Estate planning can be difficult because there are so many tax rules that could cost you a lot of money long-term if you don’t know what to deduct. This article will discuss reducing estate planning costs through deducting the expenses when you file taxes and give you general tips on saving money in the estate planning process. To dig deeper, you can get the financial help you need to prepare your estate properly by speaking with a financial advisor.
What Are Estate Planning Costs?
In most cases, the primary costs for estate planning come from hiring an attorney. While you can find cheap online templates and services, they won’t be sufficient if you have heirs, considerable assets or specific needs. Since most people creating an estate plan fit one or more of those categories, working with an estate attorney will allow you to address your questions and concerns.
Attorneys may charge either a flat fee or an hourly rate. The rate may vary by the complexity of drawing up the estate. On the low end, it may cost as little as $150 to $200. However, more complex cases require more work, which may cost as must as $300 per hour.
It should be noted that there are indirect costs of estate planning, such as the money you could lose by not using an experienced attorney. These can be considered estate planning costs but for the purpose of this article, we’re focusing on tangible costs that aren’t unique to your individual situation.
Are Estate Planning Costs Deductible?
Before 2017, some estate planning fees were deductible as itemized deductions. However, the Tax Cuts and Jobs Act changed the tax code by making it more challenging to deduct any estate planning costs. Additionally, since this law almost doubled the standard deduction and reduced itemized deductions, most taxpayers will take the standard deduction when they file. Therefore, fewer taxpayers will want to itemize their deductions and have estate planning expenses they would like to deduct.
The Tax Cuts and Jobs Act’s stipulations will expire by 2025. At that time, lawmakers will decide whether to renew or change the tax laws, meaning that the rules around itemized deductions could change in the future. If you are planning to itemize your deductions and will pay for estate planning services soon, you can work with a tax professional to find out if any of your estate planning costs are deductible.
What Can You Deduct for Taxes?
There are numerous deductions you can take when filing taxes. Taking any of the following deductions can lower your taxable income, thereby reducing what you may owe the government.
Business expenses, including using your vehicle or home for business purposes
Property and real estate taxes
Charitable contributions
Mortgage interest and moving expenses
Student loan interest
Health savings accounts
IRA contributions
This isn’t an all-inclusive list of tax deductions and there could be some available depending on your unique situation that isn’t as well used or talked about. Speaking to the right financial advisor or tax expert is the best way to unlock the knowledge of all potential tax deductions that might be of interest to you.
Other Ways to Save on Estate Planning Costs
There is no substitute for paying a thorough, skilled attorney to draw up your estate plan. They have an experience level that you don’t and will generally know the best way to make your long-term estate plan a success. However, you can still reduce costs with the following tips:
Discuss costs first: Most attorneys provide a free consultation without strings attached. Use this opportunity to explain your needs and inquire about costs. Usually, you’ll pay your estate attorney a flat fee or an hourly rate. If the attorney charges an hourly rate, ask them to estimate how many hours of work your estate plan will take.
Prepare as much as possible: Although you are meeting with an attorney to get more information, you can ensure the meeting is productive by understanding what a basic estate plan contains, what your needs are and the documents you already have. For example, you may already possess a will that does not need changing and you should bring this to your attorney’s attention.
Select the right attorney: Do your homework by asking family and others you trust about estate planning attorneys. Reading online reviews will also give you an idea of who would best serve you. Also, free consultations can help determine if a specific attorney is right for you.
Put it in writing: After you have selected an attorney, get a written contract defining what the attorney will do for you and how much it will cost. You and your attorney will sign the contract and you’ll both have clarity on what to expect during the process.
The Takeaway
The current tax law has given taxpayers little incentive to itemize deductions and has restricted what expenses you can deduct. As a result, most taxpayers take the standard deduction, which voids the issue of deducting estate planning expenses. However, if you are going to itemize your tax deductions and have questions about your estate planning expenses, it’s wise to speak to a financial advisor.
More on Estate Planning and Tax Deductions
The intricacy of the tax code makes itemizing deductions a complex task that you may need the help of a financial advisor to navigate correctly. Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started today.
Estate planning can be complicated and difficult to figure out on your own. If you’re just getting started, check out our ultimate estate planning guide to learn all about what you could be doing to prepare for the future.
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Source: https://finance.yahoo.com/news/estate-planning-save-money-now-130000528.html