Be thankful if you do not live in Connecticut, do not own property in Connecticut and do not plan on moving to Connecticut. On July 1, 2015, the Connecticut probate court gained the distinction of charging the highest probate fees in the United States. In an astonishing development, the Connecticut legislature voted to completely remove general fund support for the state’s probate courts for the next two fiscal years. In doing this they created a $32 million deficit. Probate courts have to function, so the shortfall had to be covered. In order to do so, the courts were left with no alternative but to charge higher fees. In the past there was a $12,500.00 cap on probate fees; that cap has been eliminated. Additionally, these changes go back to January 1, 2015. It is estimated that there are a handful of Connecticut estates that will owe in excess of $1 million in probate fees and at least a dozen will owe in excess of $100,000.00.
Which Other States Also Charge High Probate Fees?
Generally, the eastern states charge much higher fees than South Dakota. Connecticut’s new fee structure assesses a 0.5 percent fee on estates worth more than $2 million. Most court filing fees were increased from $150.00 to $225.00. North Carolina and New Jersey both assess probate fees of 0.4 percent. North Carolina’s fee has a cap of $6,000.00. However, New Jersey does not have a cap. In Maryland, the fee for a probate estate valued between $2 million and $5 million is $2,500.00 and for estates valued over $5 million the fee is $2,500.00 plus 0.02 percent of the excess over $5 million. In South Dakota, the filing fee to the court is $105.00. We can be thankful we live in South Dakota.
How Can Your Loved Ones Avoid Paying Probate Court Fees?
Even here in South Dakota where we have relatively low court fees to file a probate, our fees are always subject to change. With the South Dakota legislature always looking for better ways to fund the courts and better ways to shift the tax burden to system users, our fees could go up any time. Actually, in most situations it is relatively easy to keep your estate out of probate and avoid all of the fees, publicity and costs associated with it:
· Just give it all away. It really is not practical to give everything away during your lifetime. However, that would avoid probate. There are ways to gift assets in a special type of trust or family business entity of which you can be a beneficiary or a stakeholder.
· Joint property ownership. In most cases I recommend against joint property ownership. However, if an asset such as a home is owned by two people as joint tenants with right of survivorship and one owner dies, the surviving owner becomes the sole owner of the home by operation of law with no probate.
· Beneficiary designations. By design, life insurance and retirement accounts (such as IRAs and 401(k)s) avoid probate through the designation of a beneficiary. In addition, there are pay on death accounts such as bank accounts, etc. where you can simply designate the account to pay to another person on your death.
· Create and FUND a revocable living trust. When you create a revocable living trust and you transfer the title of your assets into the name of the trust, you no longer hold title to your assets in your individual name. Upon doing this, your assets are now converted into property under control of the trustee. The trustee can be you while you are alive and well, your spouse, a child, a friend or a bank. After you die the trustee can be anybody but you. When you die, control of the property simply passes to the trustee and the property is distributed according to the instructions that you have created in the trust. All of this happens without court supervision, without court expense, without publicity and without probate.
Final Thoughts on Avoiding Probate Court
It is easy to avoid probate court using any of the methods above. There are pros and cons that need to be considered for each method. Please call Doug Thesenvitz at Thesenvitz & Mickelson, LLP if you are interested in determining the best way for your estate to avoid probate court and all of the fees, costs and publicity associated with it.
Doug Thesenvitz
300 N. Dakota Ave. #603
Sioux Falls, SD 57104
doug@sfsdlaw.com
(605) 334-9448