Personal Finance: Ask the Experts

Get advice on money matters from The Bee's Claudia Buck and a panel of local experts

August 19, 2013
Is a trust really necessary for a small estate and, if so, what is a reasonable cost?

Q: My 78-year old father is going in for some heart valve repairs. He is just now getting his information/estate done! He recently informed me that he is being charged $2,500 do draw up papers. He said the attorney was from a list provided by Placer County courts. The fee seems very high to me. All he has is his home, with a large mortgage, $20,000 in a savings account and nick-nacks around his house.
My brother and I will be in charge of clearing/selling the home and then distributing assets among my father's grandchildren. Do we really need to spend $2,500? We have sat down and listed his wishes and agree with them. I will be executor and my brother will be trustee. With so little in his estate, what is the best legal way to handle this? Also, do we even need an attorney involved?

Amber, Roseville

A: You do not state the extent of services to be provided by the attorney, but I am going to assume that, based on the price you were quoted, it is for advice and preparation of documents for a small estate, such as your father's. It probably includes a revocable living trust and a will.

Your issue raises the very good question of whether a trust is required for a small estate. If one has a small estate, the primary purpose of executing a revocable living trust is to save the expense of having to go to court for a probate proceeding.

Normally, a court proceeding would be required if your father did not have a trust and died with a will ("testate") or without a will ("intestate"). If the gross value of your father's estate, including the real property, does not exceed $150,000, a small estate proceeding would be required. If the combined value is greater than $150,000, a standard probate administration will be required.

The most significant costs in a standard probate administration are fees for the attorney and fees for the personal representative, both of which are calculated using a percentage of the value of the estate, on a sliding scale basis. Most people are surprised to learn that the fees of the attorney and the personal representative are the same. Also, the value of the estate is not reduced for any mortgage on real property. For example, if your father's house is valued at $300,000 and he has a $250,000 mortgage, the fee basis for calculating the attorney's fees and the personal representative's fees would be $300,000, or the full value of the home, and not $50,000, which would be the net value after deducting the mortgage.

For an estate with a gross value of $300,000 in assets, the fees allowable under California law for the ordinary services of the attorney and the personal representative would be $9,000 for each. There are also costs, which range from $500 to $1,000 or more, and potentially fees for "extraordinary" services, if there are services outside the norm of a standard probate proceeding.

Creating a trust will allow your father's estate to pass as he wishes, without the necessity of a court-supervised probate proceeding. A caution: having a trust does not necessarily mean that you will not require the services of an attorney to carry out the trustee's duties. Trustees are required to follow the law, such as providing notices, filing forms and recording documents, among other things. If there are no disputes, these tasks are fairly easy and do not require a lot of attorney involvement. The trustee just wants to be sure that the tasks are done and distribution is made in accordance with the terms of the trust and in compliance with California law.

In my opinion, the estimate provided to your father is not unreasonable. Of course, if your father decided he did not want to spend the money for a trust and a probate proceeding is required when he dies, you could attempt to handle things informally. There is nothing in the law that prohibits you from filing the probate proceeding yourself.

You could decline to take any fees and forgo hiring an attorney. It can be done, but it is not a simple task and you will be required to follow the same procedures that an attorney would follow.

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Meet Our Financial Experts

Claudia Buck

Claudia Buck is The Sacramento Bee's personal finance columnist. Read all her columns here. Contact her at cbuck@sacbee.com

Terri Carpenter

Terri Carpenter offers advice on job hunting, retraining and career counseling. Carpenter works at Sacramento Works Inc., the career and job training arm of the Sacramento Employment and Training Agency (SETA). With 15 years in the field, she has hands-on experience with everyone from first-time job seekers to career professionals seeking advice after a layoff or looking for a mid-career change. Ask her a question.

Carlena Tapella

Carlena Tapella is a partner in the law firm of Webb & Tapella Law Corp. in Sacramento. The firm specializes in estate planning and probate, such as estates, trusts, conservatorships and litigation. She is a past president of the Sacramento County Bar Association's Estate Planning & Probate Section. Ask her a question.

Kimberly Foss

Kimberly Foss, certified financial planner, is the founder of Empyrion Wealth Management in Roseville. With nearly 30 years in the financial industry, her clients include women in transition, small business owners, retirees and "pre-retirees." Ask her a question.

Jesse Weller

Gregory Burke, a CPA and tax expert with John Waddell & Co. in Sacramento since 1984, worked as an IRS tax auditor for six years. He’s a past chairman of the California Society of CPAs. Ask him a question.

Daniel Tahara

Daniel Tahara takes your questions about California taxes. Tahara, a spokesman for the state Franchise Tax Board, has 10 years of experience as a tax auditor. Ask him a question.



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