By James W. Mallonee
I recently had a discussion with a beneficiary who wanted to express their dissatisfaction that she and the other beneficiaries of their parent’s estate had to pay an attorney his or her fee for services rendered in administering the estate. The argument being made is that the personal representative is the person who hired the attorney and therefore he or she should be the one responsible for the attorney fee. In essence, the beneficiary argued, she did not hire the attorney and therefore should not be responsible for the attorney’s fees from her share of the estate. I found the argument fascinating and somewhat plausible before being brought back to earth to realize the flaw in the beneficiary’s argument.
Florida’s probate law allows an attorney who is administering an estate to charge a reasonable fee for their services. It initially starts at $1,500.00 and increases depending on the value of the estate. However, an attorney can negotiate different terms and charges as it is in any free market.
The reasonableness of a fee under the law is based on a formula of fixed amounts plus percentages involving the value of an estate. Generally, the maximum amount allowable is approximately 3%. However, this is only a suggested amount and not mandatory because of such factors as the time spent managing the estate, managing siblings who are angry at each other, providing tax advice and having to litigate the estate just to name a few. In most cases a general percentage is applied such as 3%.
But that does not answer the question presented to me about the estate funds being the beneficiaries who did not hire the attorney and why should they be penalized for the attorney selection made by the Personal Representative.
On the surface the answer to that question comes from the fact that the estate proceeds are not the beneficiaries until all of the creditors are paid. Prior to an estate being closed the law requires that each known creditor be notified to file a claim within 30 days and if not notified, a notice published in the local news paper informing creditors they have 90 days to file a claim.
The attorney who was hired by the Personal Representative is by default a creditor. Florida’s probate code specifically makes the attorney, along with the personal representative, a Class I receiver of creditor payments. Other creditors are lower in class structured payments depending on their profession. What this means is that the attorney and personal represented get paid first from the estate proceeds.
Back to the argument from the beneficiary. Although the argument stating that the beneficiaries should not have to pay the attorney fee seems plausible, it lacks authority and reasonableness; because, to believe the beneficiary’s argument would mean that no person would ever become the personal representative of their parents’ or anyone’s estate. So how does all this work?
Florida Probate Rules require when an estate is closing that two additional forms be attached to a petition requesting the discharge of the Personal Representative. The two forms include a report showing the compensation being provided to the Attorney and Personal Representative. The other attachment is a report showing the proposed distribution of the estate’s assets. This report tells the beneficiaries and creditors who is getting paid and the amounts. The idea of the distribution report gives each interested person and creditor an opportunity to object to such distribution before it is made.
The distribution report starts with the value of the estate. This amount typically comes directly from the closing estate’s final accounting, Section E. The next section on the distribution report shows the different classes of creditors who are getting paid and the amounts to be received. The first creditor is the attorney and personal representative followed by funeral costs, taxes, medical and eventually credit cards.
Once these creditors are shown and the payment to be made, only then are the beneficiaries proposed amounts that each will receive is shown on the report. Understanding the payment order of events brings us back to the original argument whether the personal representative should be the only one paying the attorney hired to manage the estate.
The law requires that creditors be paid first and after they are paid, the balance of the estate is then eligible to be distributed to the beneficiaries. There is no real way of getting around this unless there simply is not enough in the estate to pay creditors or the estate proceeds are exempt from creditor claims. Therefore, as a beneficiary of an estate, if you don’t want to pay for an attorney to manage the estate, make certain that your parents have no assets that would require estate administration (don’t think a trust is the panacea to that solution).
To learn how to do that, talk to the attorney of your choice to discuss a means of distribution which would avoid an estate administration.
This article is intended for informational use only and is not for purposes of providing legal advice or association of a lawyer – client relationship.
James W. Mallonee (Jim Mallonee) is a graduate with a B.A. degree from the University of South Florida and a Master of Science degree from Rollins College in Winter Park, Florida. He obtained his Juris Doctorate from the University of the Pacific, McGeorge School of Law in Sacramento, California. Prior to returning to Florida to practice law, Mr. Mallonee was employed by Intel Corporation for 22 years in such locations as New Jersey, Florida and California.
In addition to being a member of the Florida Bar since 2003, Mr. Mallonee serves on the Charlotte Community Foundation Committee for asset allocation and teaches Business Law at State College of Florida. Mr. Mallonee is also on the Board of Directors for the Military Heritage Museum located in Charlotte County, Florida.
His firm practices law in the following areas: Probate, Wills & Trusts, Guardianships, and Litigation in the areas of Real Estate, Guardianships and Estates. The firm has two locations in Venice and Port Charlotte, Florida.
946 Tamiami Trail, #206
Port Charlotte, FL 33953
(941) 206-2223
Facsimile (941) 206-2224
871 Venetia Bay Blvd., #225
Venice, FL 34285
(941) 207-2223