No – Under current U.S. federal tax law, legal fees for personal estate planning are generally not tax-deductible. Most Americans creating wills or trusts cannot write off those attorney costs on their Form 1040, with only a few narrow exceptions. According to a 2023 Caring.com survey, 14% of Americans without an estate plan cite the cost as a primary barrier. With estate planning attorney fees typically ranging from $1,500 to $3,500, it’s no wonder many taxpayers ask if they can deduct those expenses on their taxes.
Despite this common question, the answer is clear: personal estate planning fees are treated as non-deductible personal expenses under federal law. In this comprehensive guide, we’ll explore why that is – and delve into important nuances that every taxpayer, estate planner, and financial professional should know.
- 📊 Immediate Answer & Why: You’ll learn exactly why personal estate planning attorney fees aren’t deductible on your federal return (and the few rare exceptions).
- ⚖️ Federal vs. State Rules: Discover how federal law disallows these deductions, but some states handle things differently – including a table of state-level nuances.
- 💼 Exceptions & Workarounds: Find out when business or trust-related estate planning costs can be deducted, and how to structure things to stay within IRS rules.
- 🕵️ Real Examples & Pitfalls: Explore real-world scenarios (personal planning, business succession, estate administration) to see what’s deductible and what’s not – and learn what mistakes to avoid.
- 📚 Expert Insights & FAQs: Gain clarity on key terms (like “miscellaneous itemized deductions” and the Tax Cuts and Jobs Act) and get quick Yes/No answers to frequently asked questions.
Now, let’s break down the details to understand what, where, how, and why estate planning legal fees are treated the way they are by the IRS.
Are Estate Planning Legal Fees Tax Deductible? (Federal Law Explained)
Under federal law, the short answer is no: personal estate planning legal fees (for tasks like drafting wills or living trusts) cannot be deducted on your individual income tax return. This was not always the case. Before 2018, some estate planning-related costs could be written off as miscellaneous itemized deductions on Schedule A if certain conditions were met. However, the Tax Cuts and Jobs Act of 2017 (TCJA) changed the landscape dramatically.
What changed? The TCJA eliminated all miscellaneous itemized deductions subject to the 2% adjusted gross income (AGI) floor for tax years 2018 through 2025. Estate planning attorney fees historically fell into this “miscellaneous” category when they related to managing income-producing assets or obtaining tax advice. But from 2018 until at least 2025, no miscellaneous deductions are allowed – which includes typical estate planning fees. In practical terms, that means an individual taxpayer can no longer deduct the cost of preparing a will, setting up a revocable trust, or other personal estate planning services on their federal taxes.
Does it matter? For most average taxpayers, this change had minimal impact. Even before 2018, writing off estate planning expenses wasn’t easy – you had to itemize deductions (forgoing the standard deduction) and your combined miscellaneous expenses (like legal fees, unreimbursed work expenses, etc.) needed to exceed 2% of your AGI. Few people met those thresholds or chose to itemize solely because of estate planning costs. Still, for those who did (particularly high-net-worth individuals or business owners with complex estates), the TCJA’s rule change removed what little tax break existed in this area.
Looking ahead: The current law is slated to stay in effect through the end of 2025. If Congress does nothing, the miscellaneous deduction rules will “sunset” – meaning that in 2026, the old rules could return, potentially allowing estate planning fee deductions again (under the 2% AGI rule). However, there’s no guarantee; lawmakers could extend the ban or make other tax reforms. As of now in 2025, personal estate planning fees remain non-deductible on federal returns.
What to Avoid When Trying to Deduct Estate Planning Fees
Given the strict IRS stance, it’s crucial to avoid missteps. Here are common pitfalls and what not to do regarding estate planning legal fees and taxes:
❌ Don’t write off personal estate planning costs on your 1040. Hiring an attorney to draft your will or family trust might feel related to finances, but the IRS considers it a personal expense. Attempting to deduct purely personal estate planning fees (like will preparation, healthcare directives, or guardianship designations) on your individual tax return will be disallowed and could potentially flag you for an audit. In short, do not list these legal fees as deductions on Schedule A – they won’t survive IRS scrutiny under current law.
