Payment of Compensation to the Personal Representative & His/Her Attorney
- Probate Fees in California
- Probate Fees in Washington: Originally
- Probate Fees in Washington: Since 1917
- Probate Fees Specifically in a Washington Nonintervention Estate
- Is Compensation Required to be Paid?
- If the Decedent Has Set an Amount for Compensation in his/herWill
- What Is the Current Range of “Reasonable” Compensation?
- When May Compensation Be Paid?
- How Does a Personal Representative Account for His/Her Payment of Compensation?
- What Are the Checks & Balances on the Payment of Compensation?
- What Is Some Typical History of Objecting to Probate Fees Paid?
- The Problem of One of Multiple Heirs or Beneficiaries Serving as Personal Representative
- Tax Consequences of Payment of Compensation
- Strategies for Reducing Taxes Based on Payment of Compensation
- Payment of Attorney’s Fees
- Payment of Attorney’s Fees in California for Time Spent Justifying One’s Original Fees
Probably no legal issue is the subject of more questions to WASHINGTON PROBATE than the fees of the Personal Representative and his/her attorney, for example:
- What fees are they entitled to? And how much?
- Is the fee based on the value of the estate?
- I think the fees paid are excessive. What can I do about that?
Consequently, we have prepared this discussion and in it gone into more detail than usual, in the hope of providing you with greater perspective with the issues involved. Chances are that this discussion will provide far more than you ever wanted to know about probate fees in Washington, and we encourage you to use your “Page Down” key liberally: “Take what you want and leave the rest behind.” And while focusing on probate fees in Washington, we shall both begin and end in California.
Unlike Washington, California provides by statute for probate fees (known as “Statutory Fees”) that are typical of those provided by many and perhaps most jurisdictions:
- What is known as the “Ordinary Fee,” for each of the Personal Representative and his/her Attorney, in a percentage amount based solely on the gross value of the estate (ie, not counting mortgages or other debt), as shown in its Inventory & Appraisement. Personal Representative: Calif. Prob. Code § 10800; Attorney: Calif. Prob. Code § 10810.
|Ordinary Fee “Formula”||Total Fees for Each of PR & Attorney|
|4% on the first $100,000||$4,000 on $100,000|
|3% of the next $100,000||$3,000 for a total of $7,000 on $200,000|
|2% of the next $800,00||$16,000 for a total of $23,000 on $1 million|
|1% of the next $9 million||$90,000 for a total of $113,000 on $10 million|
|0.5% of the next $15 million||$75,000 for a total of $188,000 on $25 million|
|An additional reasonable
amount on the balance
The Ordinary Fee is provided for performing the usual and ordinary services typical in administering a probate estate and is not subject to Court approval (ie, the Personal Representative and his/her attorney are entitled to it by right).
To give you some idea how “Ordinary” probate fees in California can add up, here are some representative examples:
|Estate Value||PR’s Fee||Atty’s Fee||Total Fees||% of Estate|
- What is known as the “Extraordinary Fee,” for any services rendered by either the Personal Representative or his/her attorney that are not ordinarily rendered in a probate estate, in an amount that the Court determines to be “just and reasonable.” Personal Representative: Calif. Prob. Code § 10801; Attorney: Calif. Prob. Code § 10811. Extraordinary Fees are typically paid for services such as:
- Carrying on and managing Decedent’s business.
- Selling property in the estate.
- Preparing and filing income or estate tax returns.
- Engaging in litigation on behalf of the estate.
Any agreement between an heir or beneficiary and the Personal Representative for compensation in excess of the above amounts is void. Calif. Prob. Code § 10803 Any agreement between a Personal Representative and his/her attorney for compensation to the attorney in excess of the above amounts is void. Calif. Prob. Code § 10813 If two or more persons act as co-Personal Representatives, then they share the fees. Calif. Prob. Code § 10805 If two or more attorneys serve the Personal Representative, then they share the fees according to services actually rendered or as they may agree. Calif. Prob. Code § 10814 If an attorney serves as Personal Representative, then he/she is entitled to receive the fee of a Personal Representative but not additional fees as attorney for the Personal Representative unless the Court approves the right to additional compensation in advance and finds it to be to the advantage, benefit, and best interests of the estate. Calif. Prob. Code § 10804
Bottom-line: An ‘Ordinary” fee based solely on the gross value of the estate + an “Extraordinary” fee for extraordinary services in a “just and reasonable” amount determined by the Court.
