By Cary A. Lind
FEES IN PROBATE – Part 2
As with many other Estate-related issues, determining fees in Probate can be quirky. Some areas merit more specific discussion.
As should be obvious, an attorney cannot recover fees from an Estate for services performed for the representative personally. Surprisingly, many attorneys do not recognize the issue or separate the services. Especially if the representative is also a beneficiary of the Estate, there will be often be situations where the representative’s personal interests will collide with his fiduciary duties. While a full discussion of those potential conflicts is beyond the scope of this article, suffice it to say that fees can usually be paid to the representative’s attorney only for services rendered to the estate. In similar manner, to the extent fees are related to non-Probate assets, they must be charged to the persons who ultimately receive the benefits of those assets, not to the estate.
Many attorneys charge for the sale of the decedent’s home on an hourly basis. While there is nothing per se wrong with doing that, it is not the most economic way of handling the transaction. On a time basis, typical fees for that sale will be well over $1,000.00 and may be much higher. There are hundreds of attorneys in the Chicago area who handle real estate transactions on a set fee basis of several hundred dollars. If the attorney for the Estate will not do the same, he or she should refer the sale of the home to an attorney who specializes in real estate and who will handle the matter for a set fee.
An executor has a duty to defend a will contest unless she has reason to know that the will is not valid and that defending it will not be justified. So long as the executor acts reasonably and in good faith in defending a will contest, her attorney will be entitled to fees for defending the contest.
By contrast, in a will construction action where the will is determined to be ambiguous, the attorneys for all parties who assist the court in resolving the ambiguity are entitled to have their fees paid out of the estate, including those who take positions adverse to the estate. The Court still may scrutinize the specific services rendered to determine which parties’ fees are entitled to be paid or reimbursed.
Where a party initiates Probate but someone else is appointed, the attorney for the original petitioner may be entitled to fees under Estate of Roselli, 70 Ill.App.3d 116, 388 N.E.2d 87, 26 Ill.Dec.463 (1st Dist.1979). In petitioning to open the estate and where a representative is appointed, there was a benefit provided to the estate, and the attorney should be entitled to fees. At some point in the process, the services no longer benefit the estate, and defining that point is not always clear. If a counter-petition is filed and has “priority,” I consider that to be the latest cut-off point for seeking fees from the estate.
In several other aspects of Probate, fees may be paid to attorneys other than the attorney for the representative when those fees resulted in conferring a benefit on the estate by reducing expenses or disbursements from an estate, by bringing additional assets into an estate, or otherwise. The entitlement to fees is often based on the common fund doctrine, i.e., when an attorney creates a benefit to the estate, a “fund” to be shared among parties other than just the attorney’s own client, the fees of the attorney should properly be paid from the fund that was created for the benefited parties. Otherwise, some parties will be unjustly enriched despite and because of their non-participation while others bear the burden of all of the fees. Fees under the common fund doctrine are often based on a percentage of the recovery, much as attorneys are paid in class actions, and the percentage seems to center around one-third of the recovery. Subject to the agreement between an attorney and the client, the client is usually initially responsible for paying fees to his or her own attorney as agreed. If fees ultimately are recovered from the estate, the client may be reimbursed.
The common fund doctrine is particularly applicable to some Probate areas. For example, successful Citation proceedings usually benefit the estate as a whole by bringing additional assets into the estate. Other examples would include surcharge petitions against representatives and successful objections to accountings.
In some cases, such services may benefit only some beneficiaries of an estate, perhaps to the detriment of others. In those cases, fees may be awarded from the estate as a whole but may be imposed only on the parties who are benefited, again under the rationale of the common fund doctrine. Will contests are one such area. Where the will is successfully challenged, all parties who benefit from the contest should share in the fees.
The above examples are not exhaustive, but the principles apply generally to Probate fee issues.
Practical Notes: The attorney who represents an executor or administrator who has misappropriated funds, committed waste or mismanagement, or has otherwise “misbehaved” may wind up with an unpleasant surprise. There is ample authority to limit that attorney to fees only for services that benefited that estate and to deny fees for all services to the errant representative that did not do so. If an attorney finds himself or herself with such a client, he or she may wind up with a double whammy! The court also may not let the attorney withdraw pending completion of an accounting, closing of the estate, or other resolution of uncompleted matters while at the same time denying the attorney any fees from the estate to continue to represent the miscreant. Even worse, the contesting attorney may himself be entitled to recover fees for successfully limiting your fees!
When a fiduciary takes any sides in a dispute, the representative and his or her attorney may lose the right to recover any fees for services related to that dispute. Even where there are legitimate issues that need to be resolved, the fiduciary cannot side with any party without violating its fiduciary duties of loyalty and impartiality to all beneficiaries. In the same vein, if the representative tries to protect or promote his or her own interest as opposed to those of the beneficiaries, the effect is similar to misbehavior, and fees may not be allowed at all. If you represent such a client, beware.
© 2006 by Cary A. Lind, all rights reserved