❌ Don’t mix personal and business expenses improperly. If you’re a business owner, you might be tempted to have your company pay for your estate planning and then deduct it as a business expense. Be very careful here. Only the portions of estate planning that are directly related to your business (for example, creating a buy-sell agreement for succession or planning for business asset transfers) can potentially be deducted by the business. Personal estate planning elements (like your personal will or family trust provisions) cannot be magically converted into business expenses. Avoid trying to lump personal estate planning bills into your business tax deductions – that could be viewed as tax evasion. Always segregate invoices and clearly document any business-related legal fees versus personal ones.
❌ Don’t double-dip with estate expenses. If you are an executor or beneficiary dealing with a decedent’s estate, you might encounter legal fees for administering that estate (probate attorney costs, etc.). We’ll discuss soon how an estate or trust itself can often deduct those on its own tax return. But one thing to avoid is attempting to also claim those same fees on your individual return. No double dipping: an expense can either be claimed by the estate/trust or potentially passed through to beneficiaries in certain final-year situations – not deducted by everyone. Similarly, expenses used to reduce an estate’s estate tax cannot simultaneously reduce the estate’s income tax. So, avoid any scenario where a legal fee is deducted twice in two places; that’s not allowed.
❌ Don’t assume all jurisdictions follow federal rules. The focus here is federal taxes, but remember: state tax laws vary. Some states adhere to the federal treatment (disallowing these deductions), while others do not. We’ll cover this in detail in the state comparison table below. A mistake to avoid is assuming that because the IRS disallows something, your state does too (or vice versa). Always check your state’s rules before writing off any fee on a state income tax return. For instance, California and New York still permit certain miscellaneous deductions at the state level even though federal law doesn’t. Failing to understand these differences could mean missed opportunities or incorrect state filings.
In summary, treat estate planning fees as personal, non-deductible costs unless you have a clear reason and documentation showing they qualify as a business or estate expense. When in doubt, consult a tax professional to avoid costly mistakes.
Examples of Deductible vs. Non-Deductible Estate Planning Fees
To make these rules more concrete, let’s look at a few real-world scenarios. These examples illustrate when estate planning legal fees might be deductible and when they’re definitely not:
Example 1: Personal Will & Trust Creation (Not Deductible)
Scenario: Jane Doe hires an attorney to draft her estate plan, which includes a will, a revocable living trust, and advance healthcare directives. She pays $3,000 in legal fees out-of-pocket. When filing her tax return, Jane wonders if this $3,000 can be deducted.
Outcome: No deduction. Jane’s estate planning costs are personal expenses. Under current IRS rules, she cannot deduct her attorney’s $3,000 fee on her Form 1040. Prior to 2018, she might have tried to list a portion of this as a miscellaneous itemized deduction (if it related to tax advice or the management of income-producing assets, and if her total misc. expenses were high enough). But today, the tax code clearly disallows deducting personal estate planning fees. Jane should simply absorb the cost; it won’t reduce her taxes.
Explanation: Crafting a will or living trust for personal affairs is considered a personal financial decision, not an income-producing activity. The IRS sees no allowable tax deduction here – just as you can’t deduct the cost of personal life insurance or the legal fees for a prenuptial agreement.
Example 2: Business Succession Planning (Partially Deductible)
Scenario: John Smith is a small business owner planning his estate. As part of his estate plan, he works with an attorney on a business succession plan for his company. The attorney drafts a buy-sell agreement and other documents to ensure a smooth transfer of the business to John’s children when he retires or passes away. John’s total legal bill is $5,000, which also includes preparing a will and a trust for his personal assets.
Outcome: Partial deduction (business portion only). John’s company can deduct the portion of legal fees that directly relate to the business succession planning. Let’s say the attorney’s invoice itemized $3,000 for the buy-sell agreement and business transfer work, and $2,000 for John’s personal estate documents.
The $3,000 portion is an ordinary and necessary business expense – the company can include that as a deductible legal expense on its business tax return (for example, on Schedule C if he’s a sole proprietor, or on the relevant business return if an LLC or S-corp). The remaining $2,000, however, was for John’s personal estate plan (his will and family trust), which is not deductible on his personal return.
