When a loved one passes away and a probate proceeding is required to administer their estate, one of the first questions asked is how much will this cost, and who has to pay for it? Another question often asked is, who has to pay the deceased person’s debts if their estate does not have enough funds? California provides clear legal statutes as to how expenses for administering a probate, as well as other creditors, are paid for by the deceased person’s estate. So, let’s dig into what those expenses are, how they are paid for by the estate, and how fees are handled when there are not enough assets (or value) in the estate to pay all its fees or debts.
Who Pays Probate Attorney Fees?
In California, a deceased person’s estate will have to pay administrative expenses such as executors fees, attorney’s fees, and court filing fees. These administrative expenses are largely set by statute and are referred to as statutory fees. If the estate administration is complicated in some way, either because of the type of assets held in the estate or as a result of litigation, the attorney or executor may be entitled to additional fees based on the time it takes to complete the additional work. Attorney’s fees and executors’ fees are only paid at the conclusion of the probate administration and after the court has approved them.
California Probate Laws
Under California law, the statutory fees paid to the attorney and the administrator for their work in a probate administration are based upon the value of the estate. The attorney and the administrator are each entitled to receive payment from the estate in the following percentages: 4% of the first $100,000; 3% of the next $100,000; 2% of the next $800,000; 1% of the next $9 million; and 0.5% of the next $15 million. For all amounts above $25 million, a reasonable fee will be determined by the court.
If the decedent (a legal term for the deceased person) left behind little or no money but had a condominium or other real property valued at $300,000 with a mortgage of $200,000, it would be reasonable to conclude that the estate only had a value of $100,000. Important to note that for purposes of probate fees, encumbrances like mortgages are not taken into account. In this hypothetical case above, the attorney and the executor would each be paid $9,000 from the estate, here is the math: $4,000 (4% of first $100,000) + $3,000 (3% of next $100,000) + $2,000 (2% of next $800,000) = $18,000 total for administrative expense, court filing fees and other court-ordered costs. In order to pay these fees, if the estate did not have any bank or investment accounts, the property would have to be sold in order to pay the administrative expenses.
In addition to the administrative expenses, the decedent’s unsecured creditors would also be entitled to be paid, provided they comply with specific requirements and deadlines for presenting their claims. Creditors’ claims can include unpaid taxes, credit card bills, utility expenses, and other similar expenses commonly incurred during a person’s lifetime. Funeral costs and final medical expenses are also creditors’ claims. Secured creditors (typically mortgage holders) are not included in this category.
Who is Responsible for Debts?
But what if the estate does not have enough assets to pay everyone? In that case, debts are paid in a specific order. First, unpaid personal income taxes are paid, then the costs of administration (attorney’s fees and executors' fees and court filing costs), and then all ordinary unsecured creditors receive a pro-rata payment based on the total amount of their claim. In this circumstance, there would be nothing left to distribute to the decedent’s heirs, but they would not be responsible for any of the unpaid debts.
As you may imagine, probate proceedings can sometimes be complicated, even probates that seem straightforward. There are myriad rules that must be complied with in order to successfully complete the administration and distribute funds to the decedent’s heirs. If you are faced with administering a decedent’s estate, you should consult with experienced probate attorneys to learn more about your duties and obligations.
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Elder abuse is illegal and can result in legal action, either criminal or probate. If your elderly relative or friend has been a victim of financial abuse, we can help you seek legal recourse at Bellator Law Group. Contact us online or call us at (619) 232-8377 to schedule a consultation with an attorney.