The original laws of Washington provided for a probate fee not unlike those currently in California. Laws of 1854, p. 295 (Rem. & Bal. Code § 1549)
|Ordinary Fee||Total Fees|
|7% on the first $1,000||$70 on $1,000|
|5% of the next $1,000||$50 for a total of $120 on $2,000|
|4% of the balance|
In 1917, however, the legislature amended the law to provide for the compensation for both the Personal Representative and his/her attorney to be “such fee as the Court may seem just and reasonable.” Probate Code of 1917 (Rem. Comp. Stat. § 1528). This change was interpreted by the Washington Supreme Court in Estate of Perry, 168 Wash. 428 (1932):
|By this amendment, the legislature clearly evidenced its desire to change the former system of compensating an Executor by paying him a percentage of the estate without regard to the nature, extent, or value of the services rendered by him …, and the Court, now, in fixing the fee of an Executor or Administrator, must take into consideration … the services rendered, and fix such compensation as, in view of all the circumstances, is just and reasonable.The intent of the legislature is manifest to depart from the former fixed and arbitrary percentage standard and establish a new more equitable rule…. Under the new rule, the compensation is commensurate with the value of the services rendered, and, while the value of the property of the estate and the resulting responsibility resting upon those who administer the same … is important …, that element should not be given too great weight in considering [the amount of the Personal Representative’s compensation]. Estate of Perry at pp. 435-436.|
Bottom-line: In 1917, the Washington legislature rejected probate fees based on “the former fixed and arbitrary percentage standard and establish[ed] a new more equitable rule” — based on the value of services rendered to the estate, as determined by the Court.
Probate fees in Washington are currently provided under RCW 11.48.210 as follows:
- The amount set by the Decedent in his/her Will, or in the absence of such a specified amount
- The amount determined by the Court to be “reasonable and just.”
If the Decedent sets an amount for compensation in his/her Will, that in effect puts the named Personal Representative who desires to receive compensation to an election:
- Default Alternative: To accept that amount as full compensation regardless of the amount of work to be performed prospectively at the beginning of the probate or as actually performed retrospectively at the end of the probate, or
- Active Alternative: To renounce that amount and allow the Court to determine “reasonable and just” compensation, with any such renunciation required to be made in a writing filed with the Court prior to his/her appointment. For the form to accomplish this renunciation and election, see: If the Decedent Has Set an Amount for Compensation in his/her Will.
A third alternative exists, of course, and that is for the Personal Representative to waive compensation, which can be advantageous, especially if the Personal Representative is the sole Heir or Beneficiary, and the estate is not so large as to benefit from receiving a tax deduction for compensation paid. See: Tax Consequences of Payment of Compensation. For the form to accomplish this waiver, see: Is Compensation Required to be Paid?
In determining the amount of compensation, the Court will consider the nature of the services rendered, the time required to perform the services, the diligence with which the services are performed, and the values of the assets necessitating the rendition of service. Estate of Bailey, 56 Wn.2d 6223 (1960). And, as stated above, while the value of estate assets is taken into consideration, it is not to be given great weight in the determination of compensation. Estate of Perry, cited above.
The Court may also increase or decrease the amount of “reasonable and just” compensation to be paid to the Personal Representative:
- Subject to increase if the Personal Representative performs services benefiting the estate that are not required by law of a Personal Representative; examples:
- Legal services,
- Accounting services,
- Brokerage services, etc.
- Subject to decrease if the Personal Representative “has failed to discharge his/her duties as such in any respect.”
E. Probate Fees Specifically in a Washington Nonintervention Estate
|(26) Pay reasonable compensation to the trustee … considering all circumstances including time, effort, skill, and responsibility involved in the performance of services by the trustee; RCW 11.98.070(26)|
A Nonintervention Personal Representative, therefore, has authority to pay him/herself “reasonable compensation” for his/her services as Personal Representative.