Explanation: This scenario shows the importance of allocation. The IRS allows deductions for expenses that are directly tied to a trade or business (under IRC Section 162). Planning how your business will be transferred is considered a legitimate business purpose. Those legal fees have a clear business nexus, so they can be written off by the company as a cost of doing business. In contrast, John’s personal estate documents benefit him and his family privately – not the business’s operations – so that part stays personal and non-deductible. If John’s attorney hadn’t separated the billing, he would need to work with her to reasonably allocate the fee between business and personal work. Proper documentation is key to defend such a deduction in case of an audit.
Example 3: Estate Administration After Death (Deductible to the Estate)
Scenario: Mary Johnson passed away, and her son Mark is the executor of her estate. The estate hires a lawyer to handle probate and to draft some trusts per Mary’s will. Over the course of administering the estate, the estate pays $10,000 in legal fees, plus $5,000 to an accountant for preparing the estate’s tax returns. Mark, as executor, is also entitled to a fee for his services, which comes out to $8,000 (though he may choose to waive it). Mark wonders: who, if anyone, can deduct these expenses?
Outcome: Yes, the estate can deduct many of these costs on the estate’s own tax returns – but Mark cannot deduct them on his personal return. An estate is a separate legal and tax entity. For federal income tax purposes, the estate will file its own tax return (Form 1041) for any income the estate earns during administration. On that fiduciary return, the estate can deduct administrative expenses necessary for settling the estate – including attorney fees, executor fees, and accounting fees. These are not considered “miscellaneous itemized deductions” for the estate; rather, they’re above-the-line deductions allowed by special rules for estates and trusts (specifically, IRC Section 67(e)). In Mary’s case, the estate’s $10,000 attorney fees, $5,000 accounting fees, and the paid portion of the executor’s fee are generally deductible against the estate’s income (assuming the estate has income, such as interest or dividends from Mary’s assets before distribution).
Additionally, if Mary’s estate is large enough to file an estate tax return (Form 706), those same administration expenses could alternatively be claimed as deductions on the estate tax return to reduce the taxable estate. However, the executor must choose – each expense can be used either for the estate’s income tax deduction or for the estate’s estate tax deduction, not both. (The tax code prevents double-dipping by disallowing an expense on Form 706 if it’s claimed on Form 1041, and vice versa.)
Mark personally doesn’t get to deduct anything for serving as executor (in fact, any executor fee he takes is taxable income to him). But he can rest assured the estate itself is getting a tax benefit from paying those legal and professional fees. The bottom line: post-death estate legal fees are deductible, but only to the estate or trust, not to the individual beneficiaries or executors (except in certain final-year scenarios where excess deductions pass through).
Explanation: This example highlights a major exception to the “no deduction” rule – the distinction between personal expenses and estate or trust expenses. When a person dies, their estate (or a trust they created) becomes its own taxpayer. The IRS allows that estate or trust to deduct costs of administration that wouldn’t exist if the property were not held in an estate or trust. Fees for probate, trust administration, executor commissions, etc., are inherently tied to managing and distributing the decedent’s assets, so they are deductible for the estate or trust. Importantly, in 2018 the IRS clarified that the TCJA’s ban on misc. deductions does not stop estates and non-grantor trusts from deducting these fiduciary administration expenses. Estates and trusts can continue to write off these costs when calculating their taxable income. This is a crucial nuance: while individuals lost the ability to deduct estate planning fees, estates and trusts (as entities) kept their deductions for estate settlement costs.
These scenarios are summarized in the table below for a quick overview of who can deduct what:
| Scenario | Deductible? (Federal Income Tax Treatment) |
|---|---|
| Personal estate planning for individual (wills, personal trusts) | No. Treated as personal expense – not deductible on individual’s federal tax return under current law (2018–2025). |
| Business-related estate planning (succession planning, business asset transfer) | Partial. If clearly part of business operations, that portion is deductible as a business expense. Personal portions of the planning remain non-deductible. |
| Estate or trust administration (post-death legal fees, executor fees) | Yes (for the estate or trust). Deductible on the estate’s or trust’s income tax return (Form 1041) or on the estate tax return – but not deductible on an individual beneficiary’s personal return. |
IRS Rules, Tax Laws, and Key Rulings Behind the Deduction
To fully understand the why and how, let’s dive into the tax law framework and IRS guidance governing legal fee deductions, especially as they apply to estate planning. Several key pieces of law come into play:
- Internal Revenue Code Section 262 – Personal Expenses: This is the fundamental rule that personal, living, or family expenses are not deductible unless specifically allowed by the tax code. Estate planning for your personal affairs falls under personal expenses, so it’s disallowed by default (just as the cost of a wedding or a prenuptial agreement’s legal fees would be).
