The value of an estate plan is not just in the cost of the documents. The value of an estate plan is measured by whether it meets your needs and expectations, and the needs and expectations of the people that will be left behind to administer it and live under it.
In reality, there are three costs to any estate plan: (1) the initial cost of the documents; (2) the cost of updating and maintaining the plan (or not doing so); and finally (3) the typically largest cost of estate administration.
- Most people (and financial advisors) have been taught to ask what the cost is for only the first cost of an estate plan, the cost of the initial documents. They shop around law firms in town asking, “What will you charge me for it?” “It” is typically a word-processed, fill-in-the-blank, bare-bones form document.
- A second cost of an estate plan is the cost of keeping it updated and maintained. Typically clients don’t know when a change in the law makes their plan outdated, and attorneys don’t know when a change in the client’s life means the plan needs to be updated. Because attorneys often charge by the hour, clients are afraid to call the attorney because they don’t know how much it will cost. So, many plans are never updated.
- The third cost of an estate plan is the cost of administering the plan, a cost that will be borne by your loved ones after you are gone. Many attorneys will charge only a small fee for document preparation, with the expectation that they will “cash in” with a probate proceeding in the future when you are gone. The cost of administration can often equal 8% or more of the total value of an estate, costing thousands of dollars for attorney fees, trustee fees, accountant fees, probate fees and other costs. This is often true even for those with living trusts, because at the time of death plans are typically not fully funded, and both a probate and trust administration are required.
We do not use estate plans as “loss leaders,” spending as little time with a client as possible and charging a small fee to prepare generic one-size-fits-all cookie-cutter documents, in anticipation of a high fee later for a costly probate proceeding. The impact of your estate plan on you and your loved ones in the event of mental disability or death is too important to be treated in this manner.
When looking at the cost of an estate plan, you must look at all three costs to determine which estate planning firm offers better value. An initial low cost for an “it” can often be the most expensive plan overall, due to the hourly costs of updating and maintenance, and the often very high costs of administering a plan that is unfunded and outdated.