How much is this going to cost? A short history of Illinois probate fees (Part 1)
That question needs to be addressed with regard to every assignment a lawyer accepts. The client deserves to know, or at least have a range of potential fee outcomes if the scope of the assignment is uncertain, and the lawyer has an ethical duty to inform the client about fees early on in the engagement. Rule 1.5 (b) of the Illinois Code of Professional Responsibility, the code of conduct imposed by the Illinois Supreme Court on all attorneys in Illinois, states:
(b) The scope of the representation and the basis or rate of the fee and expenses for which the client will be responsible shall be communicated to the client, preferably in writing, before or within a reasonable time after commencing the representation, except when the lawyer will charge a regularly represented client on the same basis or rate. Any changes in the basis or rate of the fee or expenses shall also be communicated to the client.
In the probate context, the Illinois Probate Act provides at Section 27-2(a):
…..the attorney for a representative is entitled to reasonable compensation for his services.
Sounds simple. Logical. Fair. But the hard part is defining what is “reasonable”.
When I first started practicing in 1976, the probate fee question was much simpler. The probate judges in Cook County used a fee schedule, based upon the size of the estate, to determine fees. I still have my copy, though it is now dog-eared and yellowed. In those days, the attorney’s fees in every estate were scrutinized and either approved or denied by the judge hearing the case. I still can see a judge reviewing a Final Account showing my attorney’s fees, then opening a drawer in his desk to look at the fee schedule and doing some math on a pad on his desk and then looking at me and stating “Your Final Account is approved, Mr. Reda. All fees of the attorney and the representative are approved.” It was all simple math.
Now, one of the myths about probate that the public believes is that the lawyer ends up with a fourth of the estate at their fee. I have heard that (or a similarly outrageous percentage) many times in my career. Nothing could be further from the truth, and that applies to the old fee schedule days, as well as today. The old fee schedule was a sliding scale, beginning at 4% of the first $100,000 and ending at 2% of all assets over $500,000. Simple. And some would argue fair to both client and attorney.
But in the late 70’s that all changed. The first crack in the dike was the US Supreme Court case of Goldfarb vs. Virginia State Bar. There, the Virginia State Bar had promulgated a fee schedule for real estate closing transactions that would base attorney’s fees on a small percentage of the sale price of the property. The US Supreme Court ruled that such bar-promulgated fee schedules violated the Sherman Antitrust Act and could not be used in that context. The Goldfarb ruling was in 1975.
Following Goldfarb, in 1977, the Illinois Appellate Court upheld the grant of an attorney’s fees which were based upon the local probate fee schedule, but cautioned:
We must make a statement regarding the use of bar association fee schedules. We believe that the United States Supreme Court has mandated their discontinuance.
The final death blow to probate fees based upon a fee schedule came in In Re Estate of Bonnett, an Illinois Appellate Court case from 1977, where the court stated in no uncertain terms:
While in the past some sanction has been given by local custom to a percentage fee based on the gross amount of the estate, that has no legal basis, and since Goldfarb . . . it has not been an acceptable standard. As the trial court remarked in announcing his ruling: “The reasonable fees are not concerned with percentage any more.”
Some Illinois commentators believe that the Illinois courts misinterpret the Supreme Court holding in Goldfarb. They believe Goldfarb does not stand for the proposition that fees based upon a fee schedule are pernicious in and of themselves; rather, they are pernicious when coupled with a bar association or other group effort to have all attorneys abide by that fee schedule. They believe the real thrust of the holding is not against fee schedules, but against price fixing.
Interestingly, some states continue to actually mandate that a probate attorneys fees for ordinary services be calculated per a statutory fee schedule. California, Nevada and Wyoming are three that I am aware of. In Wyoming, probate attorney’s fees are determined by the following schedule:
- 10% of the first $1,000.00 in value;
- 5% of the next $4,000.00 in value;
- 3% of the next $15,000.00 in value; and,
- 2% of everything over $20,000 in value.
The Wyoming statute allows the attorney to petition the court for additional fees if the fees dictated by the application of the schedule are not “fair and equitable.”
The California probate fee schedule is more generous with fees at the lower levels and less generous with a larger estate:
- 4% of the first $100,000 in value;
- 3% of the next $100,000 in value;
- 2% of the next $800,000 in value;
- 1% of the next $9,000,000 in value;
- .5% of the next $15,000,000 in value; and
- Such fees as the court allows on any amounts over $25,000,000
So, if fee schedules are out, how are Illinois probate attorney fees to be determined? More about that in Part 2 of this post.