- Internal Revenue Code Section 212 – Expenses for Production of Income: This provision historically allowed individuals to deduct expenses paid for managing or conserving property held for income production, or for tax planning and advice. Estate planning fees could sometimes fit here – for instance, if part of your estate plan involved advice on minimizing estate taxes (tax advice) or setting up a trust to hold income-producing assets for your heirs (income production). Prior to 2018, Section 212 was the gateway that made certain estate planning legal fees miscellaneous itemized deductions. But the deductions under Section 212 are exactly what got suspended by the TCJA.
- Internal Revenue Code Section 67 and the 2% Rule: Section 67(a) is what used to subject miscellaneous itemized deductions (including those under Section 212) to a floor of 2% of AGI. Simply put, you could only deduct the portion of those expenses that exceeded 2% of your income. Then Section 67(g) was added by the TCJA, which outright disallows all miscellaneous itemized deductions for 2018–2025. That’s the nail in the coffin for deducting things like investment advisory fees, unreimbursed work expenses, and yes, estate planning legal fees, on individual returns in those years.
- Tax Cuts and Jobs Act of 2017 (TCJA): This major tax reform law (Public Law 115-97) implemented the Section 67(g) change above, among many other provisions. It’s important to note that the TCJA changes affecting itemized deductions (including the elimination of the estate planning fee deduction) are currently temporary, set to expire after 2025. If no further legislation intervenes, the rules would revert to pre-2018 law in 2026, meaning those deductions could technically come back (with the 2% threshold, etc.). Many tax experts believe Congress may extend the ban or make new rules, but as of now, 2026 remains uncertain.
- IRS Publication 529 (Miscellaneous Deductions): The IRS issues Pub. 529 to explain miscellaneous deductions. Current guidance makes it clear that for 2018-2025, individuals cannot claim any miscellaneous itemized deductions. This explicitly covers legal fees for personal matters. So if you search IRS materials, you’ll find confirmation that estate planning attorney fees, being miscellaneous personal expenses, are off the table through 2025.
- IRS Notice 2018-61 and IRC Section 67(e) – Trust and Estate Expenses: One confusing point after the TCJA was whether trusts and estates (as separate tax entities) also lost the ability to deduct their administration expenses. Normally, Section 67(e) allows estates and trusts to deduct expenses that would not have been incurred if the property were held by an individual (i.e. unique fiduciary costs like executor or trustee fees, probate legal fees).
- In 2018, the IRS released Notice 2018-61 making it clear they interpret the new law such that these estate and trust administration costs are not treated as disallowed miscellaneous deductions. In fact, final regulations issued in 2020 cemented that position: costs of administering an estate or trust remain deductible in computing the estate’s or trust’s AGI, despite the TCJA’s suspension of misc. deductions. This was a relief to executors and trustees, ensuring that the necessary legal and accounting fees of estate settlement can still offset estate income.
- Knight v. Commissioner (2008): In a notable Supreme Court case before the TCJA, the Court examined which trust expenses are considered unique to a trust (and thus fully deductible under Section 67(e)) versus those that are ordinary (and thus were subject to the 2% floor at the time). The case involved a trust trying to deduct investment advisory fees. The Court ruled that since individuals commonly pay investment advisory fees, a trust’s investment fees were not fully deductible (they were subject to the 2% rule back then).
- Only expenses that would not be incurred if the property were held by an individual (e.g., executor or trustee commissions, probate costs) could be fully deductible by a trust or estate. This precedent is still relevant: it guides what counts as a unique deductible expense for an estate or trust. Post-TCJA, individuals can’t deduct any misc. expenses anyway, but estates and trusts can deduct their admin expenses – and Knight v. Comm’r helps define which those are (unique fiduciary expenses, yes; common expenses like investment management, no).
