What can a lawyer charge to help you with an estate?

If you hire a lawyer to look after an estate, what will it cost? It may be more complicated and possibly more expensive than you realize. The following is a note I received from a reader who is dealing with that very issue.

"I'm looking for some advice regarding legal fees in relation to the administration of my late Aunt's estate in BC. The value of the estate was just over $207,000, with the highest proportion of this sum related to the sale of her apartment. She did not leave a will and therefore died intestate with all the benefactors (including me) residing outside of Canada. While I understand that completing the administration of her affairs in such circumstances presented a number of difficulties than would otherwise be the case, I consider the fees charged by the legal firm appointed to resolve matters, which amounted to $42,000 as grossly excessive. Can you advise me of the approved formula or mechanism for calculating fees relating to estate administration?"

 

There are a few factors in play here that need to be explored. First, it's important to understand what, exactly, is included in that $42,000. And as that amounts to about 20% of the estate, I can see why you're asking.

 

There is a difference between legal fees and estate administration fees. In your case, it appears that you've had the lawyer doing both. I'll talk about this more in a moment. In addition to fees, the bill for the estate likely also includes disbursements. This refers to anything that is paid out-of-pocket by the lawyer on behalf of the estate, such as probate fees, any of your aunt's unpaid bills, taxes, accountant's fees, funeral bill and so on. This money doesn't go to the lawyer; it comes out of the estate and is paid to a third party. Your aunt's estate was administered in BC, which is one of the most expensive jurisdictions in terms of probate fees.

 

The lawyer may also have charged for disbursements in his/her own office, such as for faxes or long distance charges. In any estate where the beneficiaries all live in another country, disbursements are going to be higher.

 

And of course there is tax on all of that. Canada has goods and services tax (GST) that is charged everywhere, and in all provinces but one has a provincial sales tax added to it (together they are the HST).

 

So once you separate out the disbursements and the taxes, all of which should be carefully itemized on the lawyer's statement of account, you can see how much was actually charged in fees.

 

Now here is the kicker. There is no "approved formula or mechanism for calculating fees for estate administration" here. And even if there was, you've asked the lawyer to do much more than a simple estate administration. I can give you a few guidelines though, that you can use to judge the bill you've received.

 

Normally a lawyer will charge about 1.5% of an estate simply to obtain the probate document, or as in your case, the Letters of Administration. The actual fee is not laid down in a law. Lawyers may charge more. Whoever actually hired the lawyer should have received a quote before the lawyer started work. Quotes from lawyers may include a "job" price for a piece of work such as obtaining probate, but they may not. Most lawyers will tell you their hourly rate up front even though it's impossible to tell at the beginning how many hours the work is going to take.

 

In addition to those fees, the lawyer may charge for doing the work that an executor would normally do. While an executor normally may receive up to 5% of an estate, and more if there are complications, an executor may hire experts (such as lawyers) at the expert's normal hourly rate.

 

In addition to that, the lawyer may charge additional legal fees for additional legal work. Specifically, the selling of an apartment is not considered part of the executor's fee because the executor would have hired a lawyer and paid him/her a fee to do it. You should expect a couple of thousand dollars in fees and several disbursements for this transaction alone.

 

I hope this information helps you to understand the lawyer's bill and understand what exactly the lawyer was paid to do. If you feel that the bill is still unreasonably high, you can take steps to have it changed. Believe it or not, you can ask the lawyer to adjust the bill voluntarily. If he/she won't do that, you have the option of going through a process called taxation of account. This involves the client and the lawyer meeting with an officer of the court whose job it is to decide whether lawyers' bills are fair. Whether this would work for you when none of you is local is another matter.

 

I can see why in this case your family hired a lawyer for help. None of you lives in Canada and someone had to deal with the estate. Hiring a lawyer is definitely a good way of getting things done properly, but it's not necessarily the cheapest. There probably isn't a lot you could have done to keep the bill lower. For example, you couldn't have cleaned out the apartment yourself or taken meetings at the bank.  Somebody who lives near to the deceased could have done a lot more to control costs.

 

Another option would have been to hire a trust company, who would have done the same work for a flat fee of less than 5% of the estate (plus disbursements and tax of course).

