When most people think of dying and the cost associated with this event, they often only consider the funeral and burial/cremation expenses. It isn’t until a few weeks later when they are left with their relative’s belongings, assets, accounts (and sometimes pets) that they realize they need to hire an attorney and open a case to transfer these assets to the rightful beneficiaries.
Naturally, the most often asked question during a probate consultation is: “How much are the legal fees going to be?” A lawyer answer usually follows: “It depends.” The answer usually depends upon the following factors:
- the facts of the case;
- how complicated the required legal work is;
- whether there is litigation among beneficiaries;
- locating assets (real and personal property);
- liquidation and sale of assets;
- creditor claims against the estate;
- whether there is a valid Will;
- missing beneficiaries;
- the need to make a determination of heirs;
- how much work the personal representative (the person in charge of the probate on behalf of the beneficiaries) is willing to do on his or her own…
…among other (sometimes unexpected) things.
It’s important to know that the legal fees are charged to the estate and not the Personal Representative personally, although if the beneficiaries do not wish to liquidate assets, they may have to come out of pocket to pay legal fees and costs.
So, what types of Fee Arrangements are offered for Probate?
There are three types of fee agreements:
- Hourly Billing
- Flat Fee
- Percentage of the Value of the Estate
Under this type of arrangement, the attorney bills for the work performed on an hourly basis at a set rate. For example, if the probate matter is billed at $350 per hour and your matter takes 20 hours of work, the cost would be $7,000. The benefit of an hourly retainer is that the estate is only billed for the work performed. If the Personal Representative is willing to do some of the work (e.g., collecting assets, negotiating with creditors, dealing with the beneficiaries, etc.), legal fees could be kept to a minimum. On the other hand, if the Personal Representative is unable to take on the work or the matter is too complex, the legal fees can be quite high. This is often unavoidable when there is litigation involved. Hourly rates vary depending upon the attorney’s experience, expertise, location and other factors.
Some attorneys will agree to take on a simple probate matter on a flat fee basis. A probate case is simple where all people involved are in agreement and willing to consent. There are no individuals whose whereabouts are unknown and no minors are involved. The most likely scenario is that the decedent was survived by a spouse and adult children and the assets are minimal. If there are some small complications, the attorney may agree to a higher flat fee or hourly billing for those issues. Most flat fee agreements spell out exactly what work is included as well as what would be charged for any additional work authorized by the client.
Some clients prefer this method of billing because they feel more comfortable asking questions during the process without the fear of running up the bill. It’s important to note that flat fee arrangements often do not include fees charged by the court, recording fees, appraiser fees, etc.
Percentage of the Value of the Estate:
Attorneys may offer an arrangement where the legal fee is a percentage of the value of the estate no matter how much legal work is done. For example, if the fee is 5% and the estate is valued at $1,000,000.00, the fee would be $50,000. The fee remains the same no matter how much or how little work is actually performed. This type of billing may be beneficial where the estate is very complicated. Usually, in a percentage fee situation, the Personal Representative will allow the attorney do all the estate work from beginning to end.
How do you avoid this?
Although not 100% fool-proof, if you have created an Estate Plan using Trusts, and have properly funded these Trusts, you can avoid the inconvenience, time, and costs associated with a Probate case.
For more information, please feel free to visit our website or schedule a consultation!