When planning our estates and thinking about how to pass our property to our loved ones, most of us think of preparing a will. An awful lot of people will go to an attorney to prepare a simple will that specifies how their property will be divided up when they die. This type of estate plan is inexpensive up front, but there can be higher costs in the long run than you might realize.
The first long-term cost of a will is the cost of its administration. The movies present a simple picture of how a will works. They show the entire family heading over to a tidy office right after the funeral, still dressed in black with veils over their faces, listening to a stuffy lawyer read the will out loud or watching a video of the decedent reading the will out loud, and immediately receiving their inheritances on the spot.
I have spoken with a number of people who believe this movie theater scenario is exactly how things will play out in real life. That could not be further from the truth.
In order to administer a will, your executor must contact the local Register of Wills to open probate and receive a court order appointing them as the executor of the estate. This begins a process that typically takes a year or longer to complete. During that process, your executor must contact financial institutions, give notice to heirs and creditors, review claims, handle objections, file accounting records, pay your outstanding debts, and seek court approval at various stages of the process before your heirs can receive anything.
If done correctly from start to finish, legal fees to administer an estate through probate range from a few thousand to tens of thousands of dollars. Fees depend upon the value of the estate and must follow state regulations unless the attorney is charging by the hour. If done incorrectly, the process will take longer and legal fees to correct the initial mistakes will be even higher.
Another cost is inheritance tax. The state assesses an inheritance tax on all of your probate property (property passing through your will) and some non-probate property passing through beneficiary designations, based on the relationship between yourself and the person receiving your property. This can be up to a 15% tax, depending on the relationship. This is typically paid through the estate, but if that is not done, your beneficiaries can be personally liable for their share of inheritance tax.
By far the largest cost, though, is the cost of potentially losing everything if you have a significant health crisis and your estate planning failed to include a plan for your care and your needs while you are still alive.
If you become incapacitated and are unable to manage your own finances and you did not previously appoint a durable general power of attorney , someone will have to go through a court proceeding to obtain guardianship. This will cost thousands of dollars in legal fees, plus fees to compensate expert witnesses. That is a relatively small price compared to the cost of the delay before your potential guardian has legal authority to do anything to help you, at a time when you are in crisis and every day is expensive. Those costs include the cost of your care in the hospital or facility where you are placed during the time it takes your loved one to navigate that proceeding, or the cost of your declining health when you cannot get treatment because there is no one able to authorize your care.
If you need skilled nursing care, the average cost in Pennsylvania is $14,676.04 per month. Medicare only pays as long as that skilled care is for the purpose of rehabilitation, and is succeeding at rehabilitating you. If a doctor determines you will need a higher level of care long-term, Medicare will no longer cover the cost of that care.
At that point, the full cost of skilled nursing care becomes an out-of-pocket expense unless you have long-term care insurance or you qualify for Medicaid to pay for your care https://keystoneelderlaw.com/faq-about-medicaid-for-long-term-care/. If you fail to plan for this potential situation, this cost may quickly burn through your entire life savings, leaving nothing behind to pass through your will. If your family reaches out to an Elder Law Attorney in that moment of crisis, it is possible to preserve some of your estate, but only if you have a thorough Power of Attorney that provides the tools they need. With good quality advance planning, we can help you preserve a lot more, perhaps even everything you have built up over your lifetime, to provide for your family into the future.
For someone who is young and healthy, a will is generally an important part of an estate plan, but it should certainly not be the entire plan. Early planning should also include a Financial Power of Attorney, Health Care Power of Attorney, https://keystoneelderlaw.com/wills-powers-of-attorney-and-trusts/Life Insurance, consideration of Long Term Care Insurance, and thinking about how to set up your property and beneficiary designations so your heirs may not have to open probate to administer your estate. If you have minor children, you should also consider who you would like to take care of them if you are not able to. If you want to leave any of your property to your minor children, you should consult with a lawyer about how to set that up.
For someone who is over 60 and has health concerns or whose spouse has health concerns, a simple will could be very costly in the long run. There comes a time in life when you should really consider some enhanced estate planning options. Those options cost a bit more in the short term, but they will deliver returns and save you many times the initial cost in the long run.
Kelly Walsh Appleyard, Attorney