Estate plans help secure the future of loved ones and ensure your assets and wishes are protected. Consulting an attorney is advisable for complex estates, but estate plans can cost you thousands.
While you must create legal documents valid for your state of residence, low-cost estate planning options exist.
Depending on the value and type of assets you own and the intricacies of your family situation, do-it-yourself (DIY) estate planning may be a suitable alternative.
This guide provides valuable information and a step-by-step approach to help you navigate your estate planning journey.
How Much Does Estate Planning Cost?
Estate planning costs vary widely depending on the complexity of your estate, the number of beneficiaries, and the region you live in.
On average, hiring an attorney to create a comprehensive estate plan can cost from $1,000 to $3,000. The costs can be even higher if your estate is large or involves complex planning.
Why Is Estate Planning So Expensive?
Elaborate legal matters, such as drafting wills, establishing trusts, and navigating tax laws, can be costly for several reasons. Here is a simplified breakdown of estate planning costs.
First, hiring an attorney to draft estate planning documents involves their expertise and time, which can come at a high hourly rate, even to make one document such as a power of attorney. Additionally, attorneys have overhead expenses that impact overall costs.
Large estates or complicated family situations may complicate the planning process and require additional professional services, such as accountants or financial advisors. These experts also charge fees, adding further expense.
What Is DIY Estate Planning?
DIY estate planning is creating your estate plan without hiring an attorney.
It can be a cost-effective option for individuals with straightforward estates and a solid understanding of legal and financial matters who want to complete their estate planning on a budget.
Steps to DIY Estate Planning
The more advanced planning you do, the easier the process will be. Utilize an estate planning checklist to ensure you cover the essentials while staying organized and avoiding common estate planning mistakes.
Pre-planning
Prepare the following lists:
- Assets - financial and retirement accounts, vehicles, real property, personal possessions, life insurance policies
- Liabilities - mortgages, car loans, other debts
- Heirs and Beneficiaries
- Digital Life - email and social media accounts, cloud storage
Determine who you’ll ask to be the executor of your estate, the guardian of your minor children, and trustee if you decide to create a trust.
Document creation
The following documents are necessary for a comprehensive estate plan.
This outlines how assets are to be distributed after your passing, appoints guardians for minor children or adults with special needs, and names an executor to carry out your wishes.
Durable Power of Attorney (POA)
It designates someone to handle your financial affairs (such as paying bills and managing investments) if you become incapacitated.
This document dictates your preferences for end-of-life medical treatment.
Medical Or Healthcare Power of Attorney
It appoints someone to make medical decisions for you if you are unable to do so. This person will work with your healthcare providers to follow your medical wishes.
In some states, it’s used instead of or in combination with a Living Will and a Medical Power of Attorney. It outlines medical treatment plans and healthcare preferences and names a representative to make decisions if you cannot. You may also choose to create a DNR order to note your preferences.
This is a legal entity that holds your assets during your lifetime and distributes them according to your directions upon your death. Living trusts also help avoid probate and provide privacy for your estate.
Additional documents to consider:
- E-will - Similar to a traditional will, an e-will is created and signed digitally. E-wills are currently only valid in a few states.
- Certificate of Trust - Serves as proof of the existence of a trust and grants a trustee the authority to share information about the trust with third parties.
- Codicil to Will - A legal document used to amend an existing will.
Document organization and storage
Keep your estate plan organized and stored securely. Here are some tips for doing so:
-
Keep important documents in an easily accessible location, such as a locking filing cabinet, home safe, or safe deposit box. Create digital copies of documents and store them securely online or on an external hard drive.
-
Create a binder with important information that loved ones or the executor of your estate will need in an emergency or upon your passing.
-
Inform family or trusted individuals of the location of your documents and how to access them.
-
Update estate planning documents after significant life events, including marriage, divorce, new child, or the acquisition of substantial assets.
Pros and Cons of DIY Estate Planning
Before embarking on the DIY estate planning journey, assess whether it’s the right choice for you. While cheap estate planning might be good for your wallet now, it could cost loved ones time and money in the future.
Pros of DIY Estate Planning
- Cost-Effective: Hiring an attorney for estate planning can be expensive. DIY options significantly reduce these costs.
- Flexible: Take control of the estate planning process and tailor it to your needs and wishes. Research different options and make choices aligned with your values and goals.
- Educational Opportunity: Learn about various aspects of estate planning rather than rely on an attorney. This knowledge can be invaluable in understanding legal intricacies and making informed decisions.
- Convenient: DIY estate planning is done when and where it’s convenient for you.
Cons of DIY Estate Planning
- Lack of Legal Advice: You won’t have a qualified estate planning attorney who knows the laws specific to your state guiding you. Any mistakes could impact your estate.
- Complexity: DIY estate planning may not adequately address your unique circumstances or provide the level of protection you need.
- Validity: Legally valid estate plans require adhering to state-specific requirements and formalities. Failure to follow legal rules could result in invalid documents or challenges in probate.
- Life Changes: Without the expertise of an estate planning professional, you may not have the knowledge or tools required to update or revise your plan as needed.
Helpful Resources:
Illinois State Bar Association - Your Guide to Estate Planning
American Bar Association - Do It Yourself Estate Planning
Schaffer and Herring - Understanding Estate Planning: A Beginner's Guide
Estate plans help secure the future of loved ones and ensure your assets and wishes are protected. Consulting an attorney is advisable for complex estates, but estate plans can cost you thousands.
