By Cary A. Lind
FEES IN PROBATE – Part 1
Clients will tell you a number of widespread myths about Probate. Two of the major myths are that the “State” takes a percentage of an estate and that lawyers’ fees take a huge percentage of an estate. Obviously, the State does not take any percentage, and percentage lawyer fees are no longer the norm. It was not always so for attorney’s fees. Until 1975, the Chicago Bar Association was not alone in establishing minimum percentage fees in estates, and it was considered “unethical” to charge less than those fees. That year, the U.S. Supreme Court decided the case of Goldfarb v. Virginia State Bar, 421 U.S. 773 (1975), which outlawed mandated minimum fee schedules for attorneys as being in violation of antitrust laws.
Section 27-2 of the Probate Act states that “[t]he attorney for a representative is entitled to reasonable compensation for his services.” Obviously, that leaves a good deal of room for interpretation and a good deal of discretion to the Probate Court in awarding fees.
Regardless of the Goldfarb ruling, it is not unethical per se for an attorney or firm to charge a percentage fee. However, it may not be required. I also believe that it is not appropriate to charge fees based solely on the size of an estate. An attorney who handles an estate that has only a $500,000.00 house will do minimal work compared with another attorney who handles a $500,000.00 estate composed of 40 different securities, multiple claims against the estate, delinquent income tax returns, and more.
The primary basis for charging fees in most cases is still time, although other factors also apply. The Rules of Professional Conduct do apply, including the usual factors for determining a reasonableness of fees. RPC 1.5 sets out the factors to be considered in determining reasonable fees: (1) the time and labor required, the novelty and difficulty of the questions involved, and the skill requisite to perform the legal service properly; (2) the likelihood, if apparent to the client, that the acceptance of the particular employment preclude other employment by the lawyer; (3) the fee customarily charged in the locality for similar legal services; (4) the amount involved and the results obtained; (5) the time limitations imposed by the client or by the circumstances; (6) the nature and length of the professional relationship with the client; (7) the experience, reputation, and ability of the lawyer or lawyers performing the services; and (8) whether the fee is fixed or contingent.
The factors for fees in Probate differ somewhat from those set forth in the RPC. Estate of Halas, 159 Ill.App.3d 818, 512 N.E.2d 1276 (1987), lists the factors as good faith, diligence, reasonable prudence, the time expended, the size of the estate, the work which was done, the skills and qualifications of counsel, the novelty and complexity of the issues confronted, and the benefits conferred on the client by the legal services rendered. Matter of Grabow’ Estate, 74 Ill.App.3d 336, 341, 392 N.E.2d 980, 984 (1979), states three factors slightly differently: the skill with which the work was performed, the time required to perform the work, and the advantages gained or sought by the services rendered.
In non-Probate contexts, a court can determine whether fees incurred in different legal matters were appropriate for each separate matter. In similar manner, based on the above factors, a court can divide services performed for a Probate estate into specific pieces and make a determination as to whether the fees sought for each piece of the proceeding are appropriate.
The ultimate “test” for determining Probate fees is the benefit to the estate. To the extent a benefit has been produced, from routine administration to recovery of funds to defense of a will contest and other matters, fees will be earned by the attorney and awarded by the Court. That statement is true even where the attorney providing the services is in an impermissible conflict of interest, which in other circumstances would prohibit him from keeping any fees earned. So long as the services rendered have benefited the estate, a conflict of interest is of limited relevance in determining appropriate fees.
Except for fees that would be deemed unconscionable, any fees, percentage or otherwise, may be charged and paid if an estate is administered in independent administration and fees are approved by all parties. That proposition is also usually true in estates that are supervised and where all parties consent.
If there is no agreement on fees by all interested parties, it is up to the Court to decide. Reference is made to an excellent article by Judge Jeffrey A. Malak of the Probate Division of the Circuit Court of Cook County, Illinois, published in the Chicago Bar Journal in May, 2003. Judge Malak notes that to bring the issue of fees before the Court, it is only necessary for a party to state that he objects to the fees. The burden of proof is then on the attorney to substantiate what he or she did, how long it took, and the benefit conferred on to the estate. It is also permissible (which I frequently do) to plead objections in more detail, for example, to point out specifically to the Court the nature of the objections and even to convert the various objections into dollars.
Discovery is available before the hearing on the petition for fees. However, it will not be economic in most cases to spend time on discovery unless the fees claimed are quite substantial. Most attorneys do not pad time or charge for time they did not spend. So long as the time is actually expended as claimed, it is more appropriate and more practical to challenge the amounts of time spent on particular parts of the work or to challenge the benefits purportedly obtained from specific work.
A full hearing can be held on the petition. Depending on the amount in question, it is often more economic to avoid trying the petition date-by-date or item-by-item and instead to let an experienced Probate judge make that determination. As Judge Malak notes, the Probate judges usually know what is reasonable and what is not.
PLEASE NOTE: All fees sought in minor or adult guardianships must be awarded and may be paid only after petition to the court and allowance of the amount paid. Those proceedings are fully supervised, and an attorney who receives fees without a court order risks having to repay to the estate excess fees that were paid. The court will ultimately determine the reasonableness of the fees requested. In reality, provided the final award is greater than the fees already paid, there will usually be no negative repercussions.
© 2006 by Cary A. Lind, all rights reserved