Everybody likes a deal. Whether it is finding an item on sale or getting a discount on a bill, we can all appreciate a savings.
In estate planning, a deal is not always immediately recognized. In fact, sometime the deal never becomes tangible though the benefit has been received. This is all because when you engage a law firm you are purchasing services rather than a product.
We all can determine the value of a pair of shoes or a car because they are tangible products. Trying to determine the value of an estate plan, on the other hand, proves infinitely more difficult. What are your receiving for the money you spend? Is it actually saving you anything?
A typical plan for a married couple which includes a Trust, pour-over wills and powers of attorney costs around $3,500-4,500. Typically there will be $1,000 worth of changes and updates during the couple's lifetimes. There is also a cost for administering the Trust after each spouse's death which can be as little as $2,500 or more depending on the administration needs. Though these costs can be higher or lower depending on the clients' wishes, a typical married couple, with no beneficiary disputes, spends about $10,000 from creation and amendment of the documents through the death of the surviving spouse (the second spouse to die) and the ensuing trust administration.
In the alternative, a married couple can choose to forgo any estate planning. That saves on all the expenses associated with estate planning services but does not avoid other significant expenses.
If the married couple owns a home and has some savings, it is not unusual to have an estate worth $1 million, excluding retirement plans. There will be "things to do" at each death.
At the first death, there will be little to do and de minimus
legal fees. But at the surviving spouse's death a probate must be opened.
What is the cost of a probate on a $1 million estate? The statutory attorneys' fee for a $1 million estate is $23,000. The personal representative (e.g., executor) for the estate also is entitled to a $23,000 fee. The court costs for a probate run close to $1,000. Thus, by the time the probate is completed $47,000 of the couple's hard earned money will be distributed to non-beneficiaries. This amount increases as the size of the couple's estate increases.
Not purchasing estate planning services may cost a couple $37,000 more than if the couple had purchased such services. Thus, the question a couple must answer is whether spending $10,000 ($4,500-5,500 during life) is worth a savings of $37,000?
This savings can be even greater if the surviving spouse or both spouses lose capacity and a conservatorship must be established. Usually if both spouses are alive and one has capacity, a conservator will not be necessary. Conservatorships are expensive to create and administer yet they are almost completely avoidable with proper planning.
The cost to establish a conservatorship starts at $10,000 and increases exponentially depending on the surrounding circumstances.
Once established, a conservatorship must be administered and reports made to the court for an annual cost of about $2,500 to $3,500. This does not include the human cost of a public proceeding in which a person is deemed incapable of caring for him or herself. Nor does this include the cost of probate that will need to be opened upon the surviving spouse's death.
Additionally, estate planning services can save on estate and income taxes, reduce the chance of litigation, control how and to whom a person's assets are distributed, and increase efficiency in administering a person's estate, amongst other cost saving benefits.
The question a couple must ask themselves is what are these savings worth to them?