How Much Does Estate Planning Cost?
A will is one of the most basic elements of your estate plan – your heirs’ road map for what happens to you and your possessions once you’re gone or seriously incapacitated. Putting off making a will because you’re busy, or because you’re in good health now, is foolish. Without a will, the state legal system handles the job for you; the trouble is, you’ll have a judge making decisions that you’d probably prefer to make. And the assets that you thought would be going to someone you care about will be frittered away in court costs and possibly taxes.
Estate planning doesn’t cost a bundle
A will doesn’t have to be expensive. As Joe Buhrmann of COUNTRY Financial points out,“simple wills can cost as little as $10 online, or perhaps $150 from a local legal professional. If cost is an issue, you may be able to get low-cost help through a legal aid group or student-run clinic.” Buhrmann recommends contacting the American Bar Association in order to find a professional to help you.
And, of course, there’s an online version. At USLegalWills.com you can step through a series of questions to create a custom, inexpensive, legal will that you can update at any time at no extra charge. The interactive software will catch errors that you might make with a paper form.
Remember when using online resources that state laws can vary widely. For instance, at USLegalWills, you’re on your own if you live in Louisiana. Louisiana has procedures derived from French law, which haven’t been incorporated into their system.
Do I need a trust?
Unlike a will, a trust takes effect immediately, and it only covers assets that have been explicitly funded into it. Starting at around a thousand bucks, they’re not cheap – but they can help your estate avoid probate, which is way more expensive. “A small estate of $300,000 would cost about $9,000 to go through probate,” estimates Ken Koenen, an attorney in Pleasanton, CA. “A trust is much more cost-effective in the long run. A will is still subject to probate proceedings, whereas a trust can be dealt with by filing a few administrative documents with the proper entities.”
Keith A. Davidson, an attorney in Ontario, CA, concurs. “In most states, using a revocable trust is the way to go. It’s easier to administer and it applies both during incapacity and at death, unlike a will that only operates at death.” Davidson pointed out that the cost for preparing a revocable trust may seem high, but it pales in comparison to the legal fees for a probate – or litigation on the estate if the heirs want to fight about what their parents’ true intentions were.
What if I want to disinherit someone?
Maybe you want to make sure that your carefully earned money doesn’t go to a close relative that you think is undeserving. It’s your money, and you deserve to have those wishes carried out. However, Koenen cautions that courts sometimes throw out disinheritances, including those made by older individuals. He said he sometimes video-records the signing of the documents, as well as turning on the recorder and asking a number of questions to demonstrate the person is of sound mind, know who their legal beneficiaries would be, and if disinheriting anyone, state the reasons for the disinheritance.
That way, he explained, disinheritance stands a better chance of holding up in court: “‘why are you disinheriting little Bobby?’ ‘Because he is a drug addict, has been in an out of jail, and has not contacted us in 15 years!’ The judge hears that, and the case gets thrown out.”
Koenen offers one last bit of advice: “People should realize that they don’t have to distribute everything evenly. There are many cases where the parents have run a business for many years. One of their kids works and manages the business with them, while another might be an attorney in another state and a third is trying to be an actress. Do the parents really want to leave the business to all three children? It’s better to leave the business to the one who is running the business, and distribute other assets to the other children to make things somewhat even, rather than leaving a third of everything to everyone. That could ruin the business.”
Don’t forget your work
Certified Financial Planner Mitchell E. Kauffman says that even the best plans can get stale: “Often when the original documents are drafted, people are tempted to put them on a shelf and be done with it. However, life if anything involves change, whether it be with our economic situation, health, family or the tax code. Even absent any major changes, it is advisable to review your estate plan at least every couple of years. It’s best to work with an experienced financial planner who can help make the necessary modifications.”
Estate planning image via Shutterstock