When the propbat court appoints a lawyer to oversee a dead person’s property, exactly what duties doe he have toward the estate? Is he bound to expend as little moneys as possible? or should he spare no expense in pusuit of his duties?
I ask because lawyers have gotten a bad rap over this-some have accused them of ‘excessive’ fees when handling estates. What’s the verdict on this?
IANAL, but my understanding is that a lawyer appointed to administer (or named to execute) an estate is supposed to be a “conservator of assets,” and to receive a fee commensurate with his efforts in doing so from that estate. My impression is that that translates into doing what costs the least money in the long run. Collecting $5,000 to defend diligently against a $10,000 lawsuit is properly conserving the assets; collecting $25,000 in the same circumstance would not be.
Note in passing that those appointed to manage a trust created by will or intestatelaw in favor of a minor have a somewhat different set of criteria – expenditures to assure the minor is properly provided for during his/her minority are often appropriate, even when they do not “conserve assets” – again depending on the jurisdiction’s standards in such a case.
I’m not going to do the research right now, but my understanding is that executors of estates are permitted to incur reasonable fees. Of course, the reasonableness of any fees charged can be contested, and is subject to judicial review. I’m no expert on stiffs and gifts, but I’ve never encountered a requirement that executors spend as little as possible. Nor have I encountered any statutory requirement that executors “spare no expense” beyond what is reasonable.
Yes, a court appointed executor owes a fiduciary duty to the estate, and is precluded from wasting the estate or unduly personally profitting from it. But, he/she is entitled to have their time and expenses compensated.
I’m sure someone with greater experience and expertise than I will be along shortly.
IMHO, this is a technical question more suited for GQ. It’s been a zillion years since I was briefly a trusts-and-estates paralegal, but my recollection is that the statutes and case law of the several states define what an executor’s fiduciary duty to an estate is. (And while the OP says lawyer, he’s clearly referring to a lawyer appointed to act in the capacity of executor.) While there’s always some gray area that hasn’t been settled by statute or previous court decisions, my recollection is that lawyers consider it a fairly boring area of law because most questions that arise are in the province of long-settled law.
You are appointed to administer the estate of a homeless woman (a “bag lady”) who dies on the street. You later learn that she has $12 million in various bank accounts. You search to find any relatives she might have…so, should you travel 1st class to San Francisco to follow up on a lead (she might have a second cousin living there)? You know that the estate will revert to the state, if she has no living relatives…how do you conduct your search for heirs?
As a practical matter, a disreputable executor can charge whatever he feels he can get away with. In the situation you describe, he most likely would eventually be defending his charges against the state.
A $12 million estate would certainly support at least a couple of first-class domestic trips to SF. Of course, it might be sufficient to simply publish a couple of notices, so you’d need to decide what you wish to potentially defend as reasonable.
Yes, there is considerable leeway within which the gov’t can decide whether or not to challenge administrative expenses charged to an estate as unreasonable. And I’m not aware of anyplace spelling out what is or isn’t reasonable in terms of dollars or percentages of an estate.
In response to ralph124c’s hypothetical, my immediate reaction is that I’m a lawyer, not a private detective. I would contact a reputable private investigation firm in the San Francisco area, give them whatever info I had, and ask them to see if they can find any relatives. I would probably set a cap on how much they are to spend on the investigation, based on the market rates in their area and their initial impression of how much time it would take. I would instruct them to report back to me if they either find a relative, or reach the cap I’ve set on the fees. If they reach the cap, I would want a report, to assess whether there is any point in their continuing the search.
Does the state give probation of estates? Case in point: the late Howard hughes-believed to have died somewhere over Las Vegas. The estate was huge-billions of $, including ownership of several high-tech firms doing vital defense work for the US Gov. (Hughes Aircraft Co.). Yet, Hughe’s will was disputed, no fewer than 20 women claimed to be married to him! How long did it take to sort this out? And how much did it cost?
You can try to research Hughes’ will as well as I.
But in general, the state plays 2 active roles with respect to estates. First, probated estates must be approved by a judge. So there’s one level of review to weed out grotesquely inappropriate executor fees. Second, the executor has to file tax documents, and the state is very interested in receiving any taxes due. So the IRS and state conducts their review, and can initiate an audit.
I’ll note, however, that it is very common for courts to approve actions during probate that are blatant attempts to minimize an estate’s tax liability. It isn’t as tho the court requires that an estate be styled in the manner that results in paying the greatest amount of taxes.
But it isn’t as tho the state appoints an individual responsible for monitoring the execution of estates. Generally, the competing interests of greedy potential beneficiaries are more than enough to keep executors in line. 