of the assets that were received into it by the way over time the value of the assets could have increased or declined even if there were no expenses to the estate and so that could make that could cause uh you know a different in value as well okay so so that's that's how the fees are figured in Alabama now let's let's look at um let's look at some of these
7:09 uh factors it says um a personal representative is entitled to reasonable compensation for services as may appear to the court to be fair considering such factors that include or not limited to okay novelty and difficulty of the administrative process so if it's a if it's a difficult estate to manage an estate like that is more likely to get the maximum amount okay the skill required to perform the services okay the likelihood that acceptance of the role to administrate the the estate
7:45 will preclude other employment I.E can I do this can the administrator do it in in their in their spare time or is this something that's going to be fulltime the fee customarily charged in the locality for similar Services okay the amount involved in the results obtained requirements imposed by circumstances and condition of the estate so for example an an in an intestate Administration may be entitled to a higher fee than the same estate if a will had been left behind because uh you know when when somebody
8:22 dies in testate typically that would indicate that there's been little if any estate planning and so it may be much more difficult to find all the assets deal with all the creditors etc etc etc okay um the length the nature and length of the professional relationship with the decedent okay the experience reputation diligence and ability of the person the liability Financial or otherwise of the personal representative and the risk and responsibility involved okay so um in in um you know take the court
8:57 will take into account all of those factors plus there may be some other factors um that they're taking care of so they cite a case here I think this is well versus Bradley so the um the the estate received over $40 million worth of assets and they were and the administrator was compensated less than $2 million so you can see um that that's 2% that's not 2 and a half% okay and the assets distributed were a little bit l less than um what was received okay and
9:34 yet the compensation went up okay it's to a little bit over 2% okay so the estate was very large and complex um the estate was valued at more than $35 million at the time of Well's death okay and it included some um unusual assets competition trained hunting dogs partial ownership interest and th etc etc so you can see there's all kind kind of difficulties there okay that that made the total fees um right about4 million okay um
10:13 uh I'm I'm sorry I gave uh I I gave uh not I'm sorry not 2% they were 5% okay so this was such a complicated estate that the total um uh um okay oh I'm I'm sorry um right so the the the total um uh um compensation was almost the maximum I'm sorry I gave you the facts wrong um the total the court could have approved was a little over $2
10:48 million they approved a little bit less than $2 million but close to the what would have been the 5% um you know Maxim or the two and a half% of this and two perc of that okay so and it was because of all these um you know complications here okay so so that's that's that's Alabama okay now we're going to look at um next at California here we go how much probate cost okay all right so this is a website called smart asset okay now in
11:24 California the the they have a statutory fee schedule as well and you notice it outlines the compensation for executives personal representatives and attorneys okay and it's a it's a it's a graduated schedule so the first $100,000 of value to the estate the probate fee is 4% the next 100,000 3% the next 800,000 2% so if an estate has um $1 million um in assets the fee is going to be $4,000
11:59 + 3,000 is 7,000 plus 16,000 is $23,000 so it's going to be a 2.3% fee um on the fir on the first million dollars now notice by the way that's significantly less than what you would get if this estate were in Alabama now the next $ million is a 1% fee so 1% of $9 million $90,000 plus 23 $113,000 on a $10 million estate we're
12:35 at a 1.1% fee much much lower than uh than Alabama and then a half a percent uh for the next $15 million and then above $25 million the court determines the fee so you can see that the fees in California are significantly lower having said that okay the the um Court can award extraordinary fees um if and and they can be awarded for per Performing tasks outside of the
13:10 norm okay um they can include um um managing a business that belonged to the deedon contested Wills requiring litigation complex complex legal disputes okay other issues may involve addressing environmental issues in real proper property resolving complicated Tax Matters of the estate okay so in in this case you can see um the conditions aren't necessarily the same although I would bet if you showed a judge in California the list from Alabama the the
13:47 California judge would go yeah you know these are the kind of things we take into account in terms of extraordinary fees okay so so you can see but but very different fee structures so the first thing about determining now now by the way um you noticed in Alabama the fee was for personal representatives and Executives here it's also for attorneys okay but it's it's not that the the attorney and the personal representative share it's that the the same schedule applies to each one so in essence the
14:22 attorney you know for a a for a um a $1 million estate the attorneys can charge up to $223,000 and the personal representative or executive could Char also charge $23,000 and then if there were extraordinary issues they could get you know even more than that okay so um in in in other states um the the fees will be according to their fee schedule so if you live in I don't know Colorado so the thing you need to do is to to um do a
15:00 search and and um the search I use is just um the the name of the state probate administrator fees okay and you will probably get um the answer to your question uh real real quickly okay so in fact let's let's just do an example here here we go I'm gonna really go out on a limb here and let's go back to this and let's just do here I was talking about Colorado so uh Colorado probate oops uh probate
15:37 administrator fees okay okay what are the probate fees in Colorado okay well that's just for filing let's see uh let's let's scroll down here okay cost to probate okay so here you go here's a here's a website cost of probate in Colorado this is done a couple years ago and I thought I saw it here yeah um the boulder counter Area Agency on Aging I don't know why this is
16:12 coming up how do I get no thanks um okay often amount to 5% of the estate's total worth okay now that they're not saying by the way um that that's the statutory limit okay but they're saying that's about what it is so similar in Colorado to uh what it would be in uh Alabama okay all right and so that's what you'll you know that's what you'll do to get an idea of what um probate Administration fees should be now here's the thing in a state like
16:47 California where we have this this role called a a licensed professional fiduciary so we are required by law to disclose close our fees on our website okay and so if you go to my website in fact here I'll I'll we'll we'll go ahead and share my screen once more we'll go to my website here it is okay share all right so here's divisions and services oops cck here you go bble group fee schedule okay and there it is so