No. The simple solution to the issue of paying compensation to the Personal Representative is for him/her to waive its payment. If you, as named or appointed Personal Representative, have decided to waive any receipt of compensation, it would be easiest (although not necessary) to state that by filing a:
|Waiver of Compensation by Personal Representative form.|
And you have decided not to accept that amount and instead want the Court to determine the “just and reasonable” amount of compensation to be paid to you, you are required (RCW 11.48.210) to file prior to your appointment a:
|Renunciation of Compensation Specified in Will & Election re Court Determination form.|
Compensation of Personal Representatives in King County currently appears to be as follows:
- The proposed rates generally range from approximately $15 to $50 hourly, more or less depending upon the Representative’s skill and experience.
- The Court usually approves them as proposed unless an interested party objects.
- One rule of thumb in setting compensation is to provide a rate that is comparable to the rate of compensation that the Representative is paid at his/her regular, full-time job.
Although not expressly provided in the statute referenced immediately above, it would appear that payment of compensation may be made to a Nonintervention Personal Representative from time to time following the rendition of the actual services for which payment is being made (ie, not “paid in advance”), and preferably following the filing of the Declaration of Completion of Probate and the expiration of the 30-day objection period if a Receipt & Waiver has not been received from every Heir or Beneficiary remaining interested in the estate.
In the usual course of probate administration, a Nonintervention Personal Representative accounts for his/her compensation paid or to be paid in the paragraph of his/her Declaration of Completion of Probate dealing with “Fees. The fees paid or to be paid to each of the following are as follows: (a) Personal Representative $—, (b) Attorneys $—, etc.” RCW 11.68.110(1)(g)
K. What Are the Checks & Balances on the Payment of Compensation? How May I Object to the Payment of Fees?
An Heir or Beneficiary’s recourse to question the Nonintervention Personal Representative’s compensation is to file an Objection to the Personal Representative’s Declaration of Completion of Probate requesting the Court:
- To consider the reasonableness of the compensation paid or proposed to be paid to the Personal Representative in light of the Objection and any response to it by the Personal Representative, and
- To set the actual amount of “reasonable” compensation to be paid by the estate. RCW 11.68.110(2)
Consequently, if you believe the compensation proposed or paid to be unreasonable:
- If no Objection is filed, by you or any other person, the Personal Representative will have the right to collect the fees stated in his/her Declaration of Completion of Probate. No further action will be taken by the Court.
- If an Objection is filed, then at its hearing:
- The Court will review the proposed fees and consider them in light of the work performed, the results achieved, and so forth,
- Any interested party, including you and the Personal Representative, will have the opportunity to comment on the matter to the Court, either in writing before the hearing or orally at the hearing, and
- The Court will make its determination of the “reasonable and just” fees to be paid.
- Consequently, WASHINGTON PROBATE suggests that you discuss your concerns with the Personal Representative, among other things simply to see if he/she will agree to reduce the compensation proposed to a mutually acceptable amount so that the Personal Representative won’t have to:
- Prepare, file, and serve a Response to Objection,
- Set a hearing,
- Send notice of it to all the interested parties, and
- Attend the hearing and justify his/her position; and
If your concerns remain, …
- Timely file and serve an Objection, what this website calls a Petition for Order re Declaration of Completion.
For the procedure involved in filing such an Objection, see: Objecting to the Declaration of Completion of Probate.
Bottom-line: If you have any concerns whatsoever about the amount of compensation paid or proposed to be paid to the Personal Representative as stated in his/her Declaration of Completion, and especially if after discussing your concerns with the Personal Representative or his/her attorney, you remain concerned, WASHINGTON PROBATE urges you to immediately seek the advice of legal counsel in your locale, timely file an Petition for Order re Declaration of Completion, and serve a copy of your Petition on the Personal Representative.
- Estate of Colman, 187 Wash. 312 (1936). The trial Court had awarded fees to the PR of $20,000.
The Supreme Court opined, “The amount seems large, but the estate is a large one, and the extent of the labor and responsibility cast upon the Executor was better known to the trail court than it is to us…. A study of the record reveals nothing which would warrant a holding that there was here any abuse of discretion.” At p. 322.
