Hi, this is Stewart Albertson with Albertson & Davidson.  I want to talk to you about contingency fees, and how they can give access to some beneficiaries who don’t have the ability to pay lawyers on an hourly basis.  The traditional way that many people hire lawyers is they give that lawyer a retainer (for example, $10,000-$20,000 retainers are common), and then the lawyer bills against that retainer, according to their hourly rate. When that retainer runs out, the lawyer asks for more money.

However, beneficiaries are not in a position where they can pay lawyers to represent them in a trust contest or a will contest case. So, there is an option for contingency fee.  Now, keep in mind, you generally do better overall to hire a layer on an hourly basis, if you can, because you’ll spend less overall on a case than you will if there’s a successful outcome in a contingency fee case, as far as attorney’s fees go.

Let’s give an example.  You hire a lawyer to handle a case for you.  You’ve got a million dollars at stake and you pay that lawyer $100,000 in hourly fees to get you your access to that million dollars.  Well, that’s a pretty good result for you. You paid $100,000 in hourly fees to that lawyer and you end up getting the million dollars that was supposed to come to you.

If you didn’t have the money to pay the lawyer on an hourly basis, you could hire that same lawyer on a contingency fee basis, which is a percent of the recovery.  Generally speaking, most cases are going to be 40% in California.  So, using the same example, a lawyer works the case for a year and a half or two years, and just before trial, the case settles and it’s a million-dollar recovery to you.  If you apply the math at 40%, that would be a $400,000 attorney’s fee and the balance would go to you.  You can see the difference.

It generally makes sense to hire a lawyer on an hourly basis, versus a contingency fee basis, but if you don’t have the ability to hire a lawyer on an hourly basis, then the best option for you to do is to consider the contingency fee, which is a way to recover something for you that you normally couldn’t get access to if you didn’t have a lawyer willing to take your case on a contingency fee basis.  So that’s just a little bit on how a contingency can work to return assets to you that are rightfully yours.

Attorneys’ fees–about as enjoyable as “death and taxes.”  The unfortunate reality of our legal system is that it takes money to stand up for your rights.  In this video we discuss the ways in which we work with clients to offer various fee arrangements in representing them in California Trust and Will litigation.  For those viewing this blog by email subscription, you can click on the title for a link to the video.

Conservatorship litigation is nasty business, primarily because at the center of every conservatorship dispute is a helpless conservatee (usually an elder adult) who is caught in the middle of the family fight. 

And that family fight may just cost the parties a good deal of money from their own pocket.  As reported by Marc Alexander and William M. Hensley on their California Attorney’s Fees blog, the California Appellate Court (in Conservatorship of Alcaraz) just made a very harsh example of two conservatorship litigants who thought they deserved reimbursement from the conservatorship estate for their attorneys’ fees.  One party (the winning party) requested over $80,000 in attorney’s fees, and the losing party requested over $40,000. 

The trial court cut the fees request substantially, awarding the winning party $20,000 and the losing party a mere $8,000.  Primarily because the conservatorship estate only had $180,000 in assets and the fee requests would have taken 70 percent of the conservatorship estate.

The winning party appealed the fee ruling, but the appellate court agreed with the trial court.  The bottom line is that the trial court can award what it sees fit, and only amounts that the court feels were spent for the benefit of the conservatee directly are allowable.  Any amounts spent by family members due to a family “spat” is on their dime, not the conservatorship estate.

The costs of litigating conservatorship matters is already higher than other forms for trust and will litigation because the filing fees are excessive, and the parties have to pay in advance for the court investigator to interview the proposed conservatee.  All told, a conservatorship filing can cost as much as $1,750 just in filing fees to the court, not to mention the attorneys fees spent to draft and file the conservatorship pleadings.  And if another family member files a competing petition, and long litigation ensues, that lawsuit may be paid from your own pocket.  A tough result for a family in a tough position.

We plan to have guest posts from time to time on our blog. Our first guest post, by Richard D. Cleary and Thomas E. McCurnin, can be viewed by clicking here. Messrs. Cleary and McCurnin surmise that a recent case decided by the Court of Appeal, Donahue v. Donahue, may have far-reaching consequences for bank trustees.

As an aside, I litigated a case against Mr. McCurnin several years ago. I can truly say it was an enjoyable experience. Also, I’ve had the privilege of arguing a court of appeal case in front of Justice Richard M. Aronson, who wrote the opinion for Donahue.

I hope our blog readers will enjoy Mr. McCurnin’s and Mr. Cleary’s article entitled “New California Decision Puts Bank Trustees at Risk for Attorney Fees”.