- IRS Forms and Compliance Considerations: If you find yourself in one of the scenarios where some estate planning-related fees are deductible (for example, the portion of fees attributed to business purposes or those paid by an estate), it’s crucial to report them on the correct tax forms. Business-related legal fees should be deducted on your business tax forms (such as Schedule C for sole proprietors, or on the tax return for your partnership/corporation) – not on Schedule A of your Form 1040. Likewise, estate and trust administration expenses are taken on Form 1041 (the fiduciary income tax return) for the estate or trust.
- On Form 1041, you’ll see lines for attorney, accountant, and fiduciary fees which is where those go. If you’re handling a decedent’s estate and opt to deduct expenses on the estate’s Form 706 (estate tax return) instead, be mindful you cannot also deduct them on Form 1041 – you must choose one route. A common mistake is attempting to deduct something on an individual return that should have been taken on an estate, trust, or business return. That will almost certainly be denied by the IRS if caught. Always use the proper form and category for any deductions.
By understanding these laws and IRS rulings, it becomes evident why the default answer to our question is “no, you generally cannot deduct estate planning fees.” The tax code is actually quite explicit on disallowing personal expenses – and only carves out very specific exceptions when those expenses are tied to income generation, business needs, or estate administration.
How Estate Planning Fees Compare to Other Legal Expenses
It might be helpful to put estate planning fees in context with other types of legal fees and their tax treatment. Not all legal bills are treated equally in the eyes of the IRS. Here’s a comparison of estate planning fees versus some other common legal expenses:
- Estate Planning vs. Business Legal Fees: Legal fees incurred for business purposes are generally tax-deductible to the business. For example, fees for drafting business contracts, handling a company lawsuit, or forming a corporation/LLC are ordinary business expenses and can be written off. Similarly, if part of your estate planning is actually business succession planning (ensuring your company’s future), that portion of the legal fees can be deducted by the business as an ordinary and necessary expense. The key is having a clear business purpose – any portion of the legal work that is purely personal (unrelated to business operations) remains non-deductible.
- Estate Planning vs. Personal Legal Fees: Most purely personal legal fees are not deductible for individuals, which puts estate planning in the same category. For instance, attorney fees for divorce or for a personal injury lawsuit are not deductible (unless maybe the lawsuit involves taxable income, which is uncommon). Even before 2018, personal legal expenses were only deductible in limited cases – as miscellaneous deductions if they were related to producing taxable income. Now, with miscellaneous deductions eliminated, virtually all personal legal costs (estate planning included) are non-deductible on federal returns.
- Estate Planning vs. Tax Preparation Fees: Fees for tax preparation or tax advice were also miscellaneous deductions, and the TCJA likewise suspended those for 2018–2025. That means the money you pay your CPA to prepare your taxes isn’t deductible on your personal return right now, similar to estate planning fees. However, context matters: if an estate or trust pays tax prep fees for its own return, those are deductible to the estate/trust (as an administrative expense), and if a business pays for tax advice or accounting, that’s a business expense. The general rule remains that personal tax prep or advisory fees – much like personal estate legal fees – aren’t deductible under current law.
- Legal Fees to Obtain Taxable Income (Lawsuit Awards): Some personal legal fees can be deducted when they are directly tied to earning taxable income. A classic example is legal fees to win a taxable lawsuit settlement or an employment discrimination award. In those cases, the tax code allows an “above-the-line” deduction for attorney fees so that, say, if you win a $100,000 award and pay $40,000 to your lawyer, you’re taxed only on the net $60,000. These are specific exceptions (outlined in IRC §62) for certain kinds of cases. Estate planning fees do not fall into this category because creating an estate plan doesn’t generate taxable income. It’s about arranging asset transfer and protecting wealth, not earning income, so there’s no analogous tax break like there is for legal fees that produce taxable awards.
- Probate/Estate Administration vs. Estate Planning: To reiterate the contrast, probate or estate administration legal fees (incurred after death by an estate) are deductible to the estate, whereas estate planning legal fees (incurred by an individual before death) are not deductible to that individual. The tax law essentially treats post-death management of assets as a deductible activity for the estate, but treats pre-death planning of one’s own affairs as a nondeductible personal expense. That explains why an executor can deduct the costs of settling an estate on the estate’s returns, yet a living person cannot deduct the costs of setting up their estate plan on their personal return.