- Estate of Fetterman, 183 Wash. 410 (1935). Decedent ran his own drug store. The PR was appointed first as Special Administrator, to continue to operate the drug store, and later as General Administrator. Upon his initial appointment, the PR “proceeded to gather together the threads of [Decedent’s] business and continued [its] operation … until it was sold six months later.” At p. 411. The trial court allowed $700 to the PR and $500 to his attorney for the special administration. Upon submission of the PR’s final account in the estate, inventoried at $80,000, the Court additionally awarded $4,500 to each of the PR and his attorney.
The Supreme Court opined “… [T]he allowances made … are so excessive, measured by the size of the estate and the services rendered, as to amount to an abuse of discretion in the trial court making them…. There was no substantial litigation, and no difficult problems to solve or controversies to adjust.” At p. 413. And held: Additional compensation allowed for general administration of $2,000 for each of the PR and his attorney.
- Estate of Perry, 168 Wash. 428 (1932). The trial Court awarded $3,000 to the PR and $5,000 to his attorney in a Nonintervention estate inventoried at $90,000.
The Supreme Court opined “Practically the sole services performed by the Executor consisted of taking possession of the securities, clipping the coupons therefrom as they matured, and depositing the same in the bank. The legal services rendered by the Executor’s attorney consisted of the ordinary routine matters connected with an extremely simple probate proceeding, … The Executor expressly disclaimed the rendition of any unusual services, and it is evident that none were required or rendered, either by the Executor or by his counsel.” At p. 430. And held: Compensation allowed of $2,000 for the PR and $3,000 for his attorney.
- Estate of Levy, 125 Wash. 240 (1923). The estate consisted of a partnership business inventoried at $68,635 and eventually sold. The trial Court awarded $3,000 to each of the Administrator and his attorney.
The Supreme Court affirmed, in light of “… [T]he total value of the partnership estate and what was done and required to be done….” At p. 246.
- Estate of Snyder, 122 Wash. 65 (1922). This involved a Nonintervention estate “appraised at considerably more than $100,000, and consisting of some cash, some capital stock …, large tracts of farming land, and a great many notes and mortgages.” At p. 66. The estate had remained open a little over three years, during which time the Executor had farmed the land and collected on the notes and mortgages. The trial Court allowed $4,000 to the PR and $3,500 to his attorney.
The Supreme Court affirmed, stating “The allowance to [the PR] was less than $1,500 per year, which seems small enough.” At p. 68.
Notice that the most recent of these cases is 1936. Apparently, the Supreme Court does not like to hear probate compensation cases, Heirs and Beneficiaries have become more accepting of probate fees, or Personal Representatives have become less greedy.
Now, let’s shift to some other issues regarding compensation.
Payment of compensation for the Personal Representative’s services often becomes an issue when there are multiple heirs or beneficiaries within the Decedent’s family and one (or some but not all) of them serves as Personal Representative. Usually, he/she is willing to serve, and the other members don’t want to serve and are happy for him/her to serve, and he/she doesn’t want to serve “for nothing,” and the others recognize that he/she is providing a service, that they are benefiting from it, and that it is only fair that he/she receive something for his/her service. Query: How much? What’s fair? Just what is “reasonable” compensation?
On this question, WASHINGTON PROBATE offers several suggestions:
- As early as possible in the process, and preferably during the initial discussions about “What do we need to do about any probate? And who will accept responsibility for it?”, include as issues for discussion the issues of:
- “Are we willing for the Personal Representative to be paid compensation for his/her services from the estate?”
- “If so, how are we going to determine its amount?”
- “How should travel time be handled?” This can become an issue, for example, if multiple Court appearances become necessary or Court is some distance away.
- “How should ‘waiting around’ time be handled?” Noticed hearings at Court, for example, often result in significant “waiting around” time, waiting for your case to be called.
- Some possibilities regarding the question of “How are we going to determine the amount of compensation?”:
- A flat fee determined from the beginning, perhaps to be renegotiated during or at the end of the process. The problem with this alternative is that most people don’t have much idea about the time and effort involved in serving as Personal Representative, so it’s hard to arrive at an amount that later on isn’t seen as either a substantial under- or over-payment, perhaps resulting in hard feelings.
- A flat hourly rate determined from the beginning, perhaps to be renegotiated during or at the end of the process. This is analogous to the way most probate attorneys in Washington charge for their services.
- An agreement that the Personal Representative will keep track of his/her time spent in service, with the understanding that upon closing he/she will present a report of services performed and an accounting of time to the family, and the family including the person serving will reach an agreement that seems fair and is acceptable to all.
