Estate planning costs generally depend on the complexity of the estate, the estate planning documents to be used, the location of the attorney, and the attorney’s fees.
The factors that affect estate planning costs are:
A major portion of estate planning costs are the attorney’s fees. The attorney’s fees depend on the experience of the lawyer, the location, and the complexity of the estate. A more experienced lawyer will charge higher than a less experienced attorney. In the same way, an estate planning attorney in the city may charge higher rates than an estate planning lawyer in the suburbs. Lastly, a more complex estate will require a more thorough review of the assets to determine the best estate planning document to utilize for a particular asset, depending on the objective of the client. All of these factors combined will determine the price of the attorney’s fees.
Although there are several estate planning documents, a typical estate planning package would include the last will and testament, health care proxy and power of attorney. For reference, a last will and testament, health care proxy, and power of attorney in New York City may cost $1500 and upwards.
Most estate planning attorneys, however, recommend the execution of a revocable trust in addition to the above estate planning documents. A revocable trust avoids probate, is immediately effective, escapes the need for guardianship (similar to a power of attorney), and provides for more flexibility in the control and administration of the property during the lifetime of the client, especially in cases of blended families. The cost of a revocable trust in New York City is around $8000. It may also entail additional costs relating to the transfer of the property to the trustee’s name.
Depending on your objective, an estate planning attorney may also engage in Medicaid planning for your assets. The attorney will evaluate your assets to see how you can reduce both your assets and income in order to become Medicaid-eligible. The type of estate planning document to be used will depend on when you began your Medicaid planning.
If it is prior to the lookback period, a Medicaid Asset Protection Trust will reduce your assets on paper and exempt such asset from Medicaid estate recovery. If planning during the lookback period, a gift and loan transaction can preserve some assets, minimize the penalty period, and, at the same time, ensure that you are Medicaid-eligible.
Other Medicaid planning strategies during the lookback period include spending down countable assets, purchasing a Medicaid-compliant annuity, modern half a loaf strategy, and pooled income trust. The cost of Medicaid planning will depend on the type of estate planning document to be utilized given the amount of your assets and income and whether Medicaid planning was done prior or during the lookback period. Generally, Medicaid planning in New York City can cost 8,000.
Another estate planning cost if you have established a trust is the trustee’s fee, especially in cases of professional or corporate trustees. In New York, there is an annual commission and a pay-out commission.
The annual commission is computed as follows:
The trustee is also entitled to a pay-out commission upon trust termination and settlement of the account, which is equivalent to 1% of all principal paid out.
For wills, executors are also entitled to commission, calculated as follows:
Some estate planning documents may have filing and other administrative costs. For example, in the case of trusts, in order for it to be effective, property must be transferred in the name of the trustee. These transfers entail costs.
In the case of a will, your proposed executor must file a petition for probate with the probate court. This entails court costs and attorney’s fees. The attorney’s fees can also increase, especially when the will is contested.
Trusts and powers of attorney require notarization and witnesses. The same applies to wills, but the will requires an additional step of being executed properly in order to be valid. Usually, execution is supervised by an attorney. The notary and witnesses may entail additional costs.
Lastly, in case you amass significant assets or experience significant life milestones (such as a divorce or the birth of a child) after the execution of your estate planning documents, you might need to update your trust or will, depending on your estate planning attorney’s strategy.
Estate planning may entail costs, but proper planning for your future and your children’s future is important to preserve your assets. In case you become disabled, proper estate planning will save your family from incurring additional costs of guardianship. In case you need long-term care, proper estate planning will help you preserve your assets in order to become eligible for Medicaid and exempt your assets from Medicaid recovery.
Should you need assistance in estate planning, we at the Law Offices of Albert Goodwin are here for you. We have offices in New York City, Brooklyn, NY and Queens, NY. You can call us at 212-233-1233 or send us an email at [email protected].