What Percentage Does a Lawyer Get for Settling an Estate in New York?

If you're not paying on an hourly billing fee or a set fee arrangement, the percentage a lawyer gets would depend on your agreement and usually the value of the estate. It could range from 5% for set fee percentages to a bracket based on amount of assets collected.

Percentage of the Estate

One legal fee arrangement for settling an estate is based on a percentage of the estate's value. While not the most common approach, it's often used when the client lacks the funds to hire a lawyer upfront until they can access the deceased's assets, or when the lawyer's workload is substantial, requiring them to assume some of the executor's duties. The exact percentage a lawyer receives depends on the agreement and generally correlates with the estate's value. This can range from a flat 5% fee to a tiered structure, such as 5% of the first $100,000 in assets, 4% of the next $200,000, 3% of the following $700,000, and 2% of the next $2,000,000. In cases where attorneys charge a percentage, they usually manage almost all aspects of the estate administration process, with the executor's primary responsibility being to sign the necessary documents prepared by the attorney.

Hourly Billing Fees

Under an hourly billing retainer agreement, attorneys in New York typically charge clients a minimum of $400 per hour for the time dedicated to their case. The primary benefit of this arrangement is that clients only pay for the legal services rendered, which can be advantageous when dealing with uncomplicated estates requiring limited legal input. However, the main drawback is the unpredictability of the total legal costs, particularly in intricate cases involving probate litigation, such as will contests or discovery and turnover proceedings, where estimating the precise workload is challenging, especially if the matter proceeds to trial. Legal fees can be considerably reduced when executors actively participate in managing estate affairs, including asset collection, creditor negotiations, and beneficiary communications. On the other hand, if the executor is unable to make a significant contribution to the case, or if the estate is complex or entails legal intricacies, hourly legal fees can rapidly escalate, particularly in instances where litigation becomes necessary.

Set Fee Arrangement

In some cases, clients and attorneys may opt for a set fee retainer agreement. This arrangement works well for straightforward estates with no missing or minor beneficiaries. The agreement also outlines situations that could lead to additional legal fees beyond the set amount, such as the emergence of a previously unknown beneficiary or a contested will.

Before approaching an attorney, it's crucial to understand the scope and complexity of the legal work you anticipate needing. This will help in determining the most suitable fee structure, whether it's based on a percentage, hourly billing, or a set fee. When seeking legal representation for an estate, it's essential to discuss the legal fees with the attorney before officially retaining their services. Should you need assistance in settling an estate, contact the Law Offices of Albert Goodwin to discuss your specific legal needs. You can call us at 212-233-1233 or send us an email at [email protected]. We are located in Midtown Manhattan in New York, NY.

How Estate Legal Fees Are Different from Executor Commissions

One source of confusion in estate fees is the distinction between legal fees (paid to the attorney) and executor commissions (paid to the executor for serving as fiduciary). These are separate and have different calculations:

Executor commissions are set by statute (SCPA § 2307) on a percentage scale of the value of assets received and paid out. The rates start at 5% on the first $100,000, 4% on the next $200,000, 3% on the next $700,000, 2.5% on the next $4 million, and 2% on the rest. Commissions are split between "receiving" and "paying out" (half for each). The executor is entitled to these commissions for their work as fiduciary, separate from any legal services.

Legal fees are paid to the attorney representing the executor (or the estate). These are negotiated between the executor and the attorney and approved by the court if challenged. The fees compensate the attorney for legal services — preparing court filings, attending hearings, advising on tax issues, drafting documents, and handling any disputes.

When the executor and the attorney are the same person (an attorney serving as executor), both compensation streams may apply — commissions for executor work and legal fees for legal services. The two are tracked separately and the executor-attorney must allocate time appropriately.

Reasonable Fees Under New York Law

Whatever fee arrangement is used, the legal fees ultimately must be reasonable. The Surrogate's Court has authority to review and reduce excessive fees. In evaluating reasonableness, the court considers:

• The size of the estate.
• The difficulty of the questions involved.
• The skill required to handle the work.
• The experience and reputation of the attorney.
• The time and labor actually expended.
• The customary fees charged in the area for similar work.
• The results achieved.
• The amount in controversy.
• The responsibility involved.

This is sometimes called the "Matter of Freeman" factor analysis after the leading case. Fees that look reasonable on paper but that fail this analysis can be reduced when challenged by beneficiaries.

When Fees Are Subject to Court Approval

Legal fees in routine, uncontested estate matters are typically paid without court approval. The executor pays the attorney from estate funds and the payment shows up in the eventual accounting. Beneficiaries can object to the fees as part of the accounting process if they believe the fees are excessive.

In contested matters, particularly where there has been litigation or where the fees are substantial relative to the estate, court approval may be required before the fees are paid. The court reviews a fee application that breaks down the work performed, the time spent, and the fees charged. The court either approves the fees as requested, reduces them, or directs further information before deciding.

Beneficiary Rights Regarding Fees

Beneficiaries are interested parties with rights to scrutinize the legal fees being paid from the estate. The accounting must disclose the fees, and beneficiaries can object during the accounting proceeding. Specific objections that come up:

• The fees are disproportionate to the estate's size.
• The work could have been done more efficiently.
• The fees include time that primarily benefited the executor personally rather than the estate.
• The hourly rates charged are above market for similar work.
• The attorney duplicated work or staffed the matter inefficiently.

When objections succeed, the court reduces the fees and may direct the attorney to repay the difference to the estate.

The Importance of Engagement Letters

Whatever fee structure is used, the engagement letter should clearly document the agreement. The engagement letter typically includes:

• The scope of the engagement (what services are included).
• The fee structure (hourly, flat, percentage, or hybrid).
• The hourly rates (if applicable) for each attorney working on the matter.
• Costs that are separate from fees (filing fees, expert fees, photocopying).
• The terms for additional work outside the original scope.
• How fees are billed and when payment is due.
• What happens if the engagement ends before completion.

A clear engagement letter prevents misunderstandings later. Clients should read it carefully and ask questions about anything that is unclear before signing.