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Avoiding probate: The true cost of not having an estate plan

There are times when people may pass away without an estate plan or not have a fully funded revocable living trust. In those cases, the courts have no choice but to place assets into probate. While some may have designated beneficiaries, like life-insurance policies, others, like homes or vehicles, may not be included in any will or other estate documents.

The problem with probate is twofold. First, it takes time, and it causes your family a lot of stress. They have to go to the court for approval of the transfer of assets, which they otherwise would not need to do. This takes time. Even worse, they need to start the probate process the moment you pass away. That gives them little time to grieve without external stress.

Another major issue is the cost of probate. How much it costs depends on several things such as how much property you have and how much it's worth. The type of property also affects cost. On the whole, people who go to probate spend between $15,000 to $20,000 on average to obtain the assets they're after.

What other fees are there if your family has to go to probate?

The court itself charges a few hundred to a few thousand for probate, whereas your personal representative may charge a fee worth a percentage of the property being probated. Attorneys have their own fees, and you may have accountant fees as well. Fees for posting of a bond and having property appraised also add to the overall cost of probate. Finally, there are miscellaneous fees, which could result in a loss of between 3 to 8 percent of all assets.

Having a revocable living trust is the better option

The revocable living trust is a better option, because final fees are between 1 and 5 percent of the total value of your assets. Having a trust also means it's less likely that your family will have to go to probate, saving them time and money.

Early on, you should also have your business or property appraised, so you can indicate its value based on a certain date. These simple steps can reduce the amount your heirs or beneficiaries pay out in probate and protect your assets from taxation and other losses. Without a good plan in place, it's possible for your beneficiaries to lose thousands of dollars that you wanted them to have.

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