How To Shop
There are three phases, or steps, in the estate planning process. Your entire understanding of estate planning depends on your understanding these three steps. The fees for estate planning can also be understood in terms of these three steps. The process of making sure your plan accomplishes your objectives depends upon the strength of each of these steps, like a chain with three links:
STEP 1: Creation of the plan and organizing your estate to follow the plan
STEP 2: Maintaining the plan as the law evolves and your life changes
STEP 3: Administration of the plan during a disability and upon death
Whenever you shop for an estate plan, or more precisely, select an attorney to do the legal work to prepare the estate plan, we want to help you know what questions to ask. Following are some tips to help you through that process.
TIP 1: "WHAT ARE THE FEES FOR MY ESTATE PLAN?"
Estate planning lawyers charge in a variety of ways. Some charge by the hour to create the document; others charge a flat fee. Some charge about the same amount for everybody; others charge varying amounts depending upon the complexity of the plan.
Some firms will actually quote you a fee before you have had any meaningful conversation with the lawyer about yourself, your assets or your goals. BE WARY OF SUCH A LAW FIRM! If they charge the same fee for everybody, this suggests that they also provide the same plan for everyone. Imagine calling a car dealer and asking "I want to buy a car, how much will you charge me it?" If the car dealer answers that question without getting a lot more information from you, this tells you that he only offers one model of car.
The same thing is true of estate plans, yet many people ask that question and many attorneys give them a specific answer. Do you think that you want a plan that is just like every other plan that attorney produces? If so, you are paying for that attorney’s "word processing fee." No attorney should be able to quote you a specific fee without knowing a lot more about you than can be gathered in one short telephone conversation.
A counselling oriented attorney will spend several hours with a client before they know how the plan will be written, how much time it is going to take, and how much planning the client needs.
TIP 2: IF AFTER QUESTION #1 YOU ALREADY HAVE A FEE QUOTE, THEN ASK, "WHAT ARE THE REST OF THE FEES?"
Often you will get a long silence. "What do you mean, the rest of what fees?" might be the response. Many law firms view estate planning as a single transaction with the client. Producing some documents and being paid for printing those documents is what they perceive as the entire estate planning service.
Estate planning is a process that is only begun when the plan is written and signed. There are other costs you should be aware of! The biggest share of the fees …"the rest of the fees" … traditionally come after death. (see TIP 5)
TIP 3: "DO YOU ASSUME RESPONSIBILITY FOR FUNDING MY ESTATE PLAN?"
In reality, estate planning involves a much more comprehensive first step, plus two completely distinct follow through steps. The first step is getting the plan created, and incorporating your personal (not the attorney’s one-size-fits-all legalese) values and objectives into your plan. Then the plan will still not be ready for you to use it (by dying!) until all of your assets are reviewed and in most cases re-titled in order to follow the instructions in your written estate plan.
One of the fees that must be considered in your question about "the rest of the fees" is "how much will it cost to make sure all of my assets are properly titled to follow my plan?" We often refer to this as funding your trust (see our web page devoted to this, on Understanding Legal Title) and it is an essential part of the creation of a living trust estate plan. The fees do not have to be very much, but the work is essential and much of it involves the practice of law.
Most firms will give you form letters or instructions, but will not actually fill out the forms, track down all assets, and follow through with verification that the title has in fact been correctly changed. They leave the legwork to the clients, and in our experience the vast majority of clients won't get it done right. Please, take no offense! It’s just the truth. Re-titling all of your assets so they will follow your estate plan is a very difficult process and most clients have no experience doing it. Our service team is trained to do it efficiently, so we do it for our clients.
TIP 4: "HOW DO YOU PLAN TO MAKE SURE MY ESTATE PLAN STAYS UP TO DATE, AND HOW WILL YOU NOTIFY ME OF AMENDMENTS I MIGHT NEED?"
The second completely separate step that most attorneys ignore is the maintenance of your plan. This is such an important area we have other web pages devoted entirely to it. (Click over to "Planning for Change" and "Keeping Your Plan Current" for example.) But be sure and ask about it as you shop.
Many people seem to think that once the document (will, trust, power of attorney, or whatever) is written and signed, it can sit on a shelf until you die. This is a disastrous misconception! As just one example, within the last few years there have been literally hundreds of changes in the tax laws. Many of those affect estate plans. If your estate plan sat on the shelf during those years, and was not being updated, when you pass away it will be out of date and will not take into account all of the most recent tax planning opportunities.
Other laws change, too. Asset protection laws, divorce laws, trust laws, estate and trust administration laws … changes in all of these areas can seriously undermine what you expect to happen to your estate for your loved ones.
Many things likely to change in your life will affect your plan. People have new children or grandchildren. Divorces change the appearance of a family. You trade vehicles, sell property, and acquire different property. Each of these changes needs to be taken into account and addressed as your estate evolves. Unless your attorney has a regular process for updating client’s plans, at a reasonable and predictable fee, you will never know whether you should call and incur a fee to have a change made, and your plan will almost certainly become outdated.
