TYPES OF FEES
There are several distinct types of legal fees. A client must realize when considering a lawyer’s fee that many factors, such as time, ability and experience, may determine an attorney’s fee. Because an agreement on fees is a legal contract, if you do not understand any part of the agreement or wish independent legal advice, you should consult a separate lawyer for advice regarding this agreement.
For frequently performed services such as drafting basic estate planning documents, many lawyers may charge a fixed fee that can be readily quoted to you.
Many lawyers establish a fixed hourly charge for their services. The lawyer’s fee is computed by multiplying the fixed hourly charge by the number of hours the lawyer spends working for his client. The final fee may still include other direct out-of-pocket expenses, such as court filing costs, photocopying charges, long distance telephone charges, travel costs or other expenses directly related to a particular case.
When retaining an attorney on an hourly basis, you may wish to ask for an estimate of the costs for the requested service. Also, you should understand what complications might arise in your case and the effect they will have on your fee. Hourly rates of lawyers will vary depending upon a lawyer’s experience and involvement in a particular area of the law. No set hourly rate for lawyers or services exists. Rates do vary among lawyers.
In certain types of lawsuits—such as will contests and other forms of inheritance disputes—the lawyer who represents the person suing may agree to accept a part of the money the client recovers as the fee for services. Such an arrangement is called a contingent fee. Under the lawyer’s ethics rules, the lawyer and client must enter into a written fee agreement at the outset of the representation, stating what portion of the recovery the lawyer will receive. The fee is generally fixed at a percentage of the recovery. An additional percentage may be added if the matter is tried again or appealed to a higher court.
In a contingency fee contract, you and your lawyer agree that the lawyer will not get paid any fees unless you win your case. However, you may be charged for costs such as court filing fees or expenses paid to witnesses. If you win, these expenses may be deducted from your share of the recovery. You will have to pay these costs, even if you lose your case, unless your contract specifically says that you do not owe the costs if you lose.
The contingency fee contract must be in writing and signed by the client and any attorney or law firm who will be paid under the contract. The contract must state what percentage of the recovery the attorney may keep, other expenses which will be deducted from the recovery and how these expenses will be deducted. How much the attorney will be able to keep as a contingency fee (remember this does not include costs) will depend on what stage of the case you are in and how much is recovered.
The law requires that an estate have both a personal representative and an attorney during the estate settlement. The law also has provisions relating to settlement of trusts that may, or may not, be relevant to this estate. The law permits, but does not require, a trustee to be represented in a trust settlement. We believe that, in most instances, it is unwise for a trustee to attempt this complicated procedure without experienced and competent legal advice. The trustee may retain an attorney to answer only specific legal questions or deal with defined legal tasks (limited representation), or to represent the trustee to provide all legal advice and services required in the trust administration (general representation). The attorney for a personal representative in the probate of an estate and the attorney for a trustee of a revocable living trust are entitled to be paid a reasonable fee from the assets of the estate or the trust, even absent any specific agreement. Florida Statute 733.6171 is the controlling statute for an attorney’s compensation in probate estates, F.S. 736.1007 controls legal compensation in a trust administration, and F.S. 733.617 controls compensation of a personal representative.
The attorney and the client may find it mutually beneficial to determine the fee, at least for ordinary legal services, by agreement at the outset. This removes any uncertainty for both parties. The client and the beneficiaries know up front what their costs will be, and the attorney knows that the fee amount is agreed and set. Regardless of how much unanticipated effort is required of the attorney, the fee for ordinary legal services will not be increased. The other side of that is if less effort than anticipated is required, the fee will not be reduced. Neither party can change the agreement.
Some provisions of the statute relating to determination of the attorney’s and personal representative’s compensation are:
- The law permits an attorney and a client to agree to any fee amount or method of determining the fee amount, even if different from the method provided in the statute, as long as the client and the beneficiaries who will ultimately bear the burden of the fee all concur. If less than all concur, no agreement is possible.
- The statute provides a formula for determining a fee that is presumed by law to be reasonable. In the absence of an agreement, the client may request that the court determine a smaller fee, and the attorney or the personal representative may request that the court determine a higher fee, than that presumed to be reasonable. Stated otherwise, the fee is not “set” or “fixed” by the statute; rather, the statute provides a fee that is in the nature of a “guideline” and initially presumed to be a reasonable fee, but is subject to any person’s request that the court increase or decrease that fee.
