What Determines Estate Settlement Costs in NJ?
Aside from prior bills that were never paid, the fees charged by estate attorneys are perhaps the most common sources of client angst when settling an estate in New Jersey. But, like mayo on a cheeseburger is the amount of work that needs to be performed, so too does the size and complexity of an estate impact the amount of legal fees involved in the process. Whether beneficiaries are fighting (in which case the retainer should be increased to $5,000-$10,000) or the file consists of 10 years worth of records of a home based business (which is a high number of hours to sift through records), more time on the file equals more money required to fund the process at hand.
Other factors affecting legal fees are the location of the estate. While many attorneys practice throughout the State and are licensed for federal (or international) service, much of our work comes from referral sources and clients who have lived in the same town or county for their whole lives . Therefore, estate administration outside of your specific county is not as common to us – and therefore may take more "time" to process because you will probably get a better educated opinion and advice by hiring a local attorney who actually practices in the state (rather than someone willing you represent you in all 21 counties).
Certain counties differ as to their practices in probate. Some allow filings by mail, some jack up court filing fees, others are notorious for waiving surplus line fees while still others require supporting affidavits be typed in certain font sizes. You get the picture. If the attorney you hire only practices in one county or one venue and you have to go into court to perform tasks required in the administration of the estate (such as ordering new means and getting those pesky names "signed off"), your matter may take longer than initially expected – resulting in additional fees incurred.
All things considered, the cost of settling an estate in New Jersey is unpredictable and may be the most variable expense in the administration of an estate.
Typical Costs and Fees
Typically, attorneys in New Jersey charge clients an hourly fees, a flat fee, or a percentage of the estate in order to settle an estate.
Ordinary hourly Rates – Experienced New Jersey estate planning attorneys typically charge between $250.00-$600.00/hour; however, some attorneys charge their clients on a sliding scale. This means that the attorney charges less for less experienced associates and more for more experienced associates and partners. The rate can also be impacted if the partner has a specialty (such as trusts or tax) or is a certified specialist/member of a recognized specialty association, or if the attorney is certified by the New Jersey Supreme Court as a Certified Estate Planning Attorney or a Certified Elder Law Attorney.
Flat Fees – Some attorneys charge a flat fee for the entire probate process. In these cases, the attorney keeps records of the time that he/she spends on the case, but does not bill the client for this time. These attorneys will agree to a flat fee in advance of their engagement if they are reasonably certain that the administration will be uncontested. Note that the fee is flat for services provided in the informal administration of the estate. If the estate goes into litigation, the fees will increase since the attorney will then be billing by the hour. Moreover, flat fees generally only apply to settling estates and do not cover the drafting of estate planning documents.
Percentage Fees – New Jersey also allows attorneys to charge clients a fee equal to the usual and customary fee awarded by the New Jersey Superior Court in In re Est. of the Revocable Living Trust of Cook, 214 N.J. 130, 144 (2013). Typically, these fees are in line with the surrogate’s fees previously mentioned. The one caveat to note is that the administrator and beneficiaries must consent to the fee amount.
Costs – In addition to attorneys’ fees, costs to be incurred in any New Jersey Probate matter include:
- filing fees for the probate of a will, codicil or intestacy petition, including 2 surrogates’ certificates, which are $175.00 per certificate. This fee also covers the issuance of the initial letters testamentary or letters of administration, the initially required notice to creditors, and the filing of the inventory,
- advertisement of the ordinary notice of probate in a newspaper,
- stamps and fees for notices to creditors,
- certified copies of letters of administration and letters testamentary to be used to transfer assets, and
- possible appraisal and real estate fees.
These costs do not include miscellaneous costs associated with mailings, overnight couriers, traveling to various offices, searches, or, if necessary, bond.
Average Fees by Estate Size
The size of an estate clearly influences attorneys’ fees. This is not rocket science. However, it may be more helpful to understand how fees vary by estate size. Small estates average $800 in attorney’s fees. The estates typically fall under the New Jersey Small Estate Statute. This means that the decedent had less than $200,000 in assets and less than $50,000 in bank accounts. This means that did not have any real property or real property of very low value. In such cases, no accountings need to be prepared. The process is quicker, much easier and cheaper. One problem with these small estates is that the lawyers tend to do a lot more work than the $800 price tag can justify. Lawyers are, in these situations, often subsidizing the clients. Furthermore, the billing relays heavily on the individual lawyer’s billing practices. For example, some lawyers charge their client to prepare the small estate document and charge above and beyond for any legal correspondence. There is a "sweet spot" at which attorneys’ fees for estate settlements maximizes. That sweet spot is the medium size estate – specifically an estate valued at about $500,000. This is the amount at which attorneys’ fees fully justify all the work that needs to be done. On average, these estates will run you $2,000 to $4,000. But what is more important is understanding why these fees are reasonable. Large estates tend to be fairly straightforward. It’s the opposite for medium size estates. To illustrate this point, I have recently worked with a South and Central Jersey probate attorney to settle a medium sized estate. The estate had a mixed bag of assets, including small businesses, real property, bank accounts, business interests, etc. The business interests alone took weeks to get valued by various experts. We wound up spending a lot of time valuing the estate. If the estates are too small, we wind up spending the same amount of time preparing the documents and in communication. It’s just the nature of the beast. These factors affect both lawyers’ practices differently – and not always in a positive way. Large estates are the wild card. There is no telling whether they will have 1-2 Executors or 5-6 Executors. Some large estates are too complex, involving multiple layers of sophistication in terms of ownership. Other large estates are very straightforward, in which case the fee should just be determined based on the size.
