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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. 

6 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.

Robert Weyand said...

Thanks for you explanation of the reason why an attorney may collect the executor fee and legal fees. My question is can the attorney bill for every minute of time spent on working as executor, as we got a detailed bill for 45 hours mostly of phone calls, emails etc?

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

Dear Robert,

The overall limitation on an attorney in these situations is that the billing be reasonable. So, if he spent 45 hours when a paralegal could have made most of those calls, you may have an argument that it is unreasonable. Or if you are telling me the estate only had one bank account and no tax returns needed to be filed, then 45 hours may be a lot. However, I learned a long time ago that most estates are far more complex than people are aware and a lot of work gets done behind the scenes.

Another aspect to consider is that there is a difference between billing for legal matters vs. billing for matters that an executor typically does as an executor. For example: Let's say that the executor has to sell some real estate in which the executor/attorney hires another party as legal counsel for the sale of the property. The time spent signing the real estate paperwork is really not billable legal time, I would count that as executor time that shouldn't be billed. However, if the executor/attorney was not represented by other counsel, he could bill for legal work and take a commission.

Robert Weyand said...

Thanks for your quick response, my concern is that he only worked a total of 45 hours and billed every one of those hours as if it was all legal work and never executor work. Just looking at the detailed accounting this just wasn't the case at all.