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Friday, May 24, 2013

Can an Attorney for an Estate who is also an Executor Double Dip?

I am frequently asked whether an attorney who is acting as an executor for an estate can receive both an executor's commission and legal fees for representing the estate.  Although this may sound like a conflict of interest, the short answer in New Jersey is yes, it is specifically allowed under New Jersey Statute 3B:18-6. 

As a practical matter, the attorney's fees are also subject to guidelines as to reasonableness. Unlike Pennsylvania and Florida, were it is common practice to charge a legal fee which is a percentage of the estate, in New Jersey, it is far more common to charge an hourly rate.  So, if an attorney charges a fixed fee, and there was not a lot of legal time involved, a court could reduce the attorney fee. 

3 comments:

Millard Hiner said...

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Jennifer Moran said...

I understand your comment that an attorney that is acting as an executor and, hence, takes an executor fee, can also charge for legal fees for representing the estate. However, wouldn't the attorney have to be representing the estate in a legal matter. Otherwise, isn't the attorney just getting paid twice for handling/administering the estate? In other words, pure estate administration should be part of the executor commission and not the executor commission plus the attorney hourly rate. Is that correct? Thank you.

Kevin A. Pollock, J.D., LL.M. said...

Jennifer,

The jobs of executor and attorney for the executor are really two different roles. It is not just that the attorney would get paid if there is litigation. There are many items that an attorney can do that an executor shouldn't and there are many items that the attorney cannot do that only an executor can do.

For example, jobs that fall under the Executor role include (but are not limited to):
1) Major decision making such as the decision whether or not to sell real estate;
2) Whether to close or sell a business;
3) Hiring and firing attorneys, accountants and financial advisors;
4) How much to sell assets for or pay for services and products;
5) Gathering the assets, safeguarding the assets, and making sure bills get paid.
These are fiduciary responsibilities are not delagable. (i.e. these jobs cannot be given to someone else)


There are also many other items that an executor is responsible that can be delegated and for which the executor can pay. These include small things like cleaning out a house, writing out checks (but not signing them), and larger items such as investing assets (with the approval of the executor) or preparing income tax returns (again with the approval of the executor).

Specifically what an attorney does that falls outside the role of an executor often includes (but is not limited to):
1) Preparing paperwork for banks, financial institutions and the Court;
2) Preparing estate and inheritance tax returns (sometimes done by an accountant);
3) Preparing an accounting; and
4) Speaking with third parties about items that are needed or the status of the estate.
Now an executor can do all of these items, but it is customary to pay a third party to assist with them. These are the types of things attorneys will typically pay for even though the attorney may be acting as the executor.

As you can see, the attorney is not getting paid twice for doing the same thing. That being said, depending upon the size of the estate, some attorneys don't charge all of their legal time if they are acting as executor. Often this depends upon how much time we have to spend. I hope this helps.