How to Select an Estate Lawyer
Your choice of an estate attorney is one you want to think carefully about. There are a number of steps you can take to evaluate the qualifications of an estate attorney. First, you’ll want to be sure that any estate attorney under consideration is going to be familiar with estate and probate practice in New Jersey. This may seem like a minor detail, but there are many estate attorneys who are not qualified to practice in all 50 states. Federal tax law will be the same, but estate and probate law vary significantly in important respects between states.
Next, confirm that any estate attorney under consideration has significant experience and expertise. There are many attorneys who will advertise an expertise in estates and probate, but estate and probate practitioners can be regular trial attorneys who undertake legal work in the estates and probate arena only occasionally. If your estate has many assets , these folks probably won’t be a good fit.
Ask the estate attorneys under consideration for a fee estimate in writing. Don’t get too hung up on this, however, as the size, complexity and number of assets of an estate are impossible to predict with certainty, and even the best attorney won’t be able to give you an exact fee estimate, much less hold that estimate to a tee. That said, you are looking for the estate attorney you choose to offer you a ballpark estimate of his or her fees.
Finally, learn as much as you can about the estate attorney under consideration’s style, tone and approach to settling an estate. Some estate attorneys delegate most of the work to staff. Others work hand in glove with their clientele. Determine what kind of an approach might be the best fit with your sensibilities, and seek out an estate attorney who has that kind of an approach.
Ways to Save Money on Estate Settlement Fees
While the law can be a good friend to those who plan ahead, it can also be a harsh adversary to those who ignore the realities of law when it comes to passing on wealth and assets. For example, almost every estate is worse off than it needs to be due to procrastination or a lack of knowledge. Most clients will waste thousands of dollars if they do not have a well-drafted, up-to-date Last Will and Testament.
Solutions: An up-to-date Will minimizes the need for complex and expensive Surrogate Court work. It reduces conflict between heirs by clearly stating your wishes. It designates Guardians for minor children, thus avoiding costly litigation in Family Court. Finally, a Will helps you pass on your values as well as your wealth—something that cannot be valued in dollars. Properly Drafting a Will, Durable Power of Attorney and a Health Care Proxy are fundamental steps in reducing estate settlement costs.
Estate tax is the second largest tax many people will ever pay in their lives, but the public remains ignorant of both the tax and the fact it hits even middle income New Jersey residents. The least important of Mr. Lincoln’s famous "Four Score and Seven Years ago," my guess is he said something like: "People should place great value on saving money on taxes. They should understand that their heirs are inefficient bureaucrats. They should realize that the laws of their State and Nation make it far too easy for politicians to take public funds and use them to please their friends (think ‘pork’) and are all the more willing to do so by taxing estates. Finally, they should understand that there are laws and strategies in this Country by which their children and grandchildren can save money on their estates."
Solutions: There are many levels of expense involved with estate taxes—some avoidable, some not. The largest is the tax itself. Your estate could be subject to both a New Jersey State Estate Tax and a Federal Tax. Once your estate has been reduced by the tax you then have to pay the legal expenses of settling your estate with the I.R.S. (yes, you can get a reduction in your legal fees if you have any estate taxes). Legal fees are often the largest single estate settlement cost. An estate of $10,000 can easily cost $3,500 to settle in New Jersey.
Do something about your estate taxes—you cannot ignore them. There are many timely estate planning solutions to reducing your estate taxes. It’s that simple.
There are essentially three factors that are in play here: the state of the estate, the extent to which the Executor, Trustee or Administrator has recorded all assets and liabilities and how efficient the legal work is in collecting assets and distributing them to heirs. While we are all called to serve in the best way we can, some attorneys serve more efficiently than others.
Many people think "cheap" is equivalent to "efficient." When it comes to typical legal work such as settling an estate, it is not. Typically, when a person calls our office, there is an immediate need as the prior attorney was either incompetent or deliberately deferred work until they could bill more!
Solutions: I encourage you to comparison shop, use an attorney for "simple" estate settlements, avoid hiring "one stop shopping" firms, talk to your friends before you hire an attorney, watch for the "red flags" they send up and when the bill arrives, ask if they are charging market rates.
Here is one rule I would suggest: You should always be able to hire one of the large law firms with offices located in New Jersey and New York for about half the cost they charge their private clients. However, we also encourage our clients to use a small firm whenever possible—one that specializes in estate work.
People come to us after being told that they will save over $5,000 by using a do-it-yourself form. Eye rolling accepted (have you really seen other people use these forms correctly?!), our answer is this: "Since 50% of all estates pay more than $40,000 in estate taxes and thousands more pay excess probate fees (exceeding $2,000, $3,000 or even $4,000) that cannot be avoided, paperwork savings alone of $5,000 are illusory—almost never realized."
During the estate settlement process, your loved ones require more than just paperwork—especially if your estate may be subject to an estate tax or will be litigated. They need compassion, advice, organization and an efficient hand during a very difficult time.
Legal Assistance and Resources in New Jersey
There are a number of resources available for individuals seeking additional support and information about the process of settling an estate in New Jersey. The Legal Services Corporation offers free legal aid services for low-income individuals in civil legal matters. To be eligible, applicants must meet income eligibility requirements and demonstrate a legal need. The New Jersey Court System website provides a series of legal resources and information about estate procedures. Many services on the site are limited to residents of New Jersey . The Legal Services of New Jersey website is a statewide organization that provides free legal representation to those who qualify. Clients must be referred from one of its agencies. The New Jersey State Bar Association offers free legal advice plans and discounted consultations. Additionally, the association conducts free lawyer referral services for all types of legal matters. Many lawyers offer free phone consultations to discuss your situation. Find a New Jersey estate planning and administration lawyer to help you with your unique needs.