Average cost of estate planning
Today we're going to discuss WHAT COSTS MORE A WILL OR A TRUST TO ADMINISTER. We're just talking about the cost today.
In last week's video I said that we would go over the cost comparison of a probate versus a revocable living trust-centered estate plan. So, let's jump right in.
First, I need to disclose that these numbers are just general numbers that I'm making up based on average cost of estate planning for each of these different types of estate plans. Now, you might argue that some of these numbers I'm using are too high, or that maybe they're too low. But the important thing for our purposes here is that the calculations hold true.
So, in the comments section below, please let me know whether you think my probate costs are too high or too low, and let me know what you think a probate costs. A revocable living trust-centered estate plan can run anywhere from a couple of thousand dollars to tens of thousands of dollars, depending on how big the estate is and how much tax planning is necessary.
How much to get a living Trust done
For our purposes here today, I'm going to use generally what we see for estates for married couples from about $200,000 up to $1 million in assets. How much does it cost to set up a trust - Now, just to be fair to the last will folks, we're going to say the average cost of revocable living trust at about $5,000 for a revocable living trust package. Now, I actually think 5,000 is a little on the high side, but we're going to go with that number today just for illustration purposes.
How much to create a Will
Now, for a married couple last will and testament package and, again to be fair to our last will folks, I'm going to pick $1,800 for a last will package for a married couple. Now, right off the bat, the last will folks have a lead coming in at $3,200 less, but let's keep going. You know from watching our videos here that I always say that your estate plan must continue to evolve as your life changes.
So, over your lifetime, let's say you make four updates to your estate plan, and that each of those updates cost roughly about $500. These updates are going to cost the same whether you have a will or a revocable trust. I know what you're thinking. If it costs the same to update a trust or a will, then I'm still $3,200 ahead of the game with a last will package. And you're correct, but let's keep going. Several years down the road the first spouse passes away.
Cost of administering a will
If the married couple had a last will and testament package, then we are going to have to probate the estate of the first spouse to die. Depending on how well this married couple planned, the cost of administering a will is going to cost anywhere from $5,500 to about $8,500. And, again, these are just estimates that I have seen. Now, guys, do not quote me on any of these numbers. They are just averages.
We had two probates last year that cost well over $20,000 each. We are just coming up with these numbers here for illustration purposes, and they're just kind of averages that I have seen. So, let's say the first probate costs $7,500 for court costs, attorney fees, filing fees and everything to get the probate done.
For the couple that had the revocable living trust-centered estate plan package, well there's no need for a probate if they properly funded their trust. The surviving spouse just takes over, and continues to live their life and operate their trust.
Cost of Updating Trust
It's not always going to be so simple, and the surviving spouse will usually come into our office for a little assistance and a consultation. So let's say that we might do another $600 of work for the revocable trust, when the first spouse passes away. As you can see, after the passing of the first spouse, all of a sudden, the folks with the revocable living trust package are now $3,700 ahead of the last will couple. But let's keep going.
A few years later down the road, the surviving spouse passes away. Now what do we do? You guessed it, for the married couple that had the last will package we need to probate the estate of the surviving spouse.
And guess what? That costs more money. Now, when we probate the second spouse's estate, it will usually cost more because we are transferring real estate and other assets to their heirs.
But, for our example today, let's keep it with just another $7,500 to probate the estate, just to keep things simple and to keep it fair. The married couple with the revocable trust package had a successor trustee in place to take over and distribute the trust assets according to the terms of the trust. Sometimes, the successor trustee will do everything themselves, and so there really will not be any additional cost.
Probate Costs go up
However, sometimes they might need legal assistance, so they might spend another $1,200 for legal fees to come into our office and talk to us. So, can you see where we're heading with this? Let's go over all of these numbers again from the beginning. $1,800 for a married couple last will and testament package versus 5,000 for a married couple revocable living trust-centered estate plan package. Four updates to each plan over the years at $500 each, for a total of $2,000 for all of these updates. Probate fees for the first spouse, when they pass away, are $7,500, and $600 cost for the revocable trust folks.
When the second spouse passes away, we have another $7,500, and maybe $1,200 for the couple with the revocable trust. So the total cost for the estate plans are $18,000 for the couple with the last will package and $8,800 for the couple with that revocable living trust-centered estate plan. That is $10,000 difference. The couple with the last will package have less expenses upfront but have a substantial continuing cost over their lifetime. If we are talking about an average estate of around $180,000 here in Oklahoma, then that is 10%, and it's $10,000 less that your kids or your heirs get.
Average cost to create a living trust
Now, two things to remember here. First, we came up with the numbers here for illustration purposes only. We came up with average revocable trust attorney cost.
No matter what numbers I use when I'm showing this to clients and going over it in my office, the calculations always hold true. In the long run, a last will and testament package is going to cost your estate a lot more money than the average cost to create a living trust. And the second thing to remember is these numbers are based on everything going smoothly.
If the heirs start fighting and more law firms get involved, then the costs are going to go up. As an example, we had a probate a few years ago where the heirs were fighting over a car that was worth probably about $1,200.
However, all sides together probably spent about $10,000 in legal fees, fighting over a 1,200 car. None of them even wanted the car.
They just didn't want a particular person to have it, and so they spent a lot more money than they needed to. It's situations like that that will increase the cost of probates substantially.
If you got value from this little exercise today, then please hit the like button below. And to get you thinking, I invite you to please download our estate planning strategies guide, and I'll put a link in both the description and the comments section below. That's all for today. I hope you have a great day and, as always, an awesome week. See you next time and thanks for watching.
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