SEPTEMBER 9, 2013 VOLUME 20 NUMBER 34
There is a lot going on in Arizona with regard to the fees charged by guardians, conservators, trustees, personal representatives -- and their attorneys. There has been quite a bit of controversy in news articles (particularly, but not exclusively, in the Phoenix area) and online. Professional fiduciaries have been subjected to close scrutiny, and stories have circulated about estates being emptied by legal and fiduciary fees.
Courts have reacted to the impression created by those stories. Much more attention is paid today to court proceedings seeking approval of fees, and the complexity and cost of accounting has risen. Occasionally, courts simply mandate lower fees because, well, the proposed fee seems high.
A recent Arizona Court of Appeals case indicates that probate court judges will need to be more thoughtful before imposing fee reductions. The case involves a Phoenix-area judge who ordered a 50% reduction in the fees charged by a fiduciary and its attorney.
In the Conservatorship of Helen Maxwell (not her real name), the court-appointed fiduciary had requested fees of $96,859.60 and its lawyer filed a bill for $28,501.64. Noting that the work had ("for the most part") been "reasonable, necessary and in the best interests of" Helen, the probate judge in Phoenix nonetheless halved the fees of both applicants.
The reason? Helen's estate was only worth about $800,000, with most of that in illiquid real estate. Helen simply could not afford the fees and costs, said the probate judge. It would not be in Helen's best interests to approve the total amount of fees requested, "even though they were rightfully earned."
The Court of Appeals reversed the probate judge's ruling and sent the matter back for more consideration. Noting that they had recently given some guidance in how to judge fiduciary and legal fees, the appellate judges ordered the probate judge to weigh the costs against the benefits obtained by the fiduciary and its lawyers, and to consider a set of factors spelled out in recently-adopted court rules before ruling on the fee request.
What factors should the considered when the probate judge takes the matter up again? In addition to balancing the cost against the benefit, the court should look to:
- The result obtained by the fiduciary and its attorney
- The disclosure by the fiduciary, in advance, of the likelihood of high costs
- The fiduciary's (and the attorney's) skill and expertise
- The kind of work done, and the skill level required to accomplish it
- The actual work done, and the time spent doing it
- The fees charged by others in the business and in the community
- The risks and responsibilities undertaken by the fiduciary
In the Matter of the Conservatorship of Mallet, August 22, 2013.
It is unclear what will happen next. The fiduciary whose fees were challenged has left the business, and Helen herself died while this appeal was pending. We'll update you if we learn of a follow-up outcome.