- Same as the immediately foregoing situation but instead of presenting the report and accounting to the family, the Personal Representative will present them to the Court concurrently with the filing of the Declaration of Completion of Probate and request the Court to determine a reasonable amount of compensation. You should know, however, that in your author’s experience, Judges appear to favor petitions asking them to approve proposed fees over those asking them to set fees themselves.
- Lastly, some families and Personal Representatives simply decide that they don’t want to be bothered with the issue of Representative compensation, so they all come to an “understanding” along the following lines:
- The Representative will serve without keeping track of his/her time and without formal compensation, and
- Following the conclusion of the probate, the Representative for his/her contribution to the family will receive a “gift,” such as a paid vacation etc., from the non-serving heirs or beneficiaries. While the contractual enforceability of this arrangement as well as its tax consequences remain to be determined, such arrangements often appear to be successful for all involved.
Payment of compensation by an estate to the Personal Representative or to his/her attorney has several tax consequences:
- Its payment by the estate is a “cost of administration,” and so it is deductible by the estate for either income or estate tax purposes (but not both) by the estate. IRC § 2053. Estate of Grant v. Commissioner, 294 F.3d 352 (2d Cir. 2002).
- Its receipt by the Representative is income for services rendered, and so such compensation must be taken into income for income tax purposes by the Representative in the year in which it is received.
Caution: The “constructive receipt” doctrine. The constructive receipt doctrine, a part of federal tax law and not state probate law, effectively says that a taxpayer who has received a check:
- Can’t hold the check, waiting to decide if and when they want to cash it,
- Let substantial time pass without cashing the check,
- Eventually decide that they don’t want to cash the check at all, and
- Avoid any tax consequences that would have resulted from their having cashed the check.
Consequently, if it is clear to you that you do not desire to receive compensation for services as Personal Representative, it would be to your advantage for tax purposes to file a Waiver of Compensation as early in the probate as possible, preferably within the first few months of your appointment, and most easily when you file your Petition for Letters.
- The highest estate tax rate is higher than, and the highest estate fiduciary income tax rate is comparable to, the highest individual income tax rate, so it is usually advantageous in an estate with substantial estate tax liability to pay compensation and deduct the amount of its payment for estate tax purposes.
- The timing of its payment and receipt are usually at the discretion of the Representative, so the decision of how often and when to pay compensation can also take into account the estate’s relative year-to-year needs for tax deductions and the Representative’s relative year-to-year desires for avoidance of receipt of taxable income for the specific years in question.
Consequently, the greatest potential for tax savings as a result of payment of compensation arises in the case of:
- An estate that has substantial estate tax liability,
- An estate whose Personal Representative is its sole Heir or Beneficiary, and
- A Personal Representative with otherwise negligible income tax liability in the year of receipt.
Now let’s shift to issues expressly surrounding compensation for the Personal Representative’s attorney.
Basically, everything stated above as regards the payment of compensation to a Personal Representative applies similarly to the payment of compensation to any attorney engaged by the Personal Representative and who performs services for the benefit of the estate — namely, that such compensation shall be “just and reasonable.” RCW 11.48.210
This conclusion is strengthened and expanded by the Washington Supreme Court’s most recent case on probate attorney’s fees, Estate of Larson, 103 Wn.2d 517 (1985), a Nonintervention estate in which:
The Probate Commissioner upheld attorney’s fees of $23,145 set by the PR and charged the objectors with additional attorney’s fees of $10,000 awarded to the PR’s attorney for time spent justifying his original $23,145 fee to the Commissioner following the objections.
The trial Court upheld the Commissioner’s ruling and awarded additional fees of $4,030 to the attorney for his time spent in justifying his original fee to the trial Court.
The Appellate court held: The attorney had justified his fee and the additional fee awards were proper. And awarded the attorney additional fees for his time spent in justifying his original fee to the Appellate Court, although the Appellate Court reversed the trial Court and found that the additional fees were chargeable against the estate, not the objectors.