17:23 here's here's my fee schedule so if you want to know what it costs to hire me to administrate an estate here's what it is it's all right here okay now you say well wait a minute how come you have all these fees and such here um when California has a statutory fee schedule okay and the reason is that um first of all I administrate trusts and so if you have a trust the fee schedule doesn't apply and so you may want to know okay
17:58 what does it cost um and the second thing is um if the heirs consent to it generally speaking the court will um consent to a fee schedule even in a probate okay so um I'm I'm I'm working on a Case right now where um the the air has agreed to um my fee schedule okay so when I apply to the court for fees um generally speaking when the you know when the the probate um is concluded so
18:34 I'll submit my um invoices based on my fee schedule and the court assuming the eror doesn't object which um the erors I should say don't object um which they they probably won't so then um I'll get my regular fee schedule and that is that is typical even in a state like uh California where um you know the the the consumer laws are are you know very very strict and all of that kind of stuff now um you know if if not you know the reality is um just be as you saw BEC You
19:12 Know in the fee schedules when there's extraordinary circumstances okay the fees can be higher than the statutory minimums and so I can also um apply for higher fees based on the actual work that I'm doing okay okay and that so and and and that isn't only for professional fiduciaries that's for any executive or any personal representative so in California for example you notice one of the issues was you know are you having to run a business as part of the administration of the estate and does the running of
19:48 that business take special skills so if that's the case um you you have a you have the you have a claim to say I'm entitled to more than the statutory uh fees because I'm doing this whole other thing that takes all this you know additional time okay so that's that's really you know where the so-called you know rubber meets the road okay and um I I want to emphasize that you do not need to be a professional fiduciary to be an executive or an
20:25 administrator in California um you only need to have the license if you're going to be um the executive or administrator for two or more Estates at the same time that's when the license requirement kicks in so I'm I I don't mean to imply that you know you you can't be an executive um you certainly can um and and but if you are an executive um whether you're a professional fiduciary or not the fee schedule does apply and so you're going to want to know the
21:00 rules conversely if you're an heir um and you're not an executive or a personal representative so then you want to know hey what is what is the estate going to have to pay okay and and you're going to want to look that up okay um like I said in California where you have professional fiduciaries who are required to disclose their fees on their license on their website so you can get fee information in other states that is not required and you won't necessarily find that information um but if you were to talk to an attorney who's specialized in
21:37 Probate they should be able to give you an idea of what it would cost to probate a particular sized estate okay um and so so that's that's the key now why is this all important well I mean the the fees for administrating the estate are going to come out of the assets of the estate so um while I'm not suggesting you necessarily want to choose an an executive or or a a personal representative based on their fees you you you obviously you want someone who's competent um but if two people are
22:13 equally competent so then um you know there's no reason to pay more fees um and so and and and number one and number two um fees are you know you may be able to negotiate fees um and so um that can save um some of the expense to the estate so um I I I have a friend here in California um and his goal is to um uh um develop a system whereby a typical estate can be um administrated in half
22:51 of the usual time or well he says twice as fast for half the cost so I may have mentioned Josh in a previous episode and now you'll notice if he can do it twice as fast for half the cost he's still in essence getting the same fee um on an hourly basis if you will um but the estate itself is saving you know quite a bit of money now he's he's generally dealing with you know smaller Estates two three million Estates okay um and and ones that are not particularly complex and so um and and and and so
23:27 working on developing you know sort of economies of scale and standardized practices and those kind of things and that's good right so for that kind of estate um you know it the more that can be routinized um the faster they can be done and that's good for everybody it's it's it's good for The Heirs because they'll get their money much more quickly it's good for the courts because things can move through the court more efficiently and it's good for the administrator or the personal repres representative the person acting in that role because they can handle a lot more
24:02 clients okay and do so do so much more efficiently and and hopefully by doing so um do better financially so um all of these things should be kept in mind there are good things to ask questions about as you're doing your estate planning um if you're an heir they good questions to ask at the beginning of the administration of the estate so that people can understand really understand um what you know what what's going to be involved what what it's going to cost okay and and um and so that there's not
24:39 um a lot of um uh dissension um when it comes time to uh you know close to close the probate um which you know that that's that's when Administration gets gets expensive when there's disputes and now there's litig and all that kind of stuff so um uh that you know it's it's a it's you know it's it's a very good idea to check all of this stuff out um in advance or at least in the beginning of the probating of an estate um to make sure that you know
25:15 everyone is as clear on these issues as can possibly be so uh that's that's our show for today thank you very much for joining me and tomorrow at 10:00 a.m. is my show business lessons from the military and in honor of today being um Memorial Day um tomorrow I'm going to be talking about the three holidays honoring military people so um I don't know about you but um I was uh scrolling through my Instagram feed this morning and I saw a
25:50 number of messages um about Memorial Day and I would say most of them um either the person doesn't really know what Memorial Day is about or um they were um making it uh different than it was uh for for another reason and so um I'm going to be talking about that tomorrow and you say well what does that have to do with uh business in the United States or business in general and tune in tomorrow at 10: a.m. Pacific time and you will find out and then on Wednesday
26:25 at 10: a.m. Pacific time is my show people making money so look forward to seeing you again later this week and um thank you very much again for joining me hope you enjoyed it if you have any questions or comments please feel free to drop them into social media or um send me an email the links will all be in the show notes after the episode posts happy to respond to them and wrapping up as I always do signing off Marie you're my bell all the best folks