The Cost of Dying Without a Trust
What is the cost of dying without a living trust? Let’s take a quick look at one recent and well-known case.
On August 28, 2020, Chadwick Boseman, an actor most well-known for his role as T’Challa in Marvel’s Black Panther, died after his four-year-long battle with colon cancer.
Because he passed away without any living trust in place, his heirs filed a probate petition in order to receive his assets. If they had not done anything, Mr. Boseman’s assets would have remained stuck in limbo indefinitely, remaining inaccessible to Mr. Boseman’s family. Eventually, they would be lawfully assumed by the State of California.
Now– almost two years after his death– his family seeks approval for disbursement of the actor’s estate.
But what remains?
What is the cost of dying without a trust?
In some counties, probate can take anywhere from eighteen months to twenty-four months. During that time, assets remain in a state of limbo. If the most valuable asset within the estate is, for example, a business or the type of asset that can depreciate suddenly by changing market conditions, this state of limbo can be disastrous.
In Mr. Boseman’s case, two years have lapsed. His family waited– and waited.
At the time of probate, Mr. Boseman’s estate was valued at close to $4 million dollars. After paying off all related probate fees and expenses, however, roughly $2.5 million dollars will remain for his family. Essentially, this is a loss of $1.5 million dollars, more or less.
Put another way, his estate decreased by roughly 40% of its value. Although not all losses in value could have been avoided with proper estate planning (i.e., debts and taxes would likely still be owed), a substantial portion of that loss most likely could have been avoided, if only he had a living trust in place at the time of his death.
The State of California has a statutory formula which outlines the amount of fees that can be charged by attorneys and personal representatives (also known as, executors) during the probate process. This formula is based on the value of the estate, as determined through the probate process. At the time of this publication, they are as follows:
- 4% of the first $100,000 of the estate
- 3% of the next $100,000
- 2% of the next $800,000
- 1% of the next $9,000,000
- 5% of the next $15,000,000
Be mindful, however, that these fees may be applied twice– once to cover the legal costs related to probate (i.e., attorney fees), and once to cover executor fees.
Additionally, these fees are not the full extent of what probate may cost. In more complex probate cases (i.e., management/winding down of a business, tax issues, asset sales, intellectual property, lawsuits against the estate, etc.), the probate attorneys may also be entitled to extraordinary fees, at the discretion of the court. Not to mention, the court costs and expert/appraiser fees that arise from the probate process.
Privacy and Potential Litigation
Importantly, the probate process generally necessitates that a public notice be published and that a ‘wait-and-see’ period be allowed to lapse. Because of the public notice, it is not uncommon for the probate process to naturally elicit various debtors and claimants, both legitimate and questionable. This can result in years of litigation to parse out who is rightfully entitled to a share of the deceased’s estate.
If Mr. Boseman had a living trust in place at the time of his passing:
- he could have specified how he wished his assets to be distributed;
- he could have reduced the likelihood of costly and time-consuming litigation;
- his family could have avoided statutory probate fees and related court costs;
- his family could have received their inheritance within a matter of a days or months, rather than years; and
- he could have kept all of these matters private
Trust planning comes with a cost. But the cost of dying without a trust can be so much worse.
By: Makyla Vigil. Makyla is an associate estate planning attorney at Koza Law Group, APC.