The Supreme Court took a different view:
|In probate, the attorney-client relationship exists between the attorney and the Personal Representative of the estate. [Citation omitted.] The Personal Representative stands in a fiduciary relationship to those beneficially interested in the estate. He is obligated to exercise the utmost good faith and diligence in administering the estate in the best interests of the heirs. [Citation omitted.] The Personal Representative employs an attorney to assist him in the proper administration of the estate. Thus the fiduciary duties of the attorney run not only to the Personal Representative but also to the heirs.Generally, this Court will not interfere with an allowance of attorney fees in probate matters unless there are facts and circumstances clearly showing an abuse of the trial court’s discretion. Estate of Belknap, 12 Wn.2d 643 (1942); Estate of Fetterman, cited above….
Estate of Peterson [cited above] sets forth the criteria to be considered in evaluating attorney fee requests in probate proceedings…. See also Estate of Bailey [cited above]….
The testimony is uncontroverted that an inordinate amount of time was spent on investing estate monies and preparing [tax] returns for an estate that presented no difficult or complex legal or administrative problems. Reason and fairness compel us to observe that clients should not be expected to pay for the education of a lawyer when he spends excessive amounts of time on tasks which, with reasonable experience, become matters of routine. [Citation omitted.]
Nor should a client be expected to pay for work that is duplicative. [Citation omitted.] A review of the record indicates that [the attorneys] duplicated their efforts. At times they worked together on the same project or attended the same ex parte hearing.
Moreover, an attorney is not entitled to fees at professional legal rates for tasks that should be performed by staff, such as depositing checks in a bank. [Citation omitted.] The record reveals that [one of the attorneys] spent much of his time engaged in matters which could have been done by the law firm staff, such as trips to the IRS to pick up forms and trips to different banks to deposit funds.
When a probate attorney elects to base his fees primarily on the number of hours worked multiplied by an hourly rate, his fiduciary obligations dictate that he charge the estate only for those hours which are reasonably necessary in probating the estate. In defending against any objections to the fee raised by interested heirs, the estate attorney must assume the burden of proving that the hours charged to the estate were necessary. In determining a reasonable fee, the court shall assume $75 is a reasonable hourly charge for this type of work by a competent attorney…. The $75 an hour was a reasonable hourly charge, as [the attorney who did the work] had performed the majority of the work while an intern [ie, while a student in law school] and [later, following his graduation and passing the bar exam] a relatively inexperienced attorney. At pp. 520-532.
- A probate attorney must assume the burden of proving that the hours charged to the estate are reasonable and necessary.
- A probate attorney is not entitled to additional fees to prove the reasonableness of his fee in a final report.
- Objectors are entitled to reasonable attorney’s fees to the extent the items in the report that are disapproved as a result of their objection benefit the estate.
And reversed and remanded to the trial Court to determine the reasonableness of the attorney fees and the amount of fees to be awarded to the objectors.
Estate of Larson was revisited in Estate of Mathwig, 68 Wn. App. 472, (1993), rev. denied 121 Wn.2d 1030 (1993). There, the Personal Representative was an attorney who sought both Personal Representative’s fees ($16,479) and attorney’s fees ($27,593) in a Nonintervention estate inventoried at $165,000 with 95% of the estate passing to a charity. The evidence showed that the PR had expended 220 hours of work, some of which was for non-legal tasks. There was no dispute regarding either the amount of time spent or the necessity for the work, only that the PR should not be compensated at legal rates for non-legal work.
The trial Court:
- Found that approximately 34 or the total 220 hours had been spent on non-legal work;
- Awarded $125 hourly for legal work (effectively as the estate’s attorney) and $50 hourly for non-legal work (effectively as the estate’s Personal Representative);
- Denied any additional fee for services as Personal Representative; and
- Awarded attorney’s fees to the objector charity to be paid by the Personal Representative.
Citing Larson, the Appellate Court in Mathwig affirmed the trial Court’s decision.
And now, as stated in the beginning of this webpage, back to California.
The Supreme Court of California, in Estate of Trynin, 49 Cal.3d 871, 264 Cal. Rptr. 93 (1989), held: An attorney is entitled to reasonable fees for services rendered in preparing or defending a request for probate attorney’s fees in California — the opposite as held by the Supreme Court of Washington in Larson.
Bottom-line: If you want to object to probate fees, do so in Washington, probably the state having one of the most, and perhaps the most, consumer-oriented probate laws in the nation.