We were asked the other day how much people should spend on their Estate Planning. It was pointed out to us by a business adviser that their accountant got their Will done, including an Enduring Power of Attorney and appointment of Enduring Guardian, for $400.
It is similar to buying a car – up to a certain price, you get what you pay for. But getting your estate planning done correctly is a little more important than buying a car – you only die once.
Most lawyers charge between $300 and $400 per hour. A lawyer with a good understanding of investment and business structures charges no less than $400 per hour. A lawyer with any sort of tax or superannuation experience will charge significantly more.
So you need to ask yourself what exactly you are getting for $400? In fact, you probably need to ask the same question about an Estate Planning process that costs less than $2,000.
Admittedly, not everyone needs to consider investment and business structures – but many do. Almost all people have superannuation – and how this is handled can save (tens to hundreds of) thousands. Many people own one or more investment properties.
Another way to answer this question is to ask what you don’t get with a simple Will at a cheap price. What you are unlikely to get is:
- A good understanding of your investment and business structures, and how this ties in with your longer-term wealth accumulation and succession plans – the lawyer will simply not invest the time to get an understanding of these issues;
- How you can pass wealth on to children in a responsible way. How confident are you that your 18 or 21 year old child is going to make sensible decisions about $500k+ of life insurance or superannuation? and
- You will not get a complete explanation of all of your options to save tax and protect assets.
So to answer your question more directly, we would suggest that Estate Planning should cost around:
- $600-$800 for a simple Will, and straight-forward Enduring Power of Attorney and appointment of Enduring Guardian/ Advance Care Directive.
- $1,200 to $1,900 for a more in-depth analysis of your circumstances, including possibly incorporating a testamentary “second chance” trust for young children.
- $2,750 – $5,000 for an Estate Plan that deals adequately with more complicated investment portfolios and business assets.
- $6,000 – $8,000 for more sophisticated high-net-worth scenarios, including more complex business and investment affairs.
I am sure that some people will take exception to this view. But if someone is providing this service for any lower price, you need to ask yourself:
- Does this person actually know what they are doing?
- If they do know what they are doing, then why are they charging below market value – or actually below their real opportunity cost – for this service? What else is motivating them?
And what about ‘free Wills’ from the public trustee or an executor company? A quick look at what they charge per year to administer your estate after you have died will give you the answer. One of the well known public trustee companies that we looked up recently published a rate $19,800 to administer an estate with gross assets of around $600,000 (excluding the family home). Or $8,800 for an estate with gross assets of $400,000. Gross assets means before any debts. They also generally charge a commission on the annual income, as well as fixed fees to perform various administrative tasks, such as preparing and filing tax returns. This compares to what a lawyer is likely to charge to obtain probate of an estate of this size, being around $1,000 to $2,000.
There are ways to save money on estate planning, and still end up with a good result. The first is to invest some of your own time to get a good understanding of all the relevant issues. The other articles on our site are a good place to start. You should then put together a list of your assets and liabilities, and give some detailed consideration as to who you are going to give what.
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