Estate planning involves outlining what you would like to happen to your property or family when you pass away. An estate plan ensures that your assets will be distributed exactly the way you want. Also, estate planning can help avoid unnecessary family disputes and reduce the tax burden on your beneficiaries.
Are estate planning fees tax deductible?
The Tax Cuts and Jobs Act of 2017 made it virtually impossible to deduct estate planning fees from your tax bill. Before the tax reform, the IRS allowed individuals to deduct some legal fees tied to estate planning under miscellaneous expenses.
For example, IRS rules allowed deducting legal fees incurred in income production, maintaining an income-generating property like rental buildings, and advice related to estate taxes.
However, the IRS suspended miscellaneous expense deductions under the current tax law. Estate planning fees aren't tax deductible. Estate planning fees may be deductible again after 2025 when many of the provisions under the current tax law expire.
What is the average cost for estate planning?
The estate planning process can be complex. The paperwork needs to be done carefully because even a small error could have devastating consequences. An estate planning attorney will guide you to ensure that everything is correct. You will incur legal expenses to develop and manage an estate plan.
Estate planning is important for people of all income levels. While many people express their last wishes in a will, an estate plan directs certain inheritances. For example, an estate plan would show who receives proceeds from a life insurance policy and savings in a bank account.
How much does it cost to establish and manage an estate plan? Concern about the cost is the main reason that people avoid estate planning. The exact cost for estate planning will depend on factors like the types and complexity of documents needed, your location, and the attorney’s experience.
Some estate planning attorneys bill by the hour and others charge a fixed rate. Whether an attorney bills by the hour or charges a fixed fee, the average cost for estate planning could be a few hundred dollars to several thousand dollars.
There are ways to minimize estate planning costs. For example, you could save money with an hourly attorney if you only need simple advice. A fixed-rate attorney may be ideal if you want to control the costs and avoid surprise bills.