For many reasons, executors are well advised to use legal counsel to help them navigate through the probate process, look for tax savings, and make sure everything is done properly.
How lawyers charge varies from state to state. This blog post explains the rules governing how Pennsylvania lawyers can charge for their services.
Under Pennsylvania law, an attorney fee must be “fair and reasonable.” According to Pennsylvania’s Supreme Court:
“What is a fair and reasonable fee is sometimes a delicate, and at times a difficult question. The facts and factors to be taken into consideration in determining the fee or compensation payable to an attorney include: the amount of work performed; the character of the services rendered; the difficulty of the problems involved; the importance of the litigation; the amount of money or value of the property in question; the degree of responsibility incurred; whether the fund involved was ‘created’ by the attorney; the professional skill and standing of the attorney in his profession; the results he was able to obtain; the ability of the client to pay a reasonable fee for the services rendered; and, very importantly, the amount of money or the value of the property in question.” (LaRocca Estate, 431 Pa. 542, 546, 246 A.2d 337, 339 (1968).)
In the context of probate fees, a reference often cited for calculation of reasonable attorney fees comes from a 1983 case called the Johnson Estate, in which an Orphans’ Court judge provided the following schedule:
Following that schedule would result in fees in these amounts for estates of various sizes:
However, billing according to the Johnson Estate chart is not the only alternative. Some lawyers will charge a certain fixed percentage (say 5%), or quote a flat fee tailored the individual estate.
Yet another alternative is hourly billing. An attorney can simply charge for the time expended on the matter, perhaps with different rates for attorney and paralegal time. The resulting fee could be less than a fee charged according to the value of the estate, but it could also be higher, depending on the demands of the estate.
Sykes Elder Law approach
Every professional needs to be compensated fairly, and we’re no different.
But we have always believed that our fee charged for estate work should not be higher simply because the estate contains more assets. For example, if a person dies owning a house, an IRA, an investment account, and a checking and savings account at a bank, it takes us about the same amount to administer the estate, whether it totals $600,000 or $2.3 million.
If we charged according to the Johnson Estate model, the heirs of the $2.3 million estate would pay $36,500 more in fees ($58,250 minus $21,759) than the heirs of the $600,000 estate, for probably the same amount of work.
Granted, there are some reasons why an estate with more assets may require more work. If it’s large enough, it could involve the filing of a federal estate tax return. If the estate generates more income while it is being settled, the estate tax return will take more time. If the assets are numerous, spread out over many accounts, or involve ongoing business concerns, it will take more time to get the estate ready for distribution to heirs.
In general, though, our experience is that an hourly rate results in cost savings to the client in most cases.
Some people like to know up front what the fee will be, without the variability that comes with charging according to the time expended. For those clients, we are willing to quote a flat fee that is charged throughout the course of the engagement, as it is earned. The flat fee is based on our estimate of what it will take to settle the estate, and for that reason (especially on larger estates) it generally compares favorably to charging a percentage.
If you would like to consult with us about an estate you need to administer, feel free to call us to discuss your situation, and find out how we can settle the estate professionally for a reasonable fee.