If an attorney tells you "we notify you every few years to let you know you should update" or "we contact our clients to let them know if there is a substantial change in the law" … be very cautious for two reasons. One, they have no responsibility to contact you, and two, in our experience with informal arrangements like this you will probably not take advantage of it. Why don’t people take advantage of this service? Because they expect significant fees for doing the plan over again. But some attorneys do offer a regular, systematic updating process and for a small, fixed annual fee will (1) provide you amendments as needed, (2) help you with proper titling of assets as your life goes along, and (3) provide education for your family so they'll know what to do when the time comes for them to help (i.e. at your disability or death). Find an attorney like this and you’ll have real assurance that your plan will actually work as you expect.
TIP 5: "HOW MUCH WILL MY FAMILY HAVE TO PAY YOU OR ANOTHER ATTORNEY TO HELP CARRY OUT MY PLAN UPON DISABILITY, AND THEN UPON DEATH?"
No estate plan has accomplished its objective until it matures. An estate plan has not proved itself to work until the death of the individual has occurred, the estate taxes have been paid (if any are due) the assets have been divided up among the heirs, and creditors have been satisfied--generally, until the estate administration is complete.
Estate plans based upon Wills are subject to probate proceedings. Many studies have been done to determine the "average" or "customary" fees for administration of an estate through probate. Those studies suggest that a minimum of 2% or 3% of a large estate, or as much as10% or 15% of a smaller estate, will be consumed by the lawyers (and in some cases accountants) who advise the family with regard to administration through probate, and file all of the necessary paperwork for probate administration. Our own research showed the average to be 6% attorneys’ fees and almost 2% more for executors’ fees.
Proper use of a living trust avoids the need for probate in almost every case. Does this mean there are no administration fees? Absolutely not. This is a very dangerous misunderstanding that people have. One study suggests that administration of an estate with a properly drafted and funded living trust will cost anywhere from one-half of one percent on up to about 2.5%. One state (Florida) actually has a statute providing that the attorney’s fees for administration for a living trust should be three-fourths as much as the attorney’s fees for probate!
Whatever the trust administration fees are for a particular plan, there will be some! The living trust is not a Magic Book that takes care of everything with no involvement by professionals. So when you are shopping for an attorney for estate planning, make sure you get a specific answer to the question "what will the fees be for administration of my estate?"
Some attorneys still claim the cost for administration of an estate through probate is minimal or even claim there are no fees for administration of a living trust. Objective studies (such as by the AARP) have proven those claims to be false. Ask "How many estates have you administered to come up with these claims?" But if a lawyer gives you a written fee schedule for administration of your estate that is as low as one-half of one percent, you’ve found someone that is hard to beat.
If anyone tells you that you will not need an attorney to help administer the living trust at death, they are naive and inexperienced ... or flat out lying. Either way, they are simply not telling you the truth. Many attorneys who prepare estate planning documents for people have not been around long enough to see the results of their planning … they’ve never actually helped families carry out the plans. While some people are attracted to the notion that "doing a living trust means I won't have to deal with attorneys anymore" it just isn’t accurate. Nearly every family WILL need the assistance of an attorney at that time in order to do things right, protect themselves from liability and make the plan "work."
TIP 6: MOST ATTORNEYS DO NOT WANT TO GIVE A SPECIFIC NUMBER OR ESTIMATE FOR ADMINISTRATION FEES. ASK THEM SPECIFICALLY "WHAT PERCENTAGE OF THE ESTATE DO YOU CHARGE FOR ADMINISTRATION OF A PLAN LIKE YOU RECOMMEND?"
You may still get resistance to a specific answer. "Well, it depends upon a lot of factors." Okay … "What are some of those factors", you should ask. Make them spell it out for you. Attorneys who do this kind of work regularly and have an efficient process for doing it will be willing to commit to numbers. And you should get the numbers in writing.
We provide all of our estate planning clients our administration fee schedule. Our usual and customary charge to help a family administer a plan at death is one half of one percent of the estate. This is only possible when the family has kept the plan up-to-date from the time it was created until the time it is administered.
TIP 7: ATTORNEY ANSWERS: "WE DON’T CHARGE A PERCENTAGE; WE CHARGE BY THE HOUR." SO YOU ASK THEM, "HOW MANY HOURS DO YOU THINK IT WOULD TAKE AND HOW MUCH IS YOUR BILLABLE RATE PER HOUR?"
What do you really care about: How the attorney charges … or how much the attorney charges? We thought so! So pin them down to what matters: "How much will it cost my family?"
If you are talking to the typical attorney, there will still be an effort to avoid specific numbers. Be persistent and ask them to give you numbers. If they have experience, they should be able to do so. They will find you to be unusually perceptive, because in our experience only about 5% of clients have asked at all "how much will it cost after death."
Most often, the single overriding factor the attorney will want to know is "what is the size of your estate?" Why do they need to know that? Because legal fees for administration of the estate are generally proportionate to the size of the estate. In other words, they are predictable based upon an approximate percentage.
