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 Resources do not cover all potential legal issues, and some even contain outdated law.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.
- “A Perfect Storm” In 2010: It’s Not Too Late To Speak To Your Estate Planning Adviser (blogs.forbes.com)
- Estate Planning (And Other Legal Advice) At A Bargain (blogs.forbes.com)
- How To Do Estate Planning On The Cheap (www.forbes.com)
- How To Do Estate Planning On The Cheap – Revisited (www.jensenestatelaw.com)