Attorney Fees to Settle Estate

[jazz4cash]

Attorney's fees to settle MIL's estate were approx 1.5%. Seemed reasonable to me, but I really don't have a clue. She had a will and no real estate. Her assests were in CDs and deposit accounts, I think. She was a resident of MD.

 

[Martha]

Some states have customs and rules where lawyers charge a percentage of an estate as their fee. It seems unfair to me because the amount charged is not necessarily correlated with the work involved. I don't know if your MIL's state is such a state.

Were I live, fees must be reasonable and be charged on an hourly basis. By way of example, it would be rare to have a $30,000 (1.5% fee) for an estate of $2,000,000, even if real estate was involved. The expensive estates usually are ones where businesses are involved with complicated tax issues and appraisal issues.

 

[Texas Proud]

Again... yes it is the state...

When my dad died many years ago.. the attorneys were talking from 3% to 5%... but in Texas you can have a will without court supervision... just submit the will, inventory etc... finally found an attorney that would do it by the hour and I think we paid about $1,000.. but that was in 1980.. I am sure the hourly rate has gone up a bit..

 

[UncleHoney]

In Ohio, state law requires attorneys to charge by the hour. My Mom's estate ($500K) cost about $7500 in attorneys fees and court costs.

 

[Brat]

If there is a will to take care of the small stuff and the titled assetts are in a revocable living trust why on earth would an attorney's services be necessary?

 

[Martha]

Brat, when fees are based on a percentage of the estate and probate is a complicated process it makes sennse to have assets in a trust to avoid all the probate problems. In contrast, where I live, probate is a relatively simple process and fees are hourly so their isn't quite the need to have a trust to avoid probate. (There are other reasons to have a trust though).


If you have a will to pass the "small stuff" or the "small stuff" isn't held in the trust you will need a probate in some circumstances but not all. For example, a few years ago I knew a young man who died. His only asset was his bank account held solely in his name. I was able to get the money to his parents by providing an affidavit to the bank saying that the parents were his only heirs and that there wasn't going to be a probate. Banks even have a form for that purpose.

On the other hand, my grandfather sold his home to my cousin on a contract. Grandpa died and my cousin paid my dad. My dad died. I had to do a probate for both dad and grandpa 20 years after grandpa died and 10 years after my dad died just to get my poor cousin a deed to her home. Otherwise, no trust, no nothing, we just split up the stuff in the house.

 

[Brat]

In the situation I have in mind I believe that the only function of the will is to address anything that was overlooked, not in the trust.  To my knowledge it will be the furniture in room in the nursing home, period.  Her attorney, a wise woman, has the original of her will and perhaps private letters. 

I recall that when my MIL passed away we learned that there was stock from FIL's former employer that no one knew existed, and there were re-bates of taxes paid in earlier years.  These stray sums seemed to surface in December over several years.  It got to be a family joke, "Mom is still remembering us at Christmas!"  Her will expedited the distribution of these holiday gifts.

 

[scrinch]

These are California's statutory fees for settling an estate, both for the attorney and for executor:
4% of the first $100,000
3% of the next $100,000
2% of the next $800,000
1% of the next $9,000,000
1/2 of 1% of the next $15,000,000

Your 1.5% fee looks pretty good if the estate was worth less than about $2 million.

I was executor for my dad's $500K estate a few years ago and waived the statutory fee. Nolo Press helped make the process fairly painless, including selling his house.

 

[Martha]

In the situation I have in mind I believe that the only function of the will is to address anything that was overlooked, not in the trust.  To my knowledge it will be the furniture in room in the nursing home, period.  Her attorney, a wise woman, has the original of her will and perhaps private letters. 

I recall that when my MIL passed away we learned that there was stock from FIL's former employer that no one knew existed, and there were re-bates of taxes paid in earlier years.  These stray sums seemed to surface in December over several years.  It got to be a family joke, "Mom is still remembering us at Christmas!"  Her will expedited the distribution of these holiday gifts.

My FIL died in 2001. Last year a search company called and said they found an asset he owned and wanted 1/3 to tell us about it. We searched and searched trying ourselves to figure out what it was. We went to several states abandoned property websites. We looked through records. Nothing. Finnally gave up and let the search company have their third. Turned out he owned some Bristol Myers stock. My husband, his brother, and the search company each got 5,000. A nice unexpected present. We did need a probate though to transfer the shares. We just pretended the old probate was still open. A probate was required in the first place because the FIL owned a hunting shack that had to be probated to transfer to his sons.