- Estate Tax Planning vs. Income Tax Deductions: Many people engage lawyers to plan for reducing future estate taxes (for example, creating trusts to shelter assets from estate tax). While that can save a family estate tax down the line, it does not translate into a current income tax deduction for the person doing the planning. Any savings come in the form of reduced estate tax or smoother wealth transfer, not an immediate write-off. Only if those expenses are paid by an estate after death might they help reduce the estate’s tax. It’s important not to confuse the two tax systems: an expense that might be helpful for estate tax purposes doesn’t necessarily give you a break on your income tax return.
In summary, estate planning legal fees align with the general rule that personal legal costs are not tax-favored. They stand in contrast to business legal costs (which are deductible) and certain litigation-related fees (which may be deductible in special cases). Understanding these parallels helps make sense of why the tax code treats estate planning expenses the way it does.
State-by-State Nuances: Can You Deduct Estate Planning Fees on State Taxes?
Federal law is one thing – state income tax law is another. Some states conform entirely to federal rules, meaning if it’s not deductible on your federal return, it’s not deductible on your state return either. Other states have decoupled from federal rules and sometimes allow deductions that federal law disallows. Here’s a quick look at how different states handle the deductibility of estate planning fees:
| State | State Income Tax Treatment of Estate Planning Legal Fees |
|---|---|
| California | Deductible at state level. California did not conform to the federal suspension of miscellaneous itemized deductions. Californians who itemize on their state return can still deduct miscellaneous expenses (including qualifying estate planning attorney fees) subject to the 2% of AGI rule. In practice, while you can’t deduct these fees on IRS Form 1040, you might be able to on your California Schedule CA for state taxes. |
| New York | Deductible at state level. New York also decoupled from the TCJA changes. NY tax law allows itemized deductions as if the federal changes in 2018 didn’t apply. That means certain estate planning costs that would have been miscellaneous deductions (investment-related or tax-planning portions) can potentially be deducted on the New York state return (Form IT-196) if you itemize. In short, New York lets you calculate deductions under pre-2018 rules for state purposes. |
| Illinois (example of a conforming state) | Not deductible at state level. Illinois follows federal definitions of income and deductions closely. Since the IRS disallows miscellaneous deductions through 2025, Illinois taxpayers also cannot deduct estate planning legal fees on their Illinois state returns. Many other states that conform fully to federal law similarly offer no separate deduction for these expenses. |
| Florida (and other states with no income tax) | N/A – No state income tax. Florida has no state individual income tax, so the question of deducting an expense on a state return doesn’t apply. Whether or not legal fees are deductible federally, it makes no difference for states like Florida, Texas, Nevada, etc., because there is no state income tax filing. (Note: A few states do have separate estate or inheritance taxes, but those typically allow deductions for actual estate settlement expenses, similar to federal estate tax rules.) |
Where you live matters. Taxpayers in states like California and New York might salvage a deduction for estate planning fees on their state returns even though nothing is allowed federally. Keep in mind the mechanics: you typically need to itemize at the state level to benefit, and each state has its own definitions and limits. Also, state laws can change – some states may choose to conform to federal rules in the future, or vice versa. Always check the latest state tax guidance or consult a local tax advisor to see if your state offers a deduction in this area.
Key Terms and Concepts Defined
Understanding the deductibility of estate planning fees involves a lot of tax jargon. Here’s a quick glossary of key terms and how they relate to this topic:
- Miscellaneous Itemized Deductions: A category of tax deductions that, before 2018, were subject to the 2% AGI floor on Schedule A. They included expenses like unreimbursed employee costs, investment advisory fees, tax preparation fees, and personal legal fees (including estate planning costs). From 2018–2025, miscellaneous itemized deductions are entirely disallowed for federal taxes (thanks to the TCJA). If they return in 2026, taxpayers would again list those expenses on Schedule A and only deduct the portion that exceeds 2% of AGI.
- Adjusted Gross Income (AGI): Essentially your total gross income minus certain above-the-line adjustments (like pre-tax retirement contributions, HSA contributions, student loan interest, etc.), and calculated before itemized deductions or the standard deduction. The 2% rule for miscellaneous deductions refers to 2% of this number. For example, if your AGI is $100,000, the first $2,000 of otherwise deductible miscellaneous expenses would not be deductible (only the amount beyond that would count, if such deductions were allowed). AGI is a crucial threshold because many deductions and credits are limited based on it.
