What Does it Cost to Do A Will?

Few people realize that the cost to prepare a will is only a fraction of the actual cost of will-based planning.

The actual cost of a will can only be calculated after the person who made the will is no longer here. Why is that the case? The answer lies in the nature of a will itself. A will is not effective during the lifetime of the one who made it. It is only after the maker has passed and the will has been approved by a judge in a lawsuit known commonly as a “probate” case, that we can tally the total cost of that will. Having a will locks your family into the probate system, the legal system in which estates are settled in court.

A recent call we received illustrates the devastating impact a set of wills had on one family. I received a call from a lady. I will refer to her as “Betty” (not her real name).  Here is her story.

Betty’s parents had wills prepared when Betty and her brother and sister were still young. They kept those wills and never changed them. Betty’s father died suddenly, 20 years ago. The family probated his will. I don’t know what they spent on settling his estate in a legal proceeding, but the average in Texas as of 2015 was in excess of $10,000 per estate.

Five years later Betty’s mother suffered a serious illness that required round-the-clock nursing care. For fifteen years, Betty’s mom has lived in a nursing home. It was left to Betty and her siblings to determine how to cover the ongoing cost of their mom’s long-term care. The will gave them no guidance. After all, it won’t take effect until after their mom has died. And her other legal documents, including a power of attorney, offered no help either. I don’t know whether the children sought any advice from an elder law attorney like me, or if they heard from a friend that their mom could never qualify for Medicaid until she had only $2,000.

Acting on that belief, here is how the children dealt with the cost. They:

• spent all of their mom’s cash and savings accounts ($90,000) on the nursing home; 
• sold their parents’ home and spent the proceeds ($200,000) on the nursing home;
• liquidated and spent all of their parents’ investments ($130,000) on the nursing home; and
• cashed in their parents’ IRAs and other retirement accounts ($850,000), and spent those on her care.

Finally, someone suggested that Betty call me. By this time, all her mom had left was a one-third interest in a family house in Colorado. Mom’s share is worth about $160,000. Betty said the property is up for sale, but asked if her mom could be qualified for Medicaid now. I recommended a strategy that would save about $120,000 for the family and allow mom to qualify for Medicaid.

Now I don’t know what a lawyer charged Betty’s parents to prepare their wills and power of attorney. But I do know what it ultimately cost them. That set of wills cost Betty’s family approximately $1.2 million.

Had Betty come to me, or another elder law attorney well-versed in the rules governing Medicaid, they would have learned:

• Their parents’ home would not have prevented their mom from qualifying for Medicaid. It did not need to be sold.
• Their mom’s retirement accounts could have been converted from assets to income under Medicaid rules, by simply electing for their mom to receive the income earned by her IRAs and a small amount of the principal each year. These accounts did not need to be liquidated and the proceeds lost to the cost of their mom’s care. All the kids had to do was “turn on the faucet” of income and principal distributions from those accounts.
• The only assets that would have been at risk of loss to the Medicaid system were their mom’s excess cash (about $88,000) and her investment accounts (about $130,000) – a total of $218,000.  By employing the same strategy we recommended for her mom’s last remaining asset, we could have saved approximately $140,000 of the $218,000 at risk.
• In short, proper planning would have saved the family all but about $75,000 of her mom’s assets.  For our cost to plan and implement an asset protection plan (about the cost of a couple of months in the nursing home), their mom would have been qualified for Medicaid and the vast majority of her assets, about $1.2 million, would have been saved for Betty to use to provide for her mom items that Medicaid would not cover. Those additional resources could have greatly enriched her mother’s quality of life during her nursing stay, while Medicaid covered the major cost of her nursing home and food.

So what lessons should we take away from the story of Betty and her family?

If you have a will, or no plan at all, you and your family are tied to the probate system. And your loved ones will have to pay to play in the legal system.  There are two primary threats to your life savings from a will-based plan:

1. During your lifetime, if you are disabled a guardianship proceeding may be required to manage your property.  The attorney’s fees and court costs associated with your need for a guardian will continue as long as your disability continues. I advise clients to plan on the cost of a guardianship to start at about $25,000 and rise from there, depending on how long the disability lasts.
2. After your death, to enforce your will a probate case will need to be filed, in which your family would ask for the court to declare the will to be your valid last will and testament and to appoint an executor.  The cost to probate a will in Texas can vary from $3,500 to more than $20,000, depending on the complexity of your property and on whether any of your heirs / beneficiaries elects to contest the validity of the will.
3. Your will may not cost your family as much as Betty’s family lost, but it can easily cost between $5,000 and $35,000 in guardianship and/or will probate fees and expenses.

If you don’t have any plan at all, then state law will make every decision for you. The law, not you, will determine who inherits your property, when they inherit it, and how they inherit your assets.

I hope you heed the warning signs found in this story of what it cost one family to do a will. If you have no estate plan documents in place, or your plan is based around a will, or it is based around a trust that is more than five years old, call us today. Let us help you analyze the most cost-efficient and effective method of managing your property. Click on the button below and let’s schedule a time to meet!

You and your family are worth it!

Written by Joe Breshears