I regularly get asked, “How much does a will cost?” Or, “How much is a trust?” Well, this is not a simple question to answer because a will or a trust is only a single component in an overall estate plan. It is like asking a car dealer, “How much is it for the engine and transmission?” I guess the dealer could sell it to you, but it is not going to take you down the street.
A properly drafted estate plan keeps you in control while you are alive and well, plans for you and your loved ones in the event of your mental disability, and after you are gone, leaves what you have to whom you want, when you want, the way you want. There are a lot of different types of estate plans being sold out there. It is best that you know what you are buying.
In today’s column, we will cover the three most common types of will estate plans that I see: simple wills, wills with a testamentary trust and will based plans. Next week, we will cover the two most common types of trust estate plans I see: bare bones, forms based “simple” trusts and fully funded trust based plans.
Simple Will. A simple will just says, when I am gone, this is who gets all my stuff and this is who is going to make it happen. I have seen fees for attorney drafted wills as little as $50, but more likely are in the $100-$300 range. For free, you could attempt to use a Michigan statutory will form, but if it is not completely filled out properly, your instructions may not be followed.
If all you have is a simple will, you have one of the most basic types of estate plans. It is a good start because it gives instructions regarding the distribution of your stuff after you are gone. What you may not know is:
A will only takes effect at death. If you have a will, but no financial or healthcare powers of attorney (“POAs”), upon your mental disability, your loved ones will have to petition the probate court to: 1) appoint a guardian to make your personal and medical decisions, and 2) appoint a conservator to make your financial decisions, with additional fees. I call this the “Lifetime Probate”.
A will only controls assets in your sole name. Assets with joint owners, beneficiary designations, payable on death (“POD”) or transfer on death (“TOD”) provisions bypass the will and are distributed in accordance with those designations.
A will must go through probate. For your will instructions to be followed, the probate court must admit the will and appoint a personal representative (formerly executor) to carry out your instructions, for a fee.
Any distributions to minors or mentally disabled beneficiaries require a probate court appointed conservator to manage those assets, for a fee. When the minors reach age 18, they gain all the wisdom and insight of adulthood and are entitled to receive their entire inheritances. They then may go to the University of Corvette.
Will with Testamentary Trust. To prevent a beneficiary from going to the University of Corvette, you may be tempted to just add some trust provisions to your simple will, to take effect after your death. You may want to do this because it doesn’t cost much more than a simple will. However:
• There typically are only limited trust provisions in a will, maybe only several pages. If a situation arises which is not covered in those several pages, the probate court will have to be petitioned to fill in the gaps in the trust instructions, for a fee.
A testamentary trust is set up by the probate court and is usually supervised by the probate court for the lifetime of the trust, including annual reports that must be prepared for the court. More fees.
If you do not have financial or healthcare POAs, you have not avoided a guardianship or conservatorship upon your mental disability. And more fees
If you want a trust, you are usually better off having a revocable living trust. You not only have more instructions with a revocable living trust, after your death, it avoids probate court supervision if properly drafted and implemented.
Will Based Plan. A will based plan is what I consider the first viable type of estate plan and the minimum everyone should have. It includes a simple will and both financial and healthcare POAs. If you have minor children, it may also include a parental appointment of guardian. With a will based estate plan:
You avoid probate court proceedings for your guardianship and conservatorship during your mental disability.
You also avoid probate court proceedings to appoint a guardian for your minor children upon your mental disability or death.
Your will must go through the probate process after your death, with associated fees.
It would not be unreasonable to pay $400-$600 for a will based plan for a single person. Many attorneys, including myself, give clients a break on the fee when drafting will based estate plans for a husband and wife at the same time. I do not charge double the single person fee because I meet with both the husband and wife at the same time, and although I draft twice the number of documents, they are usually very similar.
A will based plan may include other documents and services, such as assistance with removal of joint owners and adding financial POA agents as signers on accounts for asset protection planning, and transfer-on-death (Ladybird) deeds and assistance with beneficiary designations, PODs and TODs for probate avoidance planning. The addition of asset protection or probate avoidance services can increase the cost of a will based plan to $1,000-$2,000, or more.
As you may surmise, I generally do not recommend simple wills or wills with testamentary trusts. If you do not choose a trust plan, you should have a will based plan, which at a minimum, would include financial and healthcare POAs and a simple will. Next week, we will discuss trust plans, what they include and what you should expect to pay.
By: Matthew M. Wallace, CPA, JD
Published edited May 13, 2012 in The Times Herald newspaper, Port Huron, Michigan as: With estate planning fees, you get what you pay for Will based plans offer the greatest guarentees