When the phone rings in my firm with a potential new client, one of the first questions we are asked is, “how much will an estate plan cost?”
The challenge we have in answering that question, is that every person has a different idea of what an estate plan is and therefore they are often asking a different question.
How much does a will cost? How much does a healthcare proxy cost? How much does a trust cost?
Often, there is a misconception that they are paying for my office to draft some documents for them, something that can be done with very inexpensive online software. Of course we draft documents for them but what they really pay us for, is the knowledge and expertise to create the best plan for them that will protect their hard-earned assets and allow them to age with peace and dignity.
My job in the rest of this article is to make you a more educated consumer. Keep reading and you will find out some of the questions you should be asking and some of the factors that drive the cost of a good estate plan. This way, when you call my firm to schedule a free consultation, you will be a knowledgeable consumer. So let’s get started with the first question:
Do you know the difference between Estate Planning Documents and an Estate Plan?
It is crucial to understand what estate planning is and understand what a client is paying for when they retain an attorney to prepare estate planning documents for them, such as a…
- Power of attorney
- Health care proxy
If your goal is to have documents that will address your needs, then you are looking for an estate plan, and not just documents. A proper estate plan must address your individual objectives, take your personal details into consideration, and include a professional evaluation and assessment of the type and content of the documents that would best meet your personal needs and goals. The estate planning documents prepared from this effort are the embodiment of your Estate Plan.
I recently got a call from a woman, whom I will refer to as Nancy (name changed to maintain confidentiality). Nancy heard about my services from her neighbor Susan (again, name changed).
My firm had recently set up an Irrevocable Asset Protection Trust to protect Susan’s assets in the event she needs to access Medicaid benefits to pay for her long term care in the future.
Nancy decided that it sounded very smart to do the same thing and contacted me to set up an Irrevocable Asset Protection Trust for herself.
During our initial call, Nancy asked me “How much will a trust cost?”
I explained to Nancy, that every client has a unique situation and what may have been the best plan for Susan, is not necessarily the best plan for Nancy.
We would first need to have a consultation to review details such as Nancy’s family, financial, and health situation, before determining what would be the best way to move forward in achieving Nancy’s goal of long term care planning. We would need to create an Estate Plan which would determine the type and content of the Estate Planning Documents.
By the end of my meeting with Nancy, it is clear that given her personal circumstances, there were dangerous pitfalls to proceeding with such a trust and there were more beneficial, efficient, and economical ways of proceeding.
If a lawyer can quote a precise price of preparing an estate plan that will suit a particular person in an initial 5 minute phone call, then whatever the price is, the client is overpaying for ink and paper because that is all it is worth.
Any qualified attorney will need to have an initial meeting or obtain thorough intake information from a prospective client before being able to properly assess what documents are most appropriate and what provisions should be included in those documents.
Often people make a mistake in thinking that a cheap online service will do the trick. Like most things, you get what you pay for and by not having a professional assess your situation you are likely putting your assets at risk unnecessarily.
The cost of legal services will vary based on the custom-tailored individual plan.
So instead of writing a short article with a price tag to answer the question, we started with – “how much does an estate plan cost?” – I will try to explain the factors that drive the cost of a proper plan so that you can begin to understand what to expect.
Below are some of the factors that will affect the cost of an estate plan, which may include
- Preparation of a trust
- The type of trust that is best for the client
- Determination if a trust is even the appropriate solution for a client
1. The client’s assets
- The structure of an estate plan will depend on what the client owns, the client’s “assets”. A trust is a vehicle to hold assets. The assets that will fund the trust need to be carefully identified.
- If a client’s assets are primarily retirement assets and the client has minimal non-retirement assets, a trust may possibly not be the best solution. In such a case, we may proceed with general estate planning documents (i.e. will, power of attorney, health care proxy, etc.) and merely give advice for the client to structure his/her estate planning without further legal costs and minimal attorney involvement.
- If we were proceeding with a trust, and a client owns his/her home, and perhaps an additional vacation home or investment property, the legal fee would include preparation and recording of deeds and other transfer documents to transfer the property (or properties) into the trust which can add several hundred dollars or more to the plan, (plus recording fees set by each county).
- We always evaluate whether a trust is a solution, and what type of trust, based on the total value of assets that the trust is expected to be funded with. Greater values may require more extensive drafting to address minimizing tax impact, which would increase the legal fee, but greatly save potential tax liability.
- We may determine that a trust is not the most economical or efficient vehicle in the client’s estate plan if his or her asset value is too low.
2. Family situation
- Planning for a married couple may differ significantly than planning for a single person.
- Planning for someone with children may differ from planning for someone with no children.
- Planning for someone with a special needs child or other dependent beneficiary will certainly differ from planning for someone with no special needs or dependent beneficiaries.
- Medicaid planning may involve setting up an irrevocable trust for a client. However, if I learn in the course of a consultation
- That my client has no close family and/or confidante that would be appropriate to serve as a Trustee of my client’s trust, then such a trust may likely not be the best solution to protect my client’s interests.
- That there is a special needs child, a child that lives in the residence, or a spouse that will need nursing home care in the near future, these factors would all directly impact our analysis and course of action to be taken.
In the case with Susan and Nancy:
Susan has two children with whom she has a very close relationship. They were both good candidates to serve as her trustee and be involved in her estate planning. This fact, combined with consideration of the additional facts particular to her situation, it was obvious that a trust was a good solution to meet her objective.
Nancy, on the other hand, has a strained relationship with her one son. Her only daughter is not very financial savvy and has a controlling husband. She would be uncomfortable involving either of them in her estate planning, and particularly, providing them with details of the value of her assets and giving them control of her assets in a fiduciary capacity.