So you give the attorney a number. "I expect my estate will be $300,000." Then the attorney may start giving you numbers: "I suppose that could take about 100 hours." So you ask how much they charge per hour, and the response is "$120 per hour." Now you can do the math. If they charge for 100 at $120 per hour, that is $12,000. This would be 4% of your estate.
Once you get figures like this, ask them to put it in writing. Once you have a commitment in writing from them, now you can evaluate the total cost of your estate plan, start to finish ("finish" being the administration and division of the estate among your heirs).
TIP 8: "WHEN WILL MY FAMILY BE EDUCATED ON WHAT THEY SHOULD DO IN THE EVENT OF MY DEATH OR DISABILITY?"
A law firm that does estate planning well will have a process in place for your spouse and children to be educated on the estate planning process, including their responsibilities as the executor, administrator, trustee, or other helper in your plan. They need to know what they are supposed to do, and having them trained helps facilitate the lowest cost administration of the estate—the "Step 3" fees.
Is it best to educate the family before or after your death occurs? We submit that having them prepared for the decisions and responsibilities in advance will help the process go much more smoothly. We offer classes regularly to educate clients' families on these matters.
If the attorney you are talking to has no such process in place, or charges hourly fees to meet with your family to explain things like this to them, consider looking to a firm that does offer this service.
TIP 9: "WHAT DO YOU SUGGEST I DO TO PROTECT MY ESTATE FOR MY HEIRS?"
Most attorneys are focused in on two things: probate and taxes. The truth is, most people don’t even need a living trust in order to avoid probate or to avoid estate taxes! That said, using a living trust is one of the best ways of avoiding both taxes and probate.
But, unless the attorney has more to offer than "when you die, we'll divide it equally among your adult children without estate taxes or probate" then you are definitely getting a one-size-fits-all plan. You might as well do your own by buying a computer program ... there are some nice and easy ones on the market for a lot less than the attorney will charge you to do about the same thing.
If the attorney offers you ideas about things like
- protecting assets from nursing home or catastrophic illness,
- protecting assets from your children's potential divorces (see our web page "When In-laws Become Outlaws"),
- protecting assets from lawsuits,
- keeping your estate "in the bloodline"
- protecting your estate from estate taxes even when your children die, and
- passing the business, farm, etc. to the ones who deserve it or can manage and preserve it; and then thoughtfully explores the pros and cons of such ideas and offers to really do whatever you want toin these areas without increasing your fee for every idea he or she discusses ... well, now you're talking to a counselling oriented attorney.
TIP 10: "WHAT DO YOU THINK ABOUT POWERS OF ATTORNEY? WILL I STILL NEED ONE IF I HAVE A TRUST?"
A general durable power of attorney is like a blank check, but most attorneys have clients sign them with little or no thought or advice of the consequences. The other extreme is to have no power of attorney, or only a health care power of attorney. Some attorneys will give you a "funding only" power of attorney. But this, along with a health care power, usually falls short of the likely needs.
Ask about the following. "How can I balance the need to allow a trusted family member--or family members--to take care of important things after or if I become disabled without giving them total control over my estate and affairs?" "How about the possible need for making gifts if or when I become disabled?" "What about managing my retirement accounts during my disability, since they will not be in my living trust?"
Accomplishing these objectives takes personalization and careful drafting that cannot be achieved by one-size-fits-all legalese power of attorney documents. Don't settle for less than something you fully understand and are comfortable signing. There should be some genuine discussion of your goals when it comes to powers of attorney.
TIP 11: "SO HOW MUCH SHOULD THE TOTAL ESTATE PLANNING PROCESS COST ME AND MY FAMILY?"
Once you have gone through all of the above questions with the estate planning lawyer you are "interviewing" or investigating, compare the fees to any other recommended planning you have seen. You should be able to make sure your planning is completed at the lowest possible cost, and at the same time you should be able to achieve the complete planning results you want and expect.
Our clients can, in general, be assured that the total estate planning process, including preparing the plan, doing all of the asset titling, maintaining the plan and having it updated from year to year (yes, seeing the attorney every year to review and update!) and finally administering the plan upon death will cost no more than around one percent of their estate. Every case varies somewhat, and large estates actually need much more sophisticated estate plans and can sometimes cost more. Very small estates may cost more than one percent, just because of the minimal requirements for preparing a good plan. But the average estate planning client we see at The Estate Planning Center is assured in writing that the entire process will cost no more than around one percent. If the three steps involved in your planning add up to considerably more than one percent, you are probably going to pay too much for your plan. On the other hand, if an attorney tells you your plan will cost nothing to administer at death, politely excuse yourself and move on to someone with real world experience! Remember, your family is at the mercy of the attorney unless you
Get the 3-STEP FEE COMMITMENT up front.
This web site is maintained as an educational service to the general public, and may not be relied upon as legal advice to any particular viewer or reader. The Estate Planning Center of Salem, Illinois, and its employees (the firm), can provide legal services, opinions and advice to any person who enters into a legal representation relationship with the firm by written agreement, but such a relationship cannot be facilitated or entered into via the internet. Please call to schedule an appointment if you would like to explore entering into such a relationship with our firm.