Percentage Fees in Probate Matters

Is it unlawful or unethical for an estate attorney to charge a fee based on a percentage of the estate?

That was one issue raised in In re Estate of Bessie Adcock Bingham. In that case, the executor entered into a contract with an estate attorney, whereby the attorney agreed to represent the estate for a fee of 5% of the gross estate as determined by the Tennessee Department of Revenue Inheritance Tax Return. Evidently, this is a common practice in Bedford County. According to the trial court, [T]he cultural history of fees within our judicial district has long been… they were charged as percentages.” One of the beneficiaries objected, arguing that that charging a fee based on a percentage formula in a probate matter is “per se unlawful and violate[s] Rule 1.5 of the Rules of Professional Conduct.”

The Tennessee Court of Appeals declined to adopt a blanket prohibition against a percentage fee:

Contrary to the Petitioner’s assertion, in Thompson [In re Estate of Thompson, 2012 WL 912859 (Tenn. Ct. App.)], we did not hold that a percentage fee in an estate is per se invalid; rather, the court held that the trial court erred by relying primarily on a percentage formula provided in a local rule without considering whether the fee was reasonable in accordance with the factors set forth in Rule 1.5 of the Rules of Professional Conduct. Moreover, Rule 1.5(d) identifies only two types of prohibited fees, contingency fees in certain domestic cases and contingent fees in criminal cases, neither of which are applicable here. 

Thus, a percentage fee is not automatically unreasonable. Instead, reasonableness must be determined in light of the factors set forth in Rule 1.5 of the Tennessee Rules of Professional Conduct. These factors are: 

  • the time and labor required, the novelty and difficulty of the questions involved, and the skill requisite to perform the legal service properly;
  • the likelihood, if apparent to the client, that the acceptance of the particular employment will preclude other employment by the lawyer;
  • the fee customarily charged in the locality for similar legal services;
  • the amount involved and the results obtained;
  • the time limitations imposed by the client or by the circumstances;
  • the nature and length of the professional relationship with the client;
  • the experience, reputation, and ability of the lawyer or lawyers performing the services;
  • whether the fee is fixed or contingent;
  • prior advertisements or statements by the lawyer with respect to the fees the lawyer charges; and
  • whether the fee agreement is in writing.

Source: In re Estate of Bessie Adcock Bingham, No. M2016-01186-COA-R3-CV (Tenn. Ct. App. 2017)

Posted by Joel D. Roettger, JD, LLM, EPLS

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