- Services relating to estate or trust administration are divided by law into “ordinary services” and “extraordinary services.” The “presumed reasonable fee” is for ordinary services of either the attorney or the personal representative. If only ordinary services are required, only a fee for ordinary services is allowed. If some extraordinary services are required, additional fees for those extraordinary services are allowed. An example of an extraordinary legal service is involvement in a contest of the will. There is no statutory formula supplied to determine fees for extraordinary services, but the factors to be considered in setting that fee are stated in the statute. Simple estates may require no extraordinary services; in more complex estates some extraordinary services may be required. Of course, there are exceptions to every rule.
- In the absence of an agreement, if there is disagreement regarding the fee, the court will set the fee at the conclusion of the administration, considering the statutory formula for determining the presumed reasonable fee, and if there is a good reason presented, will then either increase or decrease that amount. In a fee dispute, the court will generally award additional fees to the attorney for professional time expended in the fee dispute unless the original fee request by the attorney is found to be substantially unreasonable. Florida Statute 733.6175 is the controlling statute for such proceedings. For more on fee disputes, click here for blog entries reporting on these types of cases.
Ordinary Legal Services:
Ordinary legal services, those typically included in the base probate fee, are those shown on the following list, to the extent applicable to a particular estate:
- Review, analysis, and interpretation of testamentary documents and explanation of the dispositive provisions and procedures.
- Preparation of pleadings and papers to be filed with the probate court.
- Appointment of the Client by the court as personal representative of this estate.
- Service of legal notices on persons required to be served in the manner provided by law.
- Advice regarding obligations to account to the court and interested persons, and procedures.
- Counsel regarding the duty to locate, assemble, protect, insure, and manage estate assets.
- Counsel regarding the duty to make assets productive of income and limitations imposed by the prudent investor rule.
- Counsel regarding inter-relationships of any trust created by decedent with the probate estate and duties and obligations of, and to, the trustee.
- Counsel regarding the duty to locate and notify estate creditors, duty owed by the Client to creditors, and procedures and priorities in payment or compromise of claims and payment of expenses of administration.
- Advice on elective share, family allowance, and exempt property entitlements.
- Advice on the requirements to inform and account to interested persons.
- Advice on filing requirements for various tax returns required to be prepared and filed by the Client, including the decedent’s final income tax return, income tax and intangible tax returns for the estate, and an estate tax return.
- Clearance of tax liens from estate property and advice on matters of clear title to real property.
- Advice on abatement or ademption of devises and obtaining of court rder if applicable.
- Interim and final distribution of cash, specific and other devises, and estate residuary including preparation and recording of certificate of distribution of real property.
- Advice on avoidance of self-dealing, conflicts of interest, duty of impartiality, and obligations to creditors and beneficiaries.
Extraordinary Legal Services
Extraordinary legal services are all other legal services required in the administration of an estate, including, but not necessarily limited to, the following:
- Involvement in a will contest, a will construction, a proceeding for determination of beneficiaries, a contested claim, an elective share proceeding, apportionment of estate taxes, a proceeding for substitution or removal of a personal representative, an objection to accounting or other acts of the personal representative, or any other adversarial proceeding or litigation by or against the estate or the personal representative.
- Representation of the client in audit or any proceeding for adjustment, determination, or collection of any taxes.
- Tax advice on postmortem tax planning, such as disclaimer, renunciation of fiduciary commission, alternate valuation date, allocation of administrative expenses between tax returns, the QTIP or reverse QTIP election, allocation of GST exemption, qualification for Internal Revenue Code §§ 6166 and 303 privileges, deduction of last illness expenses, fiscal year planning, distribution planning, asset basis considerations, handling income or deductions in respect of a decedent, valuation discounts, special use and other valuation, handling employee benefit or retirement proceeds, prompt assessment request, or request for release of personal liability for payment of tax.
- Preparation or review of estate tax return or other tax returns required to be filed by the client.
- Purchase, sale, lease, or encumbrance of real property by the client or involvement in zoning, land use, environmental, or other similar matters.
- Legal advice regarding carrying on of the decedent’s business or conducting other commercial activity by the client.
- Legal advice regarding claims for damage to the environment or related procedures.
- Legal advice regarding homestead status of real property or proceedings involving that status.
- Involvement in fiduciary, employee, or attorney compensation disputes.
- Proceedings involving ancillary administration of assets not subject to administration in Florida.