Negotiating Probate Fees in Advance
The Hidden Cost in Estate Settlement: A Guide to Professional Fees
When a loved one passes away, the family is often left to navigate a complex legal process during a time of immense grief and stress. This is not a time for making critical financial decisions, yet it is precisely when they must hire professionals to help settle the estate. Unfortunately, without a plan in place, families can face unexpectedly high fees that diminish the inheritance left for them.
The Problem with Percentage-Based Fees
Many professionals, including some attorneys, CPAs, and corporate trustees, charge for their services based on a percentage of the estate’s total value. In North Carolina, an executor is allowed by statute to take a commission of up to 5% of the estate’s assets. While this may seem straightforward, it often results in a fee that is disproportionate to the actual work required.
Consider a simple estate with one primary asset, like a $1 million investment account. A 4% fee would amount to $40,000, even if the work involved is relatively minimal. This percentage-based model rewards the professional for the value of the assets, not the complexity or duration of their work.
A Fairer Alternative: Hourly Billing
A more transparent and equitable approach is for professionals to bill for their services at an hourly rate. With hourly billing, you and your family only pay for the actual time and expertise required to complete the necessary tasks. This ensures that the fee accurately reflects the work performed, whether the estate is simple or complex. At W.G. Alexander & Associates, we handle the vast majority of our estate and trust administrations based on our hourly rates, believing it is the fairest method for our clients.
The Proactive Solution: Address Fees in Your Estate Plan
The best way to protect your family from excessive fees is to address the issue in advance as part of your comprehensive estate plan. You can include specific instructions in your will or trust that direct your executor or trustee to negotiate a reasonable fee, or even require them to use a professional who bills on an hourly basis.
By discussing these matters with your chosen professionals ahead of time, you can make a clear and informed decision, removing that burden from your family. This forethought is a critical but often overlooked part of planning for the process of estate and trust administration.
Call our office at (919) 256-7000 to schedule a consultation.