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Home » Estate Planning Articles » Which Costs More: Probate or Trust Administration?

Which Costs More: Probate or Trust Administration?

April 15, 2015

Compliments of Our Law Firm,
Written By: The American Academy of Estate Planning Attorneys

There is no question that a Living Trust allows you to avoid probate – if, of course, the Trust is properly drafted and funded. But does this mean a Living Trust is more cost-effective than a Will?

Some people say that a Living Trust offers no net savings over a Will. In their opinion, the cost of preparing a Living Trust plus the cost of Trust Administration at death, equals or exceeds the costs of preparing a Will and probating an estate. Is this the truth?

In 2002, the Second Circuit Court of Appeals released an opinion in the case of Estate of Grant v. Commissioner of Internal Revenue Service. This opinion contained some interesting findings about the cost of probate as compared to the cost of administering a Trust.

Here’s what happened:

Mrs. Grant, a Maryland resident, established a Living Trust. When she died, most of her assets, including her home, were included in the Trust. These assets, with a total value of approximately $866,000, avoided probate. Mrs. Grant also left assets totaling $11,253 that were not included in her Trust. These assets were subject to probate.

Mrs. Grant’s children served as personal representatives for her estate. On the estate tax return, her children deducted a total of $48,102 in administration expenses. Personal representative and executor fees accounted for $16,875 of the deducted amount.

Since only $11,253 of Mrs. Grant’s estate was subject to probate, the IRS disallowed most of the $16,875 deduction. The Tax Court agreed, making these determinations:

  • Under Maryland law, the maximum executor fee for an estate totaling just over $11,000 was roughly $1,103.
  • The maximum Trustee fee for a Trust totaling $866,000 was $5,720 under Maryland law.

The Tax Court reduced the $16,875 deduction for personal representative and executor fees to $6,733. The children argued that their fee was reasonable and that it was less than what the executor’s fee would have been if Mrs. Grant’s entire estate had been subject to probate. They appealed to the Second Circuit Court of Appeals, and the Tax Court’s decision was upheld.

One of the lessons from this case is that in Maryland, all things being equal, the cost of administering a Trust is significantly less than the cost of probating an estate.

Is the same thing true throughout the country? Between 2000-2001, the American Academy of Estate Planning Attorneys conducted a nationwide survey of probate costs and found that, on average, probate fees approximate 2 percent of the value of the estate. According to the same survey, Trust administration expenses were much lower – ½ to 1 percent of the cost of the estate, on average.

Are Trust administration costs always less than probate costs? The facts in Mrs. Grant and the American Academy survey do not indicate this, but what they do indicate, that in most situations, it is less expensive to administer a Trust than to probate an estate.

Which is the best choice for you, a Will or a Living Trust? The best way to determine this is to seek the advice of an experienced, qualified estate planning attorney. He or she can walk you through all of the relevant factors, including cost, and help you establish an estate plan that meets your unique needs.

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We need to update our Living Trust and attended Schomer Law Group’s seminar. Afterwards we made an appointment and were impressed by the attention Scott Schomer and Liran Aliav gave to our case answering all questions and making suggestions how to minimize the estate tax. All the office staff is very friendly and we highly recommend Schomer Law Group.

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We put off getting a trust for years. After attending a seminar with Scott Schomer we realized that the time had come to get a trust. We were given very good reasons for why we should get a trust. No pressure, just the plain facts. We are very relieved and happy to finally get our trust. Scott and Cesar were very knowledgeable, helpful and listened to our ideas of what we had to say. Any questions that we have now and in the future they are available to assist us to solve them. I recommend the Schomer Law Group and I wish we knew about them years ago.

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When you’re presented with an invitation to attend in a mailer, you may have reservations, this was a truly gift!! My wife and I were educated and guided through the process of creating a family trust.
Both of our parents had attorney’s that “worked” with wills/trusts, but came up short. Fortunately, the Schomer Law Group was there! This is a group of attorney’s that only specialize in estate planning, law, and financial advice, so you know you’re getting expert and personalized advice. This is the best money we’ve ever spent!! Thank you!

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We knew we had to update our 10 year old ( 20 page ) trust. After several detailed meetings, Liran and Cesar produced a large ( 300 pages + ) highly detailed trust document that we have used to make sure our family estate is well managed and clearly understood.
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We would strongly recommend the Schomer Law Group to anyone with an estate of even modest means, to assure proper planning…

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We had contemplated updating our will and starting a trust for a number of years. After attending a talk by Scott Schomer we realized we were long overdue and the potential downside of not having our affairs in order was significant. Scott and his excellent team made the process simple and seamless. They were great listeners, addressed all our concerns and even pulled and processed all the paperwork from our financial institutions. If you are looking for assistance with estate planning, wills and trusts, we highly recommend Schomer Law Group.

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Mr. Schomer was excellent in getting our family trust and estate affairs in order. My husband and I had put off doing this and Scott really made the process easy! He is very passionate in making sure his clients get all that they need and we really appreciated it. I would highly recommend him and look forward to the many years he will be available to assist our family.

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