Considering these issues, combined with other factors carefully assessed, we determined that an irrevocable asset protection trust was not necessarily a good plan for Nancy, and there were other ways to achieve her objectives.
3. Age and Health
- Age is an important factor to consider. Medicaid trust planning involves the need to include additional people in a client’s plan, that will have knowledge and control of the assets the client is protecting. Further, and more importantly, the client is relinquishing direct control of their assets, in exchange for asset protection. With some assets, like a home, this will have little impact on the client’s everyday living. They still live in their home, and still pay the bills. However, with investment accounts, for example, they will no longer be the authority to make investment decisions, or withdraw funds. Some people are not willing to give up this control despite knowing the tradeoff of asset protection. A younger healthy person would be less inclined to do such planning and may prefer to revisit this when he/she is older.
- Health is important too. There is a five-year lookback for Medicaid nursing home eligibility. Meaning, if a person gives away their assets (money, their home), without receiving fair market value compensation, they will be subjected to a penalty in an amount equal to the value of their “gift,” the assets that they transferred.
- Giving money to a child or transferring to an irrevocable trust are both considered “gifts” that would be subject to a penalty.
- If a client is not in good health, and there is a strong possibility that a nursing home may be on the horizon, it would not necessarily be the best choice to set up an irrevocable trust.
- We may consider other methods, perhaps utilizing an exception to the transfer penalty, if available, or another strategy depending on the form and value of the assets. The direction decided upon would impact the cost of the estate plan.
4. Lifetime Planning Needs
- Perhaps the client has an excellent long term care insurance plan. An irrevocable asset protection trust may not be necessary at all.
- What if the client already had a home health aide, and is likely moving to another state in the near future, where there is a five-year lookback for Medicaid home care? An irrevocable trust can be a very bad choice and there may be much better alternatives.
These factors would be considered and would impact the type and cost of the estate plan.
5. Estate Distribution Wishes
- The cost of preparing an estate plan will also vary based on the distribution scheme in a client’s plan. If a client intends on distributing his/her estate equally to his or her children without any trust planning, this would be basic planning and would not increase a fee.
- If a client did not proceed with trust planning, but in their “basic” will, directed very detailed distribution instructions or a distribution scheme that would require trusts in the will, perhaps in the case of a second spouse, or one child that is not financially responsible, a substance abuser, has creditor issues, etc., this may involve more complex drafting, which may increase the legal fees.
6. Beneficiaries with Special needs
- It is crucial to draft carefully when a client’s estate plan leaves assets to beneficiaries that either have special needs or receive government benefits to avoid disrupting the benefits they receive without compromising their inheritance. There are different ways to set up a plan to provide for such a beneficiary and the cost of preparing a will or trust may vary based on the option selected by the client.
The above are just some of the considerations that go into determining the most appropriate plan for a client and the legal fee for the services.
As you now realize, an estate plan is not a one-size-fits all process and a trust or will is not simply a fill-in the blank document.
Careful consideration has to be put into determining the specific estate plan for each client.
Whether a trust is the right option for a client, what type of trust is the best option, the provisions to be included in the trust and/or in a last will and testament must first be considered, and only then can an attorney draft an estate plan that is appropriate to meet the client’s individual needs.
While many attorneys will be able to quote a flat fee for the services once they determine what is needed, some attorneys work by hourly fee when drafting to anticipate the different turns, issues, and client decisions, along the way.
After a thorough initial consultation, my firm is able to quote a flat fee that includes drafting the documents, a follow up meeting to discuss the drafts, and execution of documents.
I must stress that we are able to do this only after thoroughly understanding the client’s needs which I learn during their free client consultation.
- The type of trust
- Other estate planning documents required
- The objectives of the client
- The specific family, health and financial details
- Other significant factors
the fee can range between $1,000-$3,000 for a basic plan (which usually includes a will, power of attorney, health care proxy, etc.). When trust planning is appropriate the fee can range from approximately $3,000 to $8,500.
When a client retains an attorney for their estate planning, they are not paying for a fill-in-the-blank legal document that they can download on a legal forms website.
If you read this far, then you are a well-informed and savvy consumer and what you should keep in mind is that when retaining an estate planning attorney, you are paying for an assessment of your actual needs, the attorney’s advice and formulation of the best strategy to obtain your goals.
The value is in the protection of your hard-earned assets and the quality of life and peace of mind you will have.
How much do you stand to lose if your assets remain at risk?
What will be the effects if your assets were wasted by an irresponsible or substance abusing child?
Answering these questions is truly how you value the cost of an attorney in creating a plan that protects you from these unforeseen (or foreseen) circumstances.
So back to the original question, How much does an estate plan cost?
After our office’s thorough evaluation of Nancy’s situation and determining that an Irrevocable Asset Protection Trust was the wrong plan for her, we developed a more simplified plan to address her personal objectives. Nancy was able to create an inheritance distribution scheme for her $1.2 million estate as well as lifetime documents that empowered her to choose who would be making critical decisions on her behalf instead of the court making those decisions for her. Nancy’s estate plan was much simpler so her fees were on the low-end of what an estate plan can cost. However for $1,500 she now has peace of mind as well as legal protection for her well being and assets.
Nancy’s friend Susan on the other hand required a more complex plan. After our office’s thorough evaluation of Susan’s situation and creating a strategy for her, Susan would now be eligible for Medicaid to pay for her long term care while protecting her home and several brokerage accounts totaling more than $1,900,000. Our legal fee to help Susan obtain this amazing result was a mere $5,700.
In conclusion, regardless of your situation, getting a professional’s opinion on your situation can prove to be the best decision you could make in your aging planning. The great news is that my office offers free in-person consultations and you have absolutely nothing to lose. Simply call (516) 466-9455 to schedule your free consultation today.
I look forward to meeting you at a consultation soon.