- Standard Deduction vs. Itemizing: Taxpayers can either take the standard deduction (a fixed dollar amount based on filing status) or itemize their deductions (add up eligible expenses like mortgage interest, charitable contributions, state taxes, etc.). The TCJA nearly doubled the standard deduction and also eliminated or limited many itemized deductions, which led to a sharp drop in the number of people who itemize. Today, only about 10–15% of taxpayers itemize because the standard deduction is so high. This means even if estate planning fees were deductible, many people wouldn’t benefit unless their total itemized deductions exceeded the standard amount.
- Internal Revenue Code (IRC): The body of federal tax laws. We’ve mentioned several code sections (like IRC §212, §262, §67, §67(g), §67(e), §642, etc.) which form the legal basis for what’s deductible or not. For instance, IRC §262 explicitly disallows personal expenses (the broad reason estate planning fees are not deductible), and IRC §67(g) temporarily disallows miscellaneous deductions from 2018–2025 (the specific rule knocking out estate planning fee deductions currently). Knowing these sections can help decode why certain expenses get a tax break and others don’t.
- Tax Cuts and Jobs Act (TCJA): The major tax reform law passed in late 2017 (effective starting 2018) that overhauled many provisions for individuals and businesses. In our context, the TCJA suspended miscellaneous itemized deductions (eliminating the ability to deduct estate planning fees on personal returns) and also, for example, greatly increased the estate tax exemption (which reduced the number of estates that pay estate tax). Its individual tax provisions, including the deduction ban, are set to expire after 2025 unless extended.
- Estate vs. Trust vs. Individual: An estate is a legal entity that comes into existence upon a person’s death to manage and distribute their assets under an executor’s oversight. A trust is a legal arrangement (and entity for tax purposes) in which a trustee holds and manages assets for beneficiaries; trusts can be established during life (living trusts) or at death (through a will). A living individual taxpayer is a person filing a Form 1040 for their personal income. Different tax rules apply to each: estates and trusts file Form 1041 and can deduct certain administration expenses unique to those entities, whereas individuals file Form 1040 and cannot deduct personal estate planning costs.
- Executor Fees / Trustee Fees: Payments made to the person administering an estate or trust, as compensation for their services. These fees are taxable income to the person receiving them (the executor or trustee must report the fee as income on their return). For the estate or trust that pays them, however, executor and trustee fees are deductible expenses – the estate or trust claims those on its fiduciary tax return as part of the cost of administration. (Note: an executor or trustee cannot deduct a fee they receive on their own individual return; the deduction belongs to the estate/trust, while the executor/trustee simply reports the fee as income.)
- IRC Section 162 (Business Expenses): This code section allows a business to deduct all ordinary and necessary expenses paid or incurred in carrying on a trade or business. It’s why business-related legal fees are generally deductible. We referenced §162 when discussing the business succession planning scenario: if part of your estate planning legal fees can be classified as a business expense (i.e. it was an ordinary and necessary cost for your business), then that portion falls under §162 and can be deducted by the business. Legal fees that don’t meet §162’s criteria (because they’re personal, not business) won’t get a deduction.
- Form 1041 & Form 706: Form 1041 is the U.S. Income Tax Return for Estates and Trusts. It’s filed annually by estates or trusts that have income, and it’s where deductible expenses of the estate/trust (like legal fees, accountant fees, and executor/trustee commissions) are claimed to reduce the taxable income of the estate or trust.
- Form 706 is the federal Estate Tax Return, filed for estates that exceed the estate tax exemption threshold. On Form 706, an executor can deduct funeral and administration expenses (including attorney fees, executor fees, etc.) to reduce the value of the taxable estate. However, an expense can’t be used twice – an executor must choose to take a deduction either on the estate’s Form 706 or on the estate’s Form 1041, not both (IRC §642(g) prevents double-dipping between estate and income tax). Most people won’t file Form 706 unless the estate is very large, but many estates will file Form 1041, and that’s where those post-death legal fees get deducted.
