Income Deduction of Estate Planning Fees

With April 15^th approaching, it reminds us of the need to file our income tax returns. When preparing estate planning documents, clients often ask, "are these estate planning fees deductible?"

The cost to do a simple Will, Power of Attorney and Medical Directive are personal expenses and not deductible. However, a portion of the cost to prepare a comprehensive estate plan, involving a revocable trust to avoid probate and a marital and credit trust to reduce or eliminate estate taxes, is deductible.

How do you distinguish between the personal expense allocable to the non-deductible planning and the deductible expense attributable to the tax planning and the property preservation? It depends on each case and the fee charged, but it is likely 60% to 75% of the total fee is deductible. These fees are analogous to advisory fees paid to a financial planner. Of course, how this applies to your own tax return and the 2% miscellaneous deduction rule, is for you and your CPA to sought out.

Read more discussion of estate planning topics affecting Virginia residents and U.S. citizens at Dedon on Estate Planning.

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