A loved one has passed away. You may have been named the personal representative of the estate or successor trustee of the trust. You have never had this job before and you now have to hire an attorney to administer the estate or trust. What do attorneys charge? How do they charge? What can you expect?
I did a survey not too long ago of probate attorneys in Michigan and across the country. The most quoted probate costs that I found was 5%-10% of the gross probate estate. These quoted costs included not only legal fees, but all probate expenses such as court costs and personal representative fees. By far the largest costs in a typical probate estate are the attorney fees.
So if there is a trust, then the fees are less because there is no probate, right? Maybe, but only if you have a fully funded trust based estate plan. Trust funding is completely and correctly designating your trust and individuals as owners, beneficiaries and insured parties of your assets. Basically, it’s putting your stuff in your trust.
The proper funding of your trust is critical in making your estate plan work and having the results you plan. Failure to properly fund your trusts may cause unintended results. These may include probate during your lifetime or after death; distributions not in accordance with your goals and objectives; additional taxes; and additional administrative, legal and other expenses.
In my nearly thirty years in the practice of law and preparing estate plans, I still have not found anyone yet who has been able to completely and correctly fund his or her trust on his or her own without proper assistance from the estate planning attorney. So in those cases, you are going to have the probate expenses in addition to the trust administration expenses.
When attorneys are representing an estate or trust for a death administration, they typically charge on an hourly basis. The rates for these types of matters that I usually see locally range between $175 and $275 per hour. I occasionally see rates higher or lower. The rates charged by attorneys usually vary based upon the skill and experience of the attorney in probate or trust matters and where the attorney’s office is located.
Attorneys in larger metropolitan areas tend to charge higher fees than attorneys in more rural areas. Rates for locally based St. Clair County attorneys are generally lower than they are in the Detroit area.
So what fees can you expect? Let’s first look at what I consider a simple estate, which is an estate with a home, a few bank or other accounts, a small number of heirs or beneficiaries and no disputes. When our office coordinates the probate court process for a simple estate, it generally takes the better part of a year to complete and the legal fees would be around $2,000 to $3,000.
If there are more assets for which to account or numerous heirs and/or beneficiaries to notify, the costs increase, sometimes significantly. I have seen just the legal fee portion of probate costs exceed 10% of the gross value of the probate assets.
In the case of trust death administration, the legal fees can vary widely depending upon the work to be completed. In our office, we believe in fully funded trust based estate plans to keep you in control while you are alive and well, provide for you and your loved ones during your mental disability and give what you have to whom you want when you want the way you want.
Fully funded trusts are the only type of trust based estate plans we do. For these plans of clients in one of our annual update programs, we will cap our death administration fees at one-half of one percent of the gross value of the trust estate. Total legal fees we have charged for representing some death trustees of fully funded trusts have been less than $1,000. Others have been higher.
It is like the old Fram oil filter commercial, “Pay me now, or pay me a lot more later.” It is actually cheaper overall to pay your estate planning attorney to assist you with the funding of your trust at the outset, than to attempt to do it on your own. We have found in our practice that for fully funded trust based estate plans, the initial fees, annual update fees, disability costs and the after death administration costs combined, total less than 5% of the value of the assets.
If your trust is not fully funded, there not only will be the trust administration expenses, but also the probate costs and expenses. If there is any fighting, it also increases the legal fees. When there are any hearings that need to be held or if there are objections to the will or trust, or to what the personal representative or trustee is doing, the fees could be much higher. I have seen legal fees in the tens of thousands of dollars and even the hundreds of thousands of dollars in such disputes.
If you are a personal representative or trustee who is super organized and comes into the initial meeting with a copy of the will and/or trust together with listing of all the assets, all of the debts and how they are titled with documentation, we may quote a fixed fee for the administration of the estate or trust. The reason we can do this is that we would know with what we are dealing and have done enough estate and trust administrations to know how much work is involved and how long it should take to accomplish that work.
When you are a personal representative of an estate or the trustee of a trust, we will try to get you to do as much work as possible. There are basically three reasons for this. The first reason is I do not particularly like doing non-legal administrative type work; I would rather do the legal work and counsel you on the other work. The second reason is that you can generally have more time to get the estate or trust administration accomplished much faster when you have only one estate or trust to administer.
The third reason is to keep legal fees and costs down, which is one of the goals of estate planning. Attorney rates are typically higher than a non-professional personal representative’s or trustee’s rate. By keeping attorneys’ fees down, there is more available for distribution to the beneficiaries. On occasion, the personal representative or the trustee does not have the time or the skill to administer the estate or trust; in those instances, we are happy to assist – for a fee.
Trustee and personal representative fees also vary. I have seen some non-professional trustees and personal representatives charge on an hourly basis anywhere from $20 per hour to over $100 per hour. It is not unusual for a professional trustee to charge 3%-5% for the death administration plus 1% to 2% of the value of the trust on an annual basis to administer the trust.
When you are preparing your estate plan, keep a watchful eye on attorneys who want to do all the administration of your estate or trust and volunteer to be the personal representative of your estate or the successor trustee of your trust. Total fees will be higher.
If you are a beneficiary of an estate or trust, it is sometimes helpful to review the attorney, personal representative and trustee invoices, especially if charges are on an hourly basis. Ask to see the bills. I saw one case in which the attorney acting as personal representative of the estate charged $175 per hour to clean out the deceased’s refrigerator and bag trash. I saw another case in which the attorney fees were over $20,000 when the total estate was valued at about $100,000. I have also seen attorneys charge fees not based upon the work completed but upon what they believe the estate, trust or beneficiaries would bear and called it “value billing.”
The wisest choice for most is to just bite the bullet and pay to have the funding of your trust done right the first time. If done once correctly at the outset and your trust is properly maintained with an annual review and update, your wishes will be followed at a lower overall cost to you and your loved ones.
By: Matthew M. Wallace, CPA, JD
Published edited May 10, 2015 in The Times Herald, Port Huron, Michigan as: It’s best to hire attorney in trust funding