Lawyers have rules that we must follow (no, seriously we do), and one of them is that any engagement where we estimate the fees to the client will exceed $1,000 must be documented by a written fee agreement—sometimes called retainer agreement or engagement agreement. See Bus. & Prof. Code Section 6148. The California Court of Appeals clarified last year that written fee agreement are not required, however, where an attorney is representing the executor of a probate estate.
First, let’s sort out who the attorney is, and is not, representing in a probate estate. Any probate has three potential groups of interested people: (1) the executor (or administrator, both are referred to as the Personal Representative); (2) the beneficiaries; and (3) the creditors of the decedent.
When a client enters my office to discuss a possible probate, they are usually the person named as the executor under a decedent’s Will. They are asking me to represent them and handle the probate estate; who do I represent? The answer is I represent the client in his or her capacity as executor. Technically they are not an executor of the estate yet—not until the Court orders their appointment—but they are the proposed or named executor and that is the capacity in which I would represent them.
More important question: who am I NOT representing? I do not represent the “estate”—which only exists through an executor—the beneficiaries or the creditors of the decedent. This is a common misconception, many beneficiaries believe that an attorney for the executor represents the estate and, therefore, also represents the beneficiaries—not true. The attorney represents the executor, and only the executor.
So why does a lawyer not need a written fee agreement for representing an executor? According to the California Court of Appeals (in Estate of Dennis Wong) it’s because the client (i.e., the person acting as executor) will not incur any fees whatsoever in the representation. Therefore, the requirements of Section 6148 are not triggered.
Let me explain. Section 6148 states that a written agreement is required whenever the “client” will incur fees in excess of $1,000. In a probate estate, the executor does not pay the attorneys’ fees, the estate does. In other words, the executor, as an individual, is never liable for payment of fees—but the estate assets are.
You can think of the estate as a pool of assets guarded by the Court. Before the estate is closed, the Court decides who gets paid and by how much. For attorneys, the fee is set by statute, which is calculated by a percentage of the estate. And the statute also sets the procedure by which the attorney asks for those fees. Once granted by the Court, the fees are paid from the pool of assets and the rest is distributed to the estate beneficiaries.
I know what you’re thinking, if the executor is one of the estate beneficiaries, then isn’t the executor paying some portion of the attorneys’ fee? Well yes, but not directly. Remember the estate assets are not really assets of the beneficiaries until the very end of the probate process when the assets are distributed out to them. Before that, the assets belong to the decedent’s estate and the Court has say on who gets paid and how much. That’s true for creditors too. But the executor pays nothing from his or her own individual wallet, so Section 6148 is never implicated, so a written fee agreement is not required.
Now that we know that it is perfectly legal NOT to obtain a written fee agreement, should we throw out our engagement agreements? No. I have always used written fee agreements even in probate matters, and why not use them? In my experience, surprising clients about fees is a bad idea (“You owe me $20,000…SURPRISE”). Better to put it all down in writing up front so there are no surprises down the road. Each side knows what to expect and knows that the fees will not be paid until ordered by the Court.
For those of you (attorneys and clients alike) not using fee agreements in probate, however, you can no longer be surprised that fees will be paid…it’s just the amount that might catch you off guard. You’ve been warned.