We have talked about trustees’ fees, executors’ fees, and attorneys’ fees on this blog before…and here we go again.  In Marc Alexander’s and William M. Hensley’s blog on California attorneys’ fees (which I read regularly) they mentioned a recent Fourth Circuit Appellate Court decision called Kunit vs. KingstonKunit involves a trustee removed from office for committing breaches of trust–happens all the time.  The trustee then asked the court to be reimbursed over a hundred thousand dollars in attorneys’ fees.  The trust beneficiaries naturally objected arguing that a removed trustee should receive no reimbursement for his attorneys’ fees.

The trial court decided that some of the trustee’s attorneys’ fees should be reimbursed to him out of the trust—those fees incurred for the normal administration of the trust (approximately 60% of his fee request—a little over $80,000).  But the remaining 40% (about $53,000) should not be reimbursed because the Court believed that those fees were from the trustee’s defense of his own bad acts for which he is not entitled to reimbursement.

The Fourth Circuit Court of Appeals (in an opinion penned by Justice Alex C. McDonald) agreed with the trial court and affirmed the decision.  This makes sense since fees incurred for trust administration are incurred for the benefit of the trust and ought to be allowed—generally speaking.  While fees incurred fighting to remain trustee when breaches have occurred does not benefit the trust and should be denied (we have seen this before in other cases).

The one concern I have with Justice McDonald’s opinion is his statement that the Probate Code does not require a trustee to provide back-up information to support his accounting.  The court references Probate Code Section 1061, which provides the items that must be included in a court-filed accounting, but does not expressly require back-up documentation.

While the Probate Code may not be specific, it is well established by case law in California that a trustee alone bears the burden of proving that all items in an accounting are accurate and incurred for the benefit of the trust.  See Purdy vs. Johnson (174 Cal. 521) and Estate of McCabe (98 Cal. App. 2d 503).  Back-up documentation is essential to establish that a trustee actually incurred a valid expense for the benefit of the trust.  And the trustee alone should have the burden of providing back-up documents since he or she is the only one in possession of (or should have possession of) the documents required to prove-up the accounting.  While that back-up documentation is not required when first filing an accounting under Probate Code Section 1061, it certainly is required once a beneficiary objects to the accounting.

I hope that the appellate court made this statement because both parties failed to cite to any relevant case law (not sure why because it seems obvious that they should have).  But thankfully, this is an “unpublished” opinion—meaning that this case cannot be used to support future court rulings.

Marc Alexander’s and William M. Hensley’s outstanding blog on California attorney’s fees recently commented on Estate of Fernandez, where Justice O’Leary discussed the difference between “ordinary” and “extraordinary” attorney’s fees in the probate arena.

So, what is the difference between “ordinary” and “extraordinary” attorney’s fees that you pay an attorney to “probate” your loved ones estate?

Let’s take “ordinary” attorney’s fees first. California law sets the maximum amount an attorney may be paid for “probating” an estate (referred to as “ordinary fees” or “statutory fees”) as follows:

  • 4 % of the first $100,000 of estate value
  • 3 % of the next $100,000
  • 2 % of the next $800,000
  • 1 % of the next $9,000,000
  • ½ % of the next $15,000,000

Let’s take an example. If your parents’ estate (after they have both died) is worth $1,000,000, then the ordinary fee for probating your parents’ estate would be:

  • 4 % x $100,000 = $4,000
  • 3 % x $100,000 = $3,000
  • 2 % x $800,000 = $16,000

Thus, the ordinary fee would be $4,000 plus $3,000 plus $16,000 for a total ordinary fee of $23,000.

 “Extraordinary fees” are fees paid to an attorney probating an estate for extraordinary services—that is services that fall outside of the routine services required for a typical probate.   Extraordinary fees are based on:

(1)   the value of the estate,

(2)   the difficulty of the extraordinary tasks performed and time spent,

(3)   the results achieved, and

(4)   whether those results benefitted the estate.

Most extraordinary fees arise due to probate litigation (i.e., a Will Contest), the sale of real property, or handling difficult tax issues arising in a probate administration.

For example, if a Will Contest is filed by a beneficiary, lawyers will likely be retained to represent the estate and their fees will be paid as extraordinary fees—in addition to the ordinary fees.   

If the Will Contest litigation resulted in extraordinary attorneys’ fees of $30,000, then the total attorneys’ fees for the estate could equal $53,000, which is $23,000 for the ordinary fees and an additional $30,000 for the extraordinary fees. Of course the Probate Court would have to approve both the ordinary and extraordinary fees, but it is likely the Probate Court would approve such fees as outlined above.