For those of you who are unaware, the Probate process is a public Court process that is required when a person dies with or without a Will. It can take 12 -18 months or more to complete, providing there are no challenges and litigation. Probate is time-consuming, complicated, and often riddled with family and creditor claims and conflict. However, the best defense against the Probate process is to prepare an estate plan. You are probably wondering how much does an estate plan cost. To assist you in understanding how much it costs to design or not to design (enter Probate) an estate plan, I have outlined two alternatives to consider. Alternative 1 reflects the costs of designing an estate plan which will help you bypass Probate and Alternative 2 reflects the costs of not designing one which will force you directly into Probate. The differences should give you a clear picture of why estate planning is not only beneficial but necessary!
Alternative 1 – The Cost of Planning and Designing an Estate Plan
As mentioned above, when an estate plan is properly designed, you have a greater ability to control the costs and make informed decisions that positively impact your family members and loved ones. You also can address unique family dynamics like blended families or divorce. As such, estate plans should be uniquely designed to reflect your personal desires and it should take your family dynamics and financial situations into consideration. Designing a personalized strategy for your estate plan takes time and is well worth the cost. There are various types of estate plans; and, depending on your situation, you could choose between a “trust” or “will-based” plan. The costs will vary between the two options based on the selected attorney’s fee arrangement as well as the complexity of your estate plan.
Some attorneys charge a flat fee for designing and preparing estate planning documents and handling estate planning matters. The fees for a “Trust-based plan” can start at $4,000 and can increase depending on complexity; whereas the average cost for a “Will based plan” can start at $2,500 and can also increase depending on its complexity. Although more expensive than “Will-based plans,” Trusts can help you avoid the Probate process mentioned above, whereas Wills do not.
Conversely, some attorneys only offer an hourly fee arrangement for estate planning services. A typical hourly rate can range from $250 to $350, and possibly higher, depending on the firm. If your estate plan is complex and requires extra hours to meet your family’s needs, this will increase the cost of your plan. Given that fact, it is better to find a trusted and knowledgeable estate planning attorney who will charge a flat rate for these services. One caveat, if “other” legal issues arise while creating your estate plan, regardless of whether the attorney charges a flat rate, the attorney may have to charge you an hourly rate to handle that additional legal issue.
Alternative 2 – The Cost of Probate Administration and Failing to Design an Estate Plan
As stated earlier, designing an estate plan that only includes a Will, does not protect you from Probate Court. Whether a person dies with or without a Will, your family will have to go to Probate Court to handle the administration of the estate and transfer the assets. Probate proceedings can be very lengthy and costly, taking up to 12-18 months to complete (possibly longer). The Probate process can also cause intense family conflicts and from its public proceedings, opens the door to creditors chasing after your assets, in turn making Probate even longer, more expensive, and stressful for family members. It can cause total chaos! In addition, there are various fees that are involved in a Probate Administration such as those listed below, and this is where families lose a sizable amount of their inheritance. Those fees are:
Probate – Filing Fees:
Probate fees are paid to file your Probate petition and have your estate administered. The fees will depend on the type of estate – Regular or Small – and gross value of the estate. The fees (as duplicated from the Register of Wills’ website) are:
Regular Estate Probate Fee
|IF THE VALUE OF THE (REGULAR) PROBATE ESTATE IS AT LEAST||BUT IS LESS THAN||THE FEE IS|
|$5,000,000||—————||$2,500 plus .02% of excess over $5,000,000|
Small Estate Probate Fee
|IF THE VALUE OF THE (SMALL) PROBATE ESTATE IS AT LEAST||BUT IS LESS THAN||THE FEE IS|
|$200||$5,000||1% of the value of the Small Estate|
|See Regular Estate Probate Fee For Small Estates Over $5,000|
Probate – Attorney Fees:
Unlike the flat based attorney fees charged to design estate plans, that is not the case where Probate is concerned. An attorney’s compensation can be 9% for the first $20,000 of the gross estate value and 3. 6% for any amount over the first $20,000. As an example of what these fees can amount to, I have created two scenarios below:
Scenario #1 – Attorney fees for an estate valued at $750,000 can be $28,080.
- $ 20,000 x 0.09 = $ 1,800
- $730,000 x 0.36 = $26,280
Scenario #2- Attorney fees for an estate valued at $1 million can be $37,080.
- $ 20,000 x 0.09 = $ 1,800
- $980,000 x 0.36 = $35,280
It is believed that Americans pay up to $2 billion a year for Probate proceedings and more than half of that amount is paid in attorneys fees. These fees far exceed the amounts associated with designing your estate plan and entirely avoiding Probate.
Wait there is more! There are other attorney fees that could arise in a Probate case, such as litigation or handling a matter that is not a routine Probate matter. In that instance, the attorney may charge an hourly rate to handle that matter. This too can result in an additional bill worth thousands of dollars! Oy vey, the fees!
In addition to the fees mentioned above, there are more Probate related fees such as:
- Bond Fee for Personal Representative (PR): The Court may require the PR to file a bond as a guarantee that the PR will manage the estate’s assets on behalf of its heirs. The cost of the bond varies depending upon the value of the estate, the PR’s credit and the amount of the bond required by the court.
- Personal Representative Fees: The PR may be entitled to payment as well for serving as the PR.
- Appraisal Fees: Appraisals may be needed to determine the value of assets in the estate, such as a home(s), jewellery, collectibles, or other personal items.
- Accountant/CPA Fees: The decedent’s PR may need to retain an accountant/CPA to file a final income tax for the decedent or ongoing income taxes for the estate if it earns income.
- Tax Fees: There may also be a need to file and pay for state and federal taxes depending on the size of the estate, as well as any gift taxes.
- Miscellaneous Fees: There are other miscellaneous fees that may spring up during Probate administration that may not be anticipated or affordable.
The bottom line here is that you should avoid Probate at all costs and invest in an estate plan that will help save your family thousands of dollars, possibly tens of thousands, and will protect them from the perils of public probate proceedings. Not only does it help financially, but it also helps with the proper distribution of your assets to your desired beneficiaries.
The Lundy Law Group is committed to helping you and your family make estate planning and asset transfer as stress-free as possible. Planning your estate and legacy should be a pleasure and not a pain!
Call the Lundy Law Group at 410-480-7090 or email us at email@example.com today to start designing your family’s estate plan.