This year the co-op in my hometown was sold and closed. It turned out my grandfather and my father owned shares--value $469. The coop called and asked me what to do with the money. I said write me a check and I'll take care of it. I recently got the check and sent the bucks to my sibs. Irregular but appropriate.

 

[Meadbh]

In some jurisdictions legal fees are set, in some, not.

DM died in 2005 in a Western European country. Will was very simple; she left her estate to me. There was also a revocable trust in the US.  DM had named her lawyer and me as coexecutors. Customary legal fees in that country were 2%. I could have done all the work except appear in court to obtain probate (and only because I lived abroad and it wasn't practical for me to appear at a day's notice). Lawyer had a reputation for dragging things out for ever. I found that I was getting the documents organized and doing most of the work and that this was not rocket science.

My approach to this situation was to (a) determine market fees; (b) talk with lawyer friends to estimate the number of hours of work needed; (c) draw up a project plan and deadline for the process; (d) present the lawyer with this information; (e) stipulate a fee and offer to let him withdraw from his obligation if that wasn't satisfactory; (f) negotiate a fee that amounted to 1% of the estate.

Result: estate was settled in double quick time.

 

[jazz4cash]

I guess I don't understand this process very much at all. When my mom passed away many years ago. She owned her own home, had no will, and 5 heirs. All she had was SS, a pension, and a bit of savings. When my brother and I interviewed several attorneys, they all got a pained expression on thier faces when we explained "small estate, no will, 5 heirs". I was between jobs at the time, so I spent several weeks in the public library and did all the probate work myself. She had just enough savings to pay all of her bills........it was amazing. I thought the purpose of the probate was to allow any "unknown claims" to be filed against the estate and paid or divied up.

For my MIL, I am way on the outside, SIL is executor and she is just a bit secretive about proceedings. I am only guessing 1.5%. DW is still too distrought after 15 months to ask any questions. Thanks for your responses...........looks like the fee is very reasonable.

 

[jclarksnakes]

...My FIL died early in 2004. He had a will with everything left to DW and her sister. Most of his assets were in a couple of investment accounts and a credit union account. All three accounts were in his name with DW and her sister as co-owners. It took about 15 minutes at each of those locations to get the money out. Would not have had to go through probate except that he owned 6 damned Florida time shares. Lawyers fee for probate and getting titles to the time shares transferred was about 3 grand. Luckily three time shares have been sold. Unluckily two of the remaining three had serious hurricane damage and special assessments are getting out of hand. They are in Daytona Beach and have been closed for over two years now. The other one is in New Smyrna beach and is really nice. Anybody wanna buy it?
jc

 

[Meadbh]

All three accounts were in his name with DW and her sister as co-owners. It took about 15 minutes at each of those locations to get the money out. jc

If there is joint ownership of an asset, it reverts to the surviving owners and isn't part of the estate.

 

[SteveR]

When my father died my brother and I took care of most of the title changes and account name changes. We consulted with a lawyer who charged $1000 to do the probate on the estate. My mother inherited everything so it was very simple.

When DW died it was more complicated. Trusts, wills, property, stocks, etc. One guy wanted 5% of our COMBINED estate to do the probate alone. I finally found a guy who would do it on an hourly rate but I was not very happy with the speed or quality of his work. I have since found a different lawyer who completed the task and who also revised my trust and created a new one for my wife. It as not cheap but it was done right and I know what was done and why.

Shop around.

 

[mathjak107]

Im not sure of the answere but when property is put in a trust does it take on the cost basis of the origonal purchase price or does it take on a stepped up basis of the day its put in the trust? Also when the property in the trust is inheirited does the heir get a stepped up basis or does it stay at the origonal amount that it went into the trust at?

 

[Martha]

Im not sure of the answere but when property is put in a trust does it take on the cost basis of the origonal purchase price or does it take on a stepped up basis of the day its put in the trust? Also when the property in the trust is inheirited does the heir get a stepped up basis or does it stay at the origonal amount that it went into the trust at?

Depends on the trust. If the trust is revocable or the grantor has any control over the trust, then when the grantor dies, the trust assets are part of the grantor's estate and the beneficiaries will get a step up in basis.

 

[Meadbh]

Depends on the trust.  If the trust is revocable or the grantor has any control over the trust, then when the grantor dies, the trust assets are part of the grantor's estate and the beneficiaries will get a step up in basis.