- Sunset Provision: A “sunset” in tax law means that a provision will expire on a set date unless renewed. The current ban on miscellaneous itemized deductions is set to sunset after December 31, 2025. If that happens, starting in 2026 the old rules would come back (meaning estate planning fees could again be deductible as misc. deductions, subject to the 2% floor and other limitations). Congress could also act to extend the ban or change the rules before then. This built-in sunset is why any advice beyond 2025 comes with a caveat – the rules might change if the law reverts or if new legislation is passed.
Having clarity on these terms will help you navigate conversations with your CPA or attorney on this topic. It also ensures you know exactly what various articles or IRS instructions mean when they reference these concepts.
Pros and Cons of Deducting Estate Planning Fees
While currently you can’t deduct personal estate planning fees on federal taxes, it’s worth understanding the potential advantages and drawbacks of such deductions (in scenarios where they might apply, or if rules change in the future):
| Pros of Deductibility | Cons / Limitations |
|---|---|
| • Tax Savings: If allowed, deducting estate planning fees reduces your taxable income, meaning you effectively get a discount on those legal costs via tax savings. This can be significant for large estate plans or if you’re in a high tax bracket. | • Not Currently Allowed: The biggest “con” is that for now, the deduction is off the table for individual taxpayers through 2025. In other words, any theoretical benefit is moot unless and until the laws change. |
| • Encourages Professional Planning: Tax deductibility could incentivize individuals or businesses to engage in thorough estate planning, since the government would subsidize part of the cost. This might lead to better-prepared estates and fewer costly mistakes or probate issues down the road. | • Thresholds and Hurdles: Even when it was allowed (pre-2018, or if it returns later), the 2% AGI threshold and the need to itemize meant many people saw no actual benefit. Only those with substantial deductible expenses who itemized their taxes could take advantage, limiting the deduction’s usefulness. |
| • Business and Estate Advantages: In contexts where fees are deductible (like a true business expense or an estate/trust administration expense), it aligns tax treatment with the principle that the costs of managing income or assets should be deductible. It avoids situations where income is taxed but related necessary expenses aren’t deductible. | • Risk of Misuse: If people attempt to twist personal costs into deductible ones (for example, running personal estate planning fees through a business or mislabeling them), it can lead to disputes with the IRS, audits, and penalties. The complexity of the rules can also be a trap for the unwary, potentially causing errors in tax filing. |
In essence, having the ability to deduct these fees would be beneficial (who wouldn’t want to save on taxes?), but the tax code’s restrictions mean most individuals can’t take advantage of it currently. Meanwhile, the few scenarios where deductions do apply come with their own strings attached and require careful compliance. Always weigh the potential tax savings against the rules and ensure you’re not bending them beyond what’s allowed.
FAQ: Quick Answers to Common Questions
Finally, here are some frequently asked questions about deducting legal fees for estate planning, answered in plain English. These reflect the kinds of queries real people have – answered with a simple yes or no and a brief explanation:
Q: Can I deduct estate planning attorney fees on my taxes this year?
A: No. For federal income taxes, personal estate planning attorney fees are not deductible under the current law (through at least 2025).
Q: Are legal fees for setting up a living trust tax deductible?
A: No. The cost to set up a revocable living trust for your personal estate planning is considered a personal expense and isn’t deductible on your individual federal tax return.
Q: My small business paid for my estate planning – can the business deduct that cost?
A: Yes, but only the parts related to the business. If your estate planning included business succession or company-related work, that portion can be a business expense. Purely personal portions are not deductible.
Q: Can a trust or estate deduct the legal fees it pays?
A: Yes. An estate or non-grantor trust can deduct necessary legal fees and administration costs on its own tax return. Those deductions belong to the estate/trust, not to you personally.
Q: I paid probate attorney fees after my parent’s death – can I deduct those?
A: No (not personally). If you paid them out of your own pocket without reimbursement, you unfortunately can’t deduct them on your return. However, if the estate paid the fees, the estate can deduct them.
Q: Will estate planning fees ever be tax deductible again?
A: Possibly. If Congress lets the current law expire after 2025, miscellaneous deductions including estate planning fees could return in 2026. But it’s uncertain – keep an eye on tax law changes.