One of the biggest concerns for any individual considering hiring a professional to assist with estate administration is the costs involved. Depending on the services involved, where they are simple or complex, there are three types of fees. There is a flat fee, the hourly fee, and the contingency fee.
Estate Administration Flat Fee
The flat fee is the simplest fee, and corresponds with the simplest of administration to be performed. The flat fee is a specific stated amount for a specific amount of work performed. For example, certain attorneys may simply charge a set fee for creating a basic Last Will & Testament, or a Durable Power of Attorney. Based on what work needs to be performed, and the attorney in question, the fees charged can slide from less to more expensive.
We can’t an estate planning attorney always just charge a flat fee? Because estate planning is never “one size fits all” or even “one size fits most,” so estate planning fees can’t possibly one size fits all.
Estate Administration Hourly Fee
The hourly fee is a fee that is determined as legal work continues based on the amount of time it takes to complete the work performed. The rates that the fees are assessed may vary based on many factors, including the type of attorney, the level of experience held in the area of law, or the area of the country / state.
The final fee is based on total amount of work performed. Attorneys keep track of their billable hours while performing them. Generally, the hours are broken down into six minute increments, and each six minutes results in the accrual of 10% of the hourly fee. The prevents the possibility of over-charging.
In Pennsylvania, it is important to note that it is within the power of the Orphan’s court to supervise the conduct and compensation of lawyers in Estate Administration matters.
The PA Supreme Court has adopted general guidelines, borrowed from the PA Rules of Professional Conduct, for determination of attorney fees, and will consider the following:
the amount of work performed;
the type of services rendered;
the difficulty of problems involved;
the degree of responsibility incurred;
the professional skill and standing of the attorney in his profession;
the results obtained;
ability of the client to pay a reasonable fee for services rendered; and
the amount of money or value of the property in question.
The determination of fees will rest with the auditing judge, and is a question within the discretion of that judge, so the determination will not be changed, except for cases of “palpable error.”
Estate Administration Contingency Fee / Johnson Estate
Contingency fees are, generally, the fees for services provided where the fee is only payable if there is a favorable result. Contingent fees are usually determined as a percentage of the client’s net recovery. Contingency fees are not available for certain situations. For example, they cannot be used in family law or criminal cases. Generally, these fees will be allowed as long as they are considered to be reasonable.
As related to estate planning in Pennsylvania, an attorney may take as payment for services a percentage of the value of the estate. A reasonable PA attorney fee is based on a case decided in 1983, In re Johnson Estate, 4 Fid.Rep.2d(O.C. Chester 1983). Prior to this case, in simple terms, attorney fees were all over the place. Finally an executor sued an attorney and said, “Mr. Attorney, your fees are completely unreasonable.” The case was litigated in auditing the accounts of estates. Since then, several other judges have written opinions indicating that they use this schedule as well. While the fee schedule is not binding authority, it does provide guidance in determining how reasonable administration costs are or are not.