No one wants to leave their family in dire straits when they die. But for some people, the average estate planning cost will have them seeking alternative options.
Some families choose simple estate planning tools online instead of estate lawyers to create a basic estate plan.
The upside to using these DIY services is that you avoid dying without a will in place. The downside to DIY estate planning services is that many lack reputability.
Using an inferior estate planning service can give you a false sense of security about your estate. Unfortunately, this can lead to even greater financial and emotional costs for your family down the road.
Estate law is a complicated web of requirements and conditions that the average person has trouble navigating. However, an attorney can ensure there are no loopholes in your estate documents that would leave your family vulnerable.
If you're considering hiring an estate planning lawyer, keep reading to understand the full cost of estate planning.
What You Need to Know About Planning Your Estate
Put simply, estate planning involves creating a set of legal documents. These documents function as instructions for what should happen in the event of your death or incapacitation.
Planning an estate can involve creating a will or trust. It can also involve designating beneficiaries or guardians for surviving minor children.
Failing to plan your estate can result in a probate court deciding who inherits your assets when you die. It can also cause your family to lose portions of their inheritance to taxes and fees.
Creating a comprehensive estate plan will ensure your family's interests are protected, so they won't suffer financial stress on top of the grief of losing a loved one.
The Cost of Estate Planning
The average cost of estate planning is around $2,500. But the cost of an estate lawyer can range anywhere from $1,000 to $10,000, depending on the type of services your estate requires.
The type of fees you pay for planning your estate will also depend on the lawyer you hire. Here are all of the potential costs and fees associated with estate planning.
Type of Estate Plan
Just as every individual's situation is unique, so is every estate plan. A family of four earning $150,000 a year requires a different type of estate plan than a millionaire who has children with multiple former spouses, for example.
On the low end of the spectrum, a basic will may cost as little as a few hundred dollars. On the other hand, a more complex estate plan might cost as much as $300 an hour.
The cost will also reflect the number of documents your estate plan requires and the complexity of those documents. While some people may only need a will, others prefer to include a power of attorney, trusts for their heirs, and other protections.
Flat Fees
A lawyer charges a flat fee when they can easily assess what type of estate plan you will need. If your estate is simple, your attorney may be able to look at your finances and family situation and know what you need.In that case, the lawyer will offer a flat fee arrangement. That means they charge you a price that encompasses all of the work they will do on your estate plan.
When a lawyer charges a flat fee, they may ask you to pay half upfront or the entire amount.
Hourly Rate
Many estate planning lawyers charge an hourly rate. This rate applies to their time spent working on your matter and meeting with you to discuss the details.
Hourly rates vary from state to state. Lawyers use them when it is difficult to estimate the amount of time they will spend planning your estate or predict the exact cost of your estate plan.
Some attorneys may require a retainer before they can begin working on your case. A retainer is a portion of the cost paid in advance. The lawyer draws from this retainer while they work and bills you for the rest later.
Billable Hours
If planning your estate requires more sophisticated planning or coordination with other professionals, a lawyer may use billable hours. For example, your lawyer may need to collaborate with your financial planner.
Contingency Fees
It is rare that an estate planning lawyer would use a contingency fee. However, a contingency fee may occur if your family needs to use a probate attorney to help settle your estate.
Estate Planning Documents
There are several different documents involved in planning an estate. While your estate plan may not require all of them, it is important to know what you might need to consider to best protect your family and assets.
Last Will and Testament
A last will and testament is a written document. It details how you want your personal property distributed in the event of your death.
You may want to bequeath certain items to specific family members. Or you may want to donate portions of your estate to charity.
Trust
A living trust is a way to protect your assets while you're still alive. When you die, the person you designate in the trust will inherit those assets. That way, you don't need to involve a probate court.
Power of Attorney
A durable power of attorney designates who can make decisions on your behalf if you become incapacitated. You want to make sure someone you trust can legally make decisions in your best interest.
A healthcare power of attorney gives a trusted person the authority to make healthcare and medical decisions on your behalf. Power of attorney combined with a living will constitute an advance care directive.
Beneficiary Designations
Certain assets bypass a will or trust. These include life insurance policies and 401(k) plans or IRAs among others.
Including beneficiary designations in your estate plan ensures you decide who inherits these funds rather than the court.
Estate Planning Cost Takeaways
The average estate planning cost can be a deterrent for some people when it comes to planning for the future. But using a DIY estate planning service can jeopardize your family's security and incur significant costs in the long run.
The best way to protect your family and your estate is to hire an experienced, reputable estate planning lawyer. For a free legal consultation regarding your estate, contact Eric Beutel today.