Creating a will or a trust—or both—will entail out-of-pocket costs now, but you can take steps to minimize the expense and save your heirs and beneficiaries from paying more as well.
Wills, Trusts, and Your Estate Plan
An estate plan is a group of documents that dictates your post-death decisions regarding assets and property you own. Your estate is made up of more than just major expenses such as your home and car. It can also include your financial accounts, collectibles, jewelry, and any of your possessions. All property should be accounted for in your estate plan because the law requires that property ownership be transferred to a living beneficiary. To ensure your property is distributed according to your wishes, you’ll need to create a will and/or a trust. Your will can name an executor, who is someone that manages your estate through the probate process if you don’t place all your property into the name of a trust. You can appoint a guardian and/or conservator for your minor children if you have any. If you don’t leave directives, any property that doesn’t pass to a living beneficiary by some means will typically be divided among your family according to state law, such as to your spouse and children. If you have a live-in partner, they would likely receive nothing. With a trust, you can set your own rules for passing property to beneficiaries, such as that they can’t inherit until they reach a certain age or that they’ll receive their inheritances in increments. This way, you can try to ensure a beneficiary with money-management problems or an addiction can’t spend all their inheritance at once. These protections aren’t possible with a will.
What Does It Cost To Create a Will and a Trust?
The cost of forming an estate plan doesn’t have to be prohibitive. Creating a will can be relatively inexpensive if you have simple directives. You can do it online or use forms purchased at an office supply store to save on attorney fees. The cost of making an online will typically totals about $20 to $100. In contrast, hiring an attorney to prepare the document, which you may need if your case is complex, could potentially cost $100 to $300 per hour. However, attorney fees can vary significantly depending on where you live, where your property is located, and the complexity of your case. For example, estate planning will cost more in urban areas with a higher cost of living than in rural areas. The cost of preparing a trust is typically more than that associated with creating a will. It can run from about $600 up to $3,000 or more.
Factors That Affect the Cost
Probate costs are perhaps the greatest expense associated with passing your property to beneficiaries via a will, although they are not direct costs related to establishing the will. The will must be probated and this requires the involvement of a state court. The process can drag out for a year or more if your estate is significant or if there are complications. Your estate will be on the hook for filing fees, attorney fees, appraisal fees, and other professional fees during this time. All told, probate costs can cost about 10% of your estate’s value. You won’t personally have to pay these expenses during your lifetime, but they must be paid eventually, so your beneficiaries will inherit less in the end.
How To Minimize Estate-Planning Costs
You have options to lower the cost of creating a will or trust. For one, you can pass on your property to a living beneficiary in other ways. In nearly every state, the law includes alternatives. Some states, such as Oklahoma, allow you to waive the probate requirement that your named executor must post a bond to be permitted to manage your estate through the probate process. This will save your beneficiaries some money. You can also include a directive in your will that allows your executor to sell property and take other actions without involving the probate court every time. You can also pass property by placing “payable on death” designations on certain assets such as bank accounts and investments. This removes them from your probate estate. Naming beneficiaries directly on your retirement plans and life insurance policies serves the same purpose. These assets will bypass probate because they’re already named to be legally passed to a beneficiary. You can hold real estate with another individual in a similar way, creating a deed that names you both as joint tenants with rights of survivorship. The property will then pass directly to your co-tenant when you die.