Martha, interesting to hear the legal input. I have had a different experience internationally. My DM (who lived in the EU) established a revocable trust for me which contained a US mutual fund. This trust was not included in her estate, which was governed by the laws of the country where she was domiciled. Obviously this varies from country to country.

 

[Martha]

I should add to my standard disclaimer: I know nothing about foreign stuff.

 

[mathjak107]

Depends on the trust.  If the trust is revocable or the grantor has any control over the trust, then when the grantor dies, the trust assets are part of the grantor's estate and the beneficiaries will get a step up in basis.

Can you explain how it would work in an ir-revocable or marital trust ?

 

[Meadbh]

Martha, interesting to hear the legal input. I have had a different experience internationally. My DM (who lived in the EU) established a revocable trust for me which contained a US mutual fund. This trust was not included in her estate, which was governed by the laws of the country where she was domiciled. Obviously this varies from country to country.

I forgot to mention that the US trust could not be enacted till I produced notarized documentation that any applicable taxes on the estate had been paid in the country of my DM's domicile. Luckily, no taxes were owing. Had the estate included the trust, the combined NW of the estate would have exceeded the threshold, leading to a tax bill in the European country. The tax advantage was one of the reasons DM set up the trust.

 

[Martha]

Can you explain how it would work in an ir-revocable or marital trust  ?

This gets complicated.  Why do you think we need lawyers?    If I understand correctly, and I am not an estate planning lawyer, there are several types of trusts you can use for estate and tax planning.  If you have significant assets and are worried about estate taxes, you can use a bypass trust or credit shelter trust, which will allow both the husband and the wife use their estate tax credit fully.  For example, say you have 2 million and your wife has two million.  You die, she inherits your 2 million.  No estate tax is paid when assets go to the spouse.  Now she has 4 million.  She dies, but she can only shelter 2 million from federal estate tax. If you leave your 2 million to the bypass trust, it isn't taxed by the feds when you die because of the 2 million exemption and isn't taxed when she dies because it isn't hers, though she might have some rights to income under the trust.

Another variation in the QTIP trust, which is sometimes also used by the wealthy with a bypass trust to help minimize taxes.  If you use a QTIP trust, your estate isn't taxed.  However, your wife's estate would be when she dies. Under this trust, your wife would get the income and odds are your children would get the trust assets when your wife dies.  Taxes would be paid at that time.  You might give some of your assets to the bypass trust and some the the QTIP.

There are other variations and other trusts that are used for "rich people" estate planning.  or example, there are some states that allow trusts to go for more than one generation.

There are also simple revocable trusts used to avoid probate or to manage assets when your children are young.  These types of trusts do not avoid estate taxes. And, one way or another someone will pay taxes someday.

EDIT: terms here, like bypass trust and QTIP trusts are used slightly differently in different areas, but both refer to trusts set up to allow spouses to have some degree of access to the trust, with what left going to the kids.

 

[Sheryl]

In Ohio, state law requires attorneys to charge by the hour.  My Mom's estate ($500K) cost about $7500 in attorneys fees and court costs.

Really!?   We were charged a flat fee of $6,000 to settle my mom's estate in Ohio.

 

[mathjak107]

MARTH........
I was wondering about the cost basis in the irrevocable trusts.

I had heard something about the home retaining the origonal cost basis of the day it went into the trust and keeping that basis . when passed on to the kids when it came out of a particular trust but i missed the beginning of the conversation.

 

[Martha]

MARTH........
I was wondering about the cost basis in the irrevocable trusts.

I had heard something about the home retaining the origonal cost basis of the day it went into the trust and keeping that basis . when passed on to the kids when it came out of a particular trust but i missed the beginning of the conversation.

This stuff gets messy, I probably shouldn't have touched it in my previous post, which had too general to be helpful.  To illustrate, say you have assets go into a trust when you die and the assets are part of your taxable estate.  The basis will be the value at your death.  Say that your wife gets income from the trust and when she dies, the trust assets are distributed to the kids.  What happens if the trust increasedin value?  I think that capital gains could be trapped in the trust and taxes might have to be paid on those gains.

I am not sure about this stuff, and the answers depend on how and what kind of trust you set up.  But depending on the situation, the answer to your question could be yes.

There was an entire semester course in law school on taxation of trusts and estates. 

 

[mathjak107]

I had a feeling it was far more complicated than the usual advice of throwing the house in a trust to avoid probate expenses. Maybe the probate expenses may be cheaper than not getting a stepped up basis for the kids .
Interesting research project for someone who may have time.


MARTHA note the caps and spaces ? proud?