Skyrocketing Probate Fees – Another Reason to Avoid Probate Court
As of July 1, 2015, Connecticut probate courts earned the dubious distinction of charging the highest probate fees in the U.S. Amazingly, the Connecticut legislature voted to completely cut general fund support for the state’s probate courts for the next two fiscal years, thereby creating a $32 million deficit. In order to cover the shortfall, the fees charged for settling a deceased person’s estate in Connecticut were significantly increased and the $12,500 cap on probate fees was eliminated. To make matters worse, these changes apply retroactively to all deaths dating back to January 1, 2015. As a result, it is estimated that a handful of Connecticut estates will owe in excess of $1 million in probate fees and at least a dozen will owe in excess of $100,000.
Which Other States Also Charge High Probate Fees?
Connecticut’s new fee structure assesses a 0.5 percent fee on estates worth more than $2 million and most probate court filing fees were also increased from $150 to $225. While both North Carolina and New Jersey assess probate fees of 0.4 percent, North Carolina’s fee is capped at $6,000, but New Jersey does not have a cap. In Maryland the probate fee for an estate valued between $2 million and $5 million is $2,500 and for estates valued over $5 million the fee is $2,500 plus .02 percent of the excess over $5 million.
How Can Your Loved Ones Avoid Paying Probate Court Fees?
Even if you don’t live in a state that charges high probate fees now, budget shortfalls and fee changes could occur at any time. Also, in most situations it’s easy to keep your estate out of probate court and avoid all of the fees and costs associated with it:
- Gift your estate while you’re still alive. While it really isn’t practical to give all of your assets away during your lifetime, it is possible to gift assets into a special type of trust or a family business entity of which you can be a beneficiary or stakeholder.
- Own property jointly with others. If an asset such as a home is owned by two people as joint tenants with rights of survivorship and one of the owners dies, the surviving owner will become the sole owner of the home outside of probate.
- Use beneficiary designations. By design, life insurance and retirement accounts (such as IRAs, 401(k)s and annuities) avoid probate through the designation of a beneficiary. In addition, you can name a beneficiary for your bank accounts using a payable on death account and for your investment accounts using a transfer on death account.
- Create and fund a revocable living trust. When you create a revocable living trust and transfer the title of your assets into the name of the trust, you will no longer hold title to your assets in your individual name. Instead, your assets will be converted into property under the control of the Trustee (which can be you while you’re alive and a spouse, child, friend or bank after you die). After you die, the property held in the trust will pass to the beneficiaries you name in the trust agreement outside of probate.
Final Thoughts on Avoiding Probate Court
While probate is easy to avoid using any of the methods described above, there are pros and cons that need to be considered for each method. Please contact our office if you are interested in determining the best way for your estate to avoid probate court and all of the fees and costs associated with it.