Estate Planning Fees: The 6 Levels of Service

November 24, 2010
300px Internal Revenue Service Building1 Estate Planning Fees:  The 6 Levels of Service

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The distinguished blogger Hani Sarji, in his excellent forbes.com blog “Estate of Confusion”, has recently posted twice about estate planning fees.  Here, I continue the discussion by describing what I see as the six available levels of service for estate planning.  Be sure to pay close attention to the pros and cons for each as well.

All prices estimated are per individual and not per couple or family.  Also remember that in most cases, lawyers cannot quote you a fee until they know what will be involved.

Do-It-Yourself ($0 – $100)

Description – Self-preparation of will through office-supply store’s forms, software, or books such as the ones provided by nolo.com

Pros – Least expensive.  Sources like nolo.com do indicate when consulting a lawyer is more appropriate.

Cons – Reliance on one-size-fits-all solution.  Resources do not cover all potential legal issues, and some even contain outdated law.  Some do not prepare or adequately explain the importance of ancillary documents (power of attorney, living will, etc.).  Leaves impression that estate planning is finished after document is filled out.

Online Preparation Firms ($100 – $200)

Description – Preparation online without a direct relationship with a lawyer.  You fill out a questionnaire, and then the firm sends you the result.

Pros – Fast and inexpensive.  Some lawyers will separately review these for you for any errors and omissions.

Cons – Reliance on generalized sources that don’t know your circumstances.  Documents not necessarily prepared by attorney and are generally provided “as-is” (little recourse if in error).  Some companies have been successfully sued for unauthorized practice of law.

Virtual Law Offices ($100 – $500)

Description – Similar to online preparation firms, but with lawyer oversight.  You generally fill out a questionnaire, but instead a law firm reviews and discusses your answers with you thereafter.  Virtual law offices are available in nearly all states.

Pros – Least expensive lawyer option.  More accountability – lawyers are backed by insurance in case of errors or omissions.  More personal – lawyer directly communicates with you before document is complete.

Cons – Some argue that lawyers should not offer piecemeal solutions to clients, especially if more complete advice is necessary.  Reflects a transactional, rather than a relationship-oriented, approach.

Will-Based, No Tax Plan ($300 – $1,500)

Description – For those who first seek an estate plan from an attorney, this is probably the most popular level, as it includes both wills and ancillary documents.  Fees vary by location – they are generally higher near big cities and lower otherwise.

Pros – This option is appropriate for those with perhaps the simplest family situations.  Plans are more custom-designed for your personal situation than the earlier options, and are therefore more relationship-based as well.  You can usually find a good deal due to market forces.

Cons – Fewer lawyers work in this range because it is tough to maintain a strong business model and more and more people are choosing the previously mentioned options.  As of this date, the federal estate tax rate in 2011 and beyond is unknown, so your best plan may be more uncertain.  Additionally, many estate planning lawyers find the will-based plan as incomplete.

Trust-Based Plans ($1,500 – $5,000)

Description – Most common for estates in the millions, but growing in popularity for those with less.  An increasing number of estate planning lawyers prefer this option to the will-based plan because it not only provides an effective way to reduce or eliminate estate taxes, but it can also protect a family during incapacity.  Practitioner must have the technical knowledge to prepare documents carefully to avoid negative IRS interpretation.  Wide range of fees based on number and variety of strategies that can be used.

Pros – More experienced and talented estate attorneys are common at this level.  Lawyers commonly work with your other advisors, such as accountants, bankers and financial advisors, to create your best possible fit.  A well-drafted trust can provide asset protection for descendants.

Cons – Bargain hunters or those who believe they “only need a will” tend to avoid this level, whereas many in that situation probably needs the trust-based plan.  Requires more work annually.  Errors by those less experienced can result in costs in the hundreds of thousands or more.

Advanced Planning (over $5,000)

Description – Planning for the rich, involving highly complex trusts and creation of foundations that can affect many people for generations.

Pros – Elite lawyers who, in general, are directly involved with government policymaking.

Cons – Most strategies are too expensive, and therefore unavailable, to the general public.

 Estate Planning Fees:  The 6 Levels of Service
 Estate Planning Fees:  The 6 Levels of Service

Scott

Scott R. Zucker, Esq. is the owner of The Zucker Law Firm PLLC, located just outside the Capital Beltway in Annandale, within five miles of the City of Fairfax, the county seat of beautiful Fairfax County, Virginia. The firm focuses mainly on estate planning services for Virginia, Maryland and Pennsylvania clientele, and seeks to do so in an affordable and approachable way. People interested in learning more can contact Scott by phone or email.

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10 Responses to Estate Planning Fees: The 6 Levels of Service

  1. November 28, 2010 at 12:51 pm

    The “virtual law firm” option, mentioned above, is fast expanding and for many middle class couples this is the least expensive option, while retaining full lawyer accountability for accuracy and validity. For law firms that use a “web-enabled document automation solution” the completion of the on-line questionnaire results instantly in a first draft ready for the lawyer’s review and if necessary further amendment and revision. The productivity benefits of “web-enabled document automation” can results in lower fees without any sacrifice in quality or accuracy, and also provides a web experience for those clients who would trade off a face-to-face meeting for the reduced cost legal services. Moreover, a coming generation which has the Internet in their DNA may prefer a web-based interaction, rather than a face-to-face interaction, particularly if the cost is less. See for example:
    http://www.smarterwill.com and for a directory of virtual law firms delivering legal services on-line that utilize web-enabled document automation technologies see: http://www.directlawconnect.com.