While you must create legal documents valid for your state of residence, low-cost estate planning options exist.
Depending on the value and type of assets you own and the intricacies of your family situation, do-it-yourself (DIY) estate planning may be a suitable alternative.
This guide provides valuable information and a step-by-step approach to help you navigate your estate planning journey.
How Much Does Estate Planning Cost?
Estate planning costs vary widely depending on the complexity of your estate, the number of beneficiaries, and the region you live in.
On average, hiring an attorney to create a comprehensive estate plan can cost from $1,000 to $3,000. The costs can be even higher if your estate is large or involves complex planning.
Why Is Estate Planning So Expensive?
Elaborate legal matters, such as drafting wills, establishing trusts, and navigating tax laws, can be costly for several reasons. Here is a simplified breakdown of estate planning costs.
First, hiring an attorney to draft estate planning documents involves their expertise and time, which can come at a high hourly rate, even to make one document such as a power of attorney. Additionally, attorneys have overhead expenses that impact overall costs.
Large estates or complicated family situations may complicate the planning process and require additional professional services, such as accountants or financial advisors. These experts also charge fees, adding further expense.
What Is DIY Estate Planning?
DIY estate planning is creating your estate plan without hiring an attorney.
It can be a cost-effective option for individuals with straightforward estates and a solid understanding of legal and financial matters who want to complete their estate planning on a budget.
Steps to DIY Estate Planning
The more advanced planning you do, the easier the process will be. Utilize an estate planning checklist to ensure you cover the essentials while staying organized and avoiding common estate planning mistakes.
Pre-planning
Prepare the following lists:
- Assets - financial and retirement accounts, vehicles, real property, personal possessions, life insurance policies
- Liabilities - mortgages, car loans, other debts
- Heirs and Beneficiaries
- Digital Life - email and social media accounts, cloud storage
Determine who you’ll ask to be the executor of your estate, the guardian of your minor children, and trustee if you decide to create a trust.
Document creation
The following documents are necessary for a comprehensive estate plan.
This outlines how assets are to be distributed after your passing, appoints guardians for minor children or adults with special needs, and names an executor to carry out your wishes.
Durable Power of Attorney (POA)
It designates someone to handle your financial affairs (such as paying bills and managing investments) if you become incapacitated.
This document dictates your preferences for end-of-life medical treatment.
Medical Or Healthcare Power of Attorney
It appoints someone to make medical decisions for you if you are unable to do so. This person will work with your healthcare providers to follow your medical wishes.
In some states, it’s used instead of or in combination with a Living Will and a Medical Power of Attorney. It outlines medical treatment plans and healthcare preferences and names a representative to make decisions if you cannot. You may also choose to create a DNR order to note your preferences.
This is a legal entity that holds your assets during your lifetime and distributes them according to your directions upon your death. Living trusts also help avoid probate and provide privacy for your estate.
Additional documents to consider:
- E-will - Similar to a traditional will, an e-will is created and signed digitally. E-wills are currently only valid in a few states.
- Certificate of Trust - Serves as proof of the existence of a trust and grants a trustee the authority to share information about the trust with third parties.
- Codicil to Will - A legal document used to amend an existing will.
Document organization and storage
Keep your estate plan organized and stored securely. Here are some tips for doing so:
-
Keep important documents in an easily accessible location, such as a locking filing cabinet, home safe, or safe deposit box. Create digital copies of documents and store them securely online or on an external hard drive.
-
Create a binder with important information that loved ones or the executor of your estate will need in an emergency or upon your passing.
-
Inform family or trusted individuals of the location of your documents and how to access them.
-
Update estate planning documents after significant life events, including marriage, divorce, new child, or the acquisition of substantial assets.
Pros and Cons of DIY Estate Planning
Before embarking on the DIY estate planning journey, assess whether it’s the right choice for you. While cheap estate planning might be good for your wallet now, it could cost loved ones time and money in the future.
Pros of DIY Estate Planning
- Cost-Effective: Hiring an attorney for estate planning can be expensive. DIY options significantly reduce these costs.
- Flexible: Take control of the estate planning process and tailor it to your needs and wishes. Research different options and make choices aligned with your values and goals.
- Educational Opportunity: Learn about various aspects of estate planning rather than rely on an attorney. This knowledge can be invaluable in understanding legal intricacies and making informed decisions.
- Convenient: DIY estate planning is done when and where it’s convenient for you.
Cons of DIY Estate Planning
- Lack of Legal Advice: You won’t have a qualified estate planning attorney who knows the laws specific to your state guiding you. Any mistakes could impact your estate.
- Complexity: DIY estate planning may not adequately address your unique circumstances or provide the level of protection you need.
- Validity: Legally valid estate plans require adhering to state-specific requirements and formalities. Failure to follow legal rules could result in invalid documents or challenges in probate.
- Life Changes: Without the expertise of an estate planning professional, you may not have the knowledge or tools required to update or revise your plan as needed.
Helpful Resources:
Illinois State Bar Association - Your Guide to Estate Planning
American Bar Association - Do It Yourself Estate Planning
Schaffer and Herring - Understanding Estate Planning: A Beginner's Guide
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