Shop for a Lawyer
People price-shop for almost everything they buy. Yet most people don't price-shop for a lawyer. This is because most don't know how — where to look and what to ask. If this describes you, read on.
The best way to find a lawyer is a referral from a satisfied client. Ask your friends, neighbors, and work colleagues if they have had any planning done. Ask who they used, how much it cost, and whether they were satisfied with the results. If you don't find a lawyer this way, contact your local or state bar association. Many of the state bar associations have a referral service or a directory that will help you find a lawyer in your area who does estate planning.
Some attorneys prepare an estate planning package such as a will, trust (if needed), durable power of attorney, medical directive and HIPAA (Health Insurance Portability and Accountability Act) document for a flat fee. You may want to compare the cost of a package fee with a lawyer's hourly rate.
When you find a lawyer, it is important to understand what she will do for you. A lawyer does different things for you when helping you plan than she does after you are gone.
During the estate planning process, your lawyer spends a relatively small amount of time drafting documents for you. Most of your lawyer's time is spent learning about your family and your property and informing you of your options. Your lawyer does five things for you:
Learns about your property
Learns about your family
Learns what you want to do with your property
Explains the law
Drafts documents to implement your plan
If you are organized and have played the who, what, where, when, and why game, you have done most of the lawyer's job. Then, when you learn the rules about the various legal documents you can use, you have done another part of your lawyer's job. Imagine how much money you will save by doing these things in advance! You can then make an appointment with your lawyer. The only job that will be left is to have your lawyer prepare the documents in accordance with your well-thought-out plan and the laws of your state.
The functions a lawyer will perform for your loved ones after you are gone depend on what type of documents you had in place. If you had a will, the lawyer will start a probate proceeding in your county probate court. If you didn't have a will, or any other estate planning document, the steps the lawyer needs to take are almost the same. The difference is that your state's laws will determine who takes your property. The particulars regarding the probate process are covered in Chapter 4.
The lawyer will typically arrange to close credit cards, terminate Social Security, secure final wages, and pay final expenses. Your executor or family member can handle many of these tasks with some guidance from the lawyer. This will save your estate money.
If you have used a trust, a lawyer might be necessary to explain the trustee's duties to the person you appoint. But, frankly, if you are organized and understand your documents, you will be able to explain the duties to your trustee while you are living, preparing your trustee to serve as your successor trustee after you are gone.
If your estate is subject to federal estate taxes, you will need to hire either a lawyer or an accountant to prepare the federal estate tax return. It is nearly impossible for a person to prepare the federal tax return without professional help. A federal estate tax return is more than fifty pages long and has terms and phrases that even many lawyers don't understand.
You will need to hire a lawyer or an accountant who prepares federal estate tax returns on a regular basis. He will also need to file the final income tax returns.
Questions You Should Ask
When you contact the lawyer's office, find out if the initial consultation or meeting is free — this is a common practice. Ask the lawyer how long he plans for the first meeting and what information you should bring. If the lawyer tells you that you have a half-hour appointment and you don't need to bring anything to the meeting, you can be sure you won't get much information free: You are being invited to be sold on the lawyer's services.
Sometimes law firms include separate charges for filing costs, photocopies, telephone charges, or research time. Be sure to inquire about each of these. It isn't a pleasant surprise to get a bill for several hundred dollars for miscellaneous charges you expected to be included in the hourly fee. Ask what will be covered by the hourly fee.
Ask the lawyer to send information about the firm in advance of your appointment. Having information on the firm readily available is often a sign of a well-organized professional. The information does not have to be glossy and expensive, but it should be informative. Find out if there is a web-site describing the firm. A nicely presented website indicates that the lawyer is on top of technology. This can be important because a technologically sophisticated office typically saves you money. Ask the lawyer how many areas of law she covers. If the answer is all areas of the law, this is probably not the lawyer you want to draft your plan. It is impossible to be an expert in every area of law.
Let the Interrogation Begin!
Ask the lawyer a few basic planning questions and be prepared with the answers yourself, in order to better evaluate him. For instance, you might ask, “What is the main disadvantage to owning property in joint name?” The answer is that when you own property in joint name, there can be negative income tax consequences for the surviving joint tenant. Or you could ask, “If property is placed in a revocable trust, does the trust protect the property from creditors?” The answer is no. As long as you hold a power to revoke the trust, creditors can reach the assets held in trust.
If the lawyer does not know the answers or tells you that he has to get back with you, this is not the lawyer you want. If the lawyer is offended that you are asking questions, then you'll likely want to look elsewhere.
Should You Ask How Much?
Yes. You should definitely ask how much it will cost. The answer to this question is often, “Well, it depends.” Don't let it rest at that. Follow up with more specific questions. Find out if the lawyer bills by the hour, by the project, or by the nature of the documents prepared. If the lawyer charges by the hour, find out what the hourly fee is.
Should you ask for a confirmation?
Yes. The lawyer should put her estimate in writing and confirm the services that will be provided. Also, ask the lawyer to confirm, in writing, the maximum amount you can expect to be billed.
It is also important to ask if other people in the office will work on your file. Different lawyers in a firm typically have different billing rates. Find out whether the bills will list who worked on your file and how much each person billed per hour. You should also ask whether a paralegal will work on your file. If so, how much will you be billed per hour for the paralegal's work? Then ask how many hours the lawyer thinks each person will spend on your job. Don't feel as though you are being intrusive or demanding. This is your money, and you have a right to know where it goes.
It is extremely important to ask the lawyer what the fees will be after your death to “settle” the estate or plan. It is quite common to be charged a reasonable amount — $500 to $1,500 — for preparing the will or trust, only to find that when you die, the lawyer charges a percentage of the estate to “settle the estate” after death. It's not unusual for a lawyer to charge 1 to 1½ percent of the fair market value of the assets to settle the estate, and another flat fee or additional percentage of the fair market value of the assets to prepare the federal estate tax return, if one is required. There may be a separate fee for handling probate assets and nonprobate assets. Add up the value of your assets and compute the cost!
It is possible to find a lawyer who charges a flat fee to prepare your documents but will charge an hourly fee to settle the estate after you are gone. This is typically more cost-efficient.
Paying in Advance
Many lawyers ask for what is called a retainer. This is an amount of money the lawyer requests be placed on deposit before he starts the job. You should not have to pay for all of the services in advance, only a portion of the estimated cost. It is common to pay a retainer in advance, but it is also possible to find a lawyer who will not bill until the job is done. This really depends on the billing practice of the lawyer or law firm. It does not mean the lawyer is bad or evil merely because he requests money in advance.