 

Anyone hiring a lawyer to help with an estate must have a frank discussion about fees, disbursements and taxes. Don't be afraid to ask what you can do to keep a lid on the costs. Get your estimate in writing before the lawyer starts working on the estate. Another good idea is to ask for a monthly statement of fees so that you can see what is happening at each step, and what each of those steps costs.

 

 

Handling your parents' estate? Do your homework.

This article in the Globe and Mail talks about estate sales and "re-purposing" items in your parents' home once the home is no longer needed. This could take place either at the time the parent passes away or when he or she is moving into long term care or a smaller place. There are ideas here you may not have thought about. And anyone that can help an estate run smoothly and avoid disputes between the kids is ok in my book. Click here to read the article.

For a Great Deal, Try an Estate Sale

If you've ever wanted to know more about estate sales, or are considering holding one, now is your chance to learn more. The link below goes to a blog post by Toronto lawyer Megan Connolly, and in it she references several websites and facts that you might find interesting. I've been to several estate sales around rural Alberta where farm equipment, tools, machinery and household items were sold. They are extremely well-attended sales, and they can work just as well in an urban setting.

For a Great Deal, Try an Estate Sale

Conducting an estate sale

Most executors have to deal with selling some personal or household items for an estate. As most executors are new at that  job, they may have questions about how to proceed. This post will explore ideas for selling those items properly, without short-changing the estate or getting the executor into trouble.

When talking about selling items, I'm assuming that the executor has already given away any specific items that were left to specific beneficiaries. Obviously if a Will or Memorandum of Personal Effects requests that an item be given to someone, that item isn't going to be sold unless the beneficiary has already passed away. Before you start selling anything, make sure that you have read the Will carefully, or your lawyer has done so on your behalf, so that you do not accidentally sell someone's inheritance.

The first step is to determine what you're dealing with. Is the deceased's home full of valuable artwork, antiques, jewelry or collections? Is it a rural property, with equipment, vehicles and tools? Is it your average home with regular furniture and possessions, but nothing of outstanding monetary value?

The majority of estates don't need a formal estate sale, and I'll get to more suitable options in a moment. For a home that is full of valuables, or a rural home with a lot of equipment, it just might be a good idea to hold an estate sale. The best way to do this is to contact an auction house in your province (look up "auction" on google or in the Yellow Pages). Try to give them an idea over the phone of what you're dealing with. For example, did the deceased leave a box full of antique jewelry? A set of eight original oil paintings? A rebuilt 1947 car?

If the auction house thinks that an estate sale is the way to go, they'll send someone out to take a look at the items. They will probably give you an estimate on what price could be expected, and set a general timeline for a sale. The sale might be conducted right from the deceased's home, or the items might be taken to the auction house for inclusion in a larger sale there. Make sure you get a detailed list and signed receipt for any items taken.

When using an auction house, be prepared for the fact that they will probably advertise the sale in the local paper (they don't use the deceased's name). Also, remember that they will take their pay out of the sale proceeds before handing the net amount to you.

As mentioned earlier, the majority of estates don't need to go through an estate sale. The executor will be responsible for finding other ways of selling the household and personal goods. Some common ways of doing this are:

- hold a garage sale
- sell goods privately to beneficiaries, family members, friends etc - remember to sell at fair market value
- advertise goods on eBay, in newspapers, etc.
- take unusual items (e.g. a hockey card collection) to a dealer
- sell to second-hand shops

There are always items that are not worth much money. These might be small appliances, used clothing, used books, used DVDs, etc. If family members don't want these items and the executor can't sell them, they can be donated to a charity such as Goodwill. If they are of little value, don't expect a charitable receipt.

The executor should keep careful records of items going out and money coming in. Remember that personal items are more likely to be the cause of a family fight than money or property. The executor should keep any bills of sale, receipts, inventories or charitable receipts.

All money generated from any of these sources should be deposited into the estate account. Rather than the executor taking out his expenses (such as shipping)  and depositing the rest, it is safer and more transparent to deposit all of the money and then make a separate payment to the executor for expenses.