Part 3 - FEES IN PROBATE
By Cary A. Lind
FEES IN PROBATE - Part 3
Section 27-1 of the Probate Act provides that "[a] representative is entitled to reasonable compensation for his services . . . "
As with attorney fees, the bar-mandated fee schedule used to provide that representatives were paid a percentage of the value of the estate, usually two to five percent, for acting as representative. Also like attorney fees, that fee schedule is no longer mandatory. In contrast to attorney fees, it may actually be more appropriate for a representative to charge a percentage fee because the representative often assumes responsibility that is not necessarily reflected in the time that is spent. Factors other than time must also be considered. However, time expended is still the major factor used by a court in determining a representative's fees.
Also as with attorney fees, if all parties approve the representative's fees, the court will not care. If all parties do not agree, a representative needs to petition the court for fees just as attorneys do. The hourly rate at which representatives are paid will not usually be measured by the hourly wage that the representative earns at his or her regular job, the income that has been lost by the representative, or other measures specific to the representative. The rates that will be allowed should be related to the specific nature of the services performed by the representatives. For example, for time spent cleaning out and cleaning up the decedent's home, a representative should be paid at a rate comparable to one that would be charged by someone hired to do that job, maybe $10.00 per hour. On the other hand, a representative who spends time reviewing hospital bills looking for and finding overcharges, who does a thorough job in dealing with creditors, who saves the estate money, and who otherwise handles the job of representative in a thorough and efficient manner will have earned greater fees, perhaps $25.00 to $30.00 per hour for those services. A representative must keep detailed time records as does an attorney in order to substantiate any fee request.
The courts have clearly said that an attorney who acts as both executor and attorney in an estate may charge attorney rates for the services rendered as attorney but may only charge executor rates for acting as executor. This comes to a shock to some attorneys who assume that they may charge their attorney rate for all services rendered. That is not the law.
WHEN DO FEES GET PAID?
Once upon a time, when all estates were supervised, attorneys used to wait until closing of an estate to be paid. That is still often true in supervised estates, specifically in disabled and minor guardianships (subject to interim fee awards). That procedure had pros and cons for the attorney and the client. Working on every estate for a year or more without getting paid puts an unfair financial burden on attorneys. Most attorneys need significant fees to be paid on a current basis. Waiting until the end can also alienate a client who does not find out exactly how much the fees will be until then.
Apart from supervised estates, there is no prohibition on collecting fees as work is performed. My own practice is to receive a retainer at the beginning, to charge periodically as fees are incurred, and to wait on my final payment for approval of all parties at the closing of the estate. The ultimate question is whether the total fees charged and paid are reasonable and are accepted by all interested parties and the court if necessary. If no one disputes the total, it does not matter when the fees were paid. In the rare case where an attorney has been overpaid, he or she can return the excess fees to the estate.
Following this procedure keeps Probate attorneys solvent and more content with the practice of law. It also has the beneficial effect of informing clients (and perhaps interested parties) of the fees as the case proceeds instead of hoping that there will be no problem at the end. If there is a problem, it is better to resolve it earlier rather than later when someone may be dissatisfied with the end result.
In sum, pay-as-you-go has many benefits and should be the rule. Even where an estate must wait for cash from sale of real estate or other assets, an attorney should get a retainer in front and should be paid when money becomes available.
A Final Story About Fees
Sometimes a fee contest can have unexpected results. My office was retained in connection with "Walter's" complicated contested estate. Within the estate itself, we represented the decedent's sons in contesting the will drawn by the decedent's prior lawyer, "Edmund," and in Citation proceedings for discovery against Edmund for records and information received during his prior representation. At the time Walter died, he was litigating two Chancery cases with Edmund as his attorney, one suit against our clients, and a second suit seeking to invalidate a purported contract to sell Walter's prior home. We intervened in the contract case in order to assert our clients' superior rights in the real estate, and we substituted in the other case against our clients. The executor substituted into both Chancery suits and hired a litigation attorney ("Philip") to represent the estate in both cases and to defend against the will contest.
We converted the estate to supervised administration and compelled Philip and the estate's attorneys to petition for fees. By the time we filed our objections to the fees, we were convinced that on any objective basis, the estate should have dismissed the Chancery suit against our clients and should have yielded to our clients' superior rights in the real estate contract litigation. We also believed that the amounts that had previously been incurred in fees to Philip already exceeded any potential benefit to the estate from either Chancery case and that substantial additional fees were inevitable if the cases proceeded. We objected to the fees and laid out the circumstances in both Chancery cases to the Probate Court with a request that no more fees be allowed until there were "results" for the Probate Court to measure fees against. The Court agreed and essentially turned off the fee spigot. Soon after that was done, Philip withdrew from all matters. He had not agreed to handle the cases for a "contingent fee," and the Executor could not or would not agree to pay him from her own funds. Philip's withdrawal afforded a window of opportunity and led to a prompt settlement of all litigation matters.
At the time the fee petition was being contested, we expected a long, difficult fight still to come. The Court's ruling on fees changed the entire complexion of all of the cases. The Probate Court had no direct control over either of the Chancery cases, but it did have control over the purse strings. We hoped that the Court would put limits on the fees still to come, as it ultimately did. The ruling of the Court was justified by and based squarely on the factors and issues set forth in Parts 1 and 2 of this series of articles.
As you can tell from these three articles, fees in Probate estates are not always routine and do not always follow the rules applicable to other cases. Attorneys with conflicts of interest can still be paid rather than being barred from receiving any fees, attorneys who furnish services for their client-representatives in connection with the estate may be denied payment from the estate, attorneys who represent parties adverse to the estate may be entitled to receive fees from the estate, and the common fund doctrine is alive and well. The best advice is twofold: first, be sure that you are on solid footing at all times with regard to fees that you intend to claim; and second, make sure your fee agreement with your client makes the client personally responsible for your fees where ethically permissible. On the positive side, in most Probate situations, there are assets from which to be paid fees, and an attorney is not always at the mercy of the client.
The discussions above highlight the areas that are most fraught with difficulty to help you avoid not getting paid and to help you get paid appropriately when warranted.
© 2006 by Cary A. Lind, all rights reserved
Cary A. Lind, P.C.