Get the Ultimate Guide to Legal, Tax and Financial Freedom
It’s the question I get asked more than any other – how much should an estate plan cost? In this post, I’ll do my best to answer that question…
First, it’s a bit of an unfair question. A living trust or a complete estate plan is a customized affair. Even though people are mostly the safe, they’re all a little bit different. And, those differences matter.
Let me give you an analogy. Have you ever tried to work at someone else’s desk? If you have, then you probably thought it was a strange experience. The desk probably has all of the desk parts and tools you’re used to, but it’s just not set up for you and the way you like to work. Well, an estate plan is the same way. It’s not the parts that matter. It’s how we fit them together.
Add to that, some families have goals, needs or obstacles that require special planning – a business, a large fortune, a special needs child, a “blended” family, etc. Because every plan is different, the better question is really how much should your estate plan cost?
With that understanding, let’s jump in and look at the options:
Option One: DIY Software. Computers have made it easier to use software to create estate planning documents. And, there are several do-it-yourself programs that will help you create generic planning documents at home. The documents created by these programs are very basic. The authors know that the options are going to be selected by non-attorneys who may not understand what they’re doing and may make bad decisions. So, the documents are written so that they do as little harm as possible in the hands of a non-expert.
The problem is that the best way to make sure that the document doesn’t do anything wrong is to make sure that it doesn’t do anything at all. As a result, DIY Software documents are largely ineffective. They will likely be valid and they will likely get the right property to the right people. (Although, honestly, they might not.)
I’m a fan of analogies. So, here’s another. Using DIY software to prepare a trust is like using WebMD to diagnose an illness and write a prescription. Would you really trust a computer program to tell you what medicine to take? Well, using software to draft an estate plan is the same thing. The good news is that DIY software is cheap. But, the $39 to $79 you pay now may cost your family a fortune later.
Option Two: LegalZoom or Paralegal. Many people who wouldn’t dare trust their family’s financial security to a computer program have no problem paying LegalZoom or a paralegal to prepare the documents. To be blunt, don’t. Hiring LegalZoom or a paralegal (like We The People) is no different from using a computer program. The only difference is that you are paying a human being to enter your information into the program on your behalf.
To be clear, LegalZoom is not a law firm. They do not have lawyers working on your documents. They are not allowed to give legal advice. In fact, if you make a dangerous decision, they can’t even warn you. It would be a crime for them to help you solve any legal problems. The only lawyers working at LegalZoom are the lawyer in their commercials, and the lawyers defending the company from the multiple lawsuits filed against them by state attorney generals and people who were damaged as a result of a LegalZoom estate plan.
A complete estate plan from a paralegal will probably cost you $450 to $600. A complete estate plan from LegalZoom will cost you about $700 to $1,000.
Option Three: Attorney “Trust Mill.” There are attorneys who try to offer the lowest priced estate plan they can. They figure that they’ll make it up in volume. And, volume they do. Many trust mill attorneys will prepare a thousand or more trusts per year. Unlike LegalZoom, a trust mill attorney is allowed to give you legal advice. The problem is that he just doesn’t have time.
As a matter of necessity, a trust mill lawyer asks for only the minimal amount of information. After all, at their prices, the worst thing they could do would be to find out that you have some problem that will take a few hours to solve. Those extra hours are nothing but an expense for them. So, the trust mill attorneys stick to the basics and don’t ask about anything else. The documents you get from a trust mill lawyer may be as bad as those you’ll get from software or LegalZoom. The big difference, however, is that if you ask to do something that would be a mistake, a trust mill lawyer can warn you. (That doesn’t mean they will warn you. Just that they can.)
A complete estate plan from a trust mill attorney will cost you between $600 and $1,200.
Option Four: Comprehensive Estate Planning. The most expensive option is also the most thorough. Comprehensive estate planning involves a thorough evaluation of your financial, tax and estate planning objectives – taking into account the legal and tax threats you face in your particular situation. There is no one-size-fits-all answer at this level, because every family is different.
Because of the thorough evaluation at the beginning, a comprehensive plan is more expensive than the other options – even if your needs are very basic. That’s because – instead of just assuming that there are no problems – a comprehensive planning attorney actually investigates whether you have any situations that require unusual planning.
The price for comprehensive planning also goes up as a result of the attorney presenting you with more options – things like protecting surviving spouses from financial predators, protecting children’s inheritances from divorce, passing family values to the next generation, etc.
Basically, at this level, you are paying for a thorough evaluation and a customized recommendation.The cost for a comprehensive estate plan typically starts at $2,500, but can go up quickly depending on the options you choose. Most families planning at this level spend $3,500 to $5,000 on an estate plan. (Families with more than $5 million in assets should expect to spend $20,000 or more on a complete estate plan.)
One last word on this subject… There is only one right way to plan for your family, and that’s a comprehensive estate plan. I know that it’s expensive, but the alternative is really not worth it. Last analogy. I am a die-hard woodworker. I used to buy cheap tools when I couldn’t afford the good ones. I’ve regretted every cheap tool I’ve ever bought. They either broke, ruined my project, or both. Estate planning is the same way. If you go the cheap route, you might save a few bucks up front. But, the potential risk to your family doesn’t justify the artificial cost savings.
Stay tuned to this blog, because I’ll be publishing a lower-cost alternative that will allow you to get the most “bang for the buck” when you decide to prepare an estate plan for your family.