    • Scott
      November 29, 2010 at 2:56 pm

      Thank you for your comments, Mr. Granat.

      Mr. Granat is one of the forefathers of the virtual law office (VLO) concept, and I am honored to have him post here. He is quite obviously more articulate and well-versed at this aspect of legal service than I am. I have mentioned him elsewhere on past posts — check my index or search button.

      For full disclosure, my firm is listed on directlawconnect.com, and I did pay to be listed. While I have never spoken to Mr. Granat personally (we’ve exchanged emails), I may pay his firm in the future for more online capabilities for my clients — I will keep you posted on these developments.

  2. Pat
    December 11, 2010 at 1:00 pm

    Problem occurs not in the upfront estate planning fees for the wealthy but in how enterprising lawyers set the estate to charge and recoup fees on the back end after the decedent is dead – including the ripoff of hundreds of thousands of dollars and property, as well as to set the family up for litigation that will accrue to them as estate lawyers for the accomplice trustees – in a win-win situation for the attorneys and trustees, and a lose-lose for the beneficiaries and the taxing authorities.

    Such shams not only cost the public money in increased taxes for court construction and judicial and staff salaries to handle the judicial overload, but also under the color of law, deprive decedents as well as beneficiaries of due process under the law in a weird sort of court collusive and sanctioned advanced fee fraud.

    The estate tax is meant to be a tax on the right to transfer property, not a fund to provide income to attorneys or trustees with unreasonable immunity to steal from estates for a minimum of the 2 years allowed as standard for probate process, or the inevitable extensions granted to steal more.

    Fraud on the court is quite lucrative apparently, and the upfront fees of estate planning is the least of the cost of will/trust creation which, while people cannot afford, is thrust upon them by a government all too willing to impose tax upon the dead as well as the living left behinds as a basis of proper taxation – the ultimate victim insult.

    • Scott
      December 11, 2010 at 9:33 pm

      Pat–

      Thank you for submitting your thoughts here. It sounds like you may have experienced some frustrating times during a family member’s estate administration. If so, I am sorry that happened to you; there are many, many ethical and professional estate planning and administration attorneys out there, and it is a shame when one bad apple seems to ruin the whole bunch.

      Let’s assume that your entire post is correct. If so, one of the great benefits of American jurisprudence is the ability for any citizen to begin a grassroots campaign to have the law changed. It may take a while, but history shows many examples of great reforms starting from the frustrations experienced in a single case (see the earlier post on this blog about the two great ladies who fought to have “Loretta’s Law” implemented in Maryland this year).

      Why not take your particular facts to your local or state congressperson? Perhaps you too could help change the status quo.

      Best wishes,
      Scott

  3. March 23, 2012 at 7:13 pm

    I disagree that most people only need a Will based plan. There are many important reasons why a Will isn’t sufficient. The decision to have a Trust based plan is not just based on estate taxes. They include people who have a disabled or bankrupt beneficiary or a beneficiary who is married to a person who is bankrupt or disabled, a beneficiary who is young, or a beneficiary who is reckless and irresponsible. Additionally, the client may have real estate outside the Commonwealth of Virginia, hold problematic assets (promissory notes) or may have Medicaid related planning issues (taking advantage of the asset protected testamentary Medicaid trust provision). There are many more reason to consider a trust. When you think about it, because most assets pass outside of Probate, the most important document in a Will based plan is a POA (with detailed Medicaid provisions). Love the website, but you should revise this blog.

    • Scott
      March 23, 2012 at 7:53 pm

      Mr. Lenzi–

      Although I haven’t met you personally, I know of you by reputation (all good, I assure you).

      One of the unfortunate things about blogging somewhat frequently is that it is difficult to go back and change earlier posts when one’s viewpoints evolve fairly slowly. I absolutely agree with everything you say in your comments, and hopefully my blog has reflected this in the last year plus.

      To those reading this far, I have indeed revised my original post to more reflect my points of agreement with Mr. Lenzi. As opposed to what I wrote back in late 2010, I now strongly believe in the trust-based plans for all the reasons stated by him. Additionally, the trust format can allow for your financial affairs to continue almost seamlessly upon your incapacity or death as if very little has occurred (as long as a co-trustee or successor trustee is named). In fact, some third-party institutions (banks, brokerages, etc.) are usually better able to rely on a trust than a durable power of attorney upon incapacity if the trust has been funded and utilized in the months and years before the incapacity occurs.

      Anyways, thank you for stopping by and pointing out your views, Mr. Lenzi!

      Take care,
      Scott

      Luke Lenzi, Esq. is the founder of The Lenzi Law Firm PLLC in Alexandria, VA — a mere hop, skip and jump from my own office. I am truly flattered that he would take the time to comment here. Check out Mr. Lenzi’s blog at his website, oldtownattorney.com.

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