Harris 5th Edition NY Estates: Probate Administration and Litigation: Ch. 18, Attorneys' fees
kuacou
The law journals and official reports are replete with cases involving
disputes among lawyers, personal representatives and beneficiaries
concerning legal fees. In many cases, these disputes arise from the
lawyer's lack of knowledge of the standards employed in estate
practice to fix legal fees, or failure to take practical steps to
record and justify a fee application.
There may also be a failure to understand that the court has the final
and determinative role in assessing the appropriateness of any fee.
An understanding of these problems -- and of the governing rules --
will assist the attorney in collecting a fair fee for the work done.
§ 18:2. ETHICAL CONCERNS, GENERALLY
The Code of Professional Responsibility (CPR) and its Disciplinary
Rules provide that a lawyer shall not enter into an agreement for,
charge or collect an illegal or excessive fee. DR 2-106. Specific
criteria are provided for determining whether a fee is excessive. DR
2-106(B).
In Gibbs v. Breed, Abbott & Morgan, 170 Misc. 2d 493, 649 N.Y.S.2d 974
(Sup. Ct. 1996), the firm sought to charge its former partner, who had
received (or was entitled to receive) commissions as fiduciary of an
estate for which the firm had acted as counsel, in the amount of the
difference between fees fixed by the Surrogate as "fair and
reasonable" and unrecovered time charges shown on the firm's records.
The firm's claim was based on an alleged policy under which a partner/
fiduciary would be required to make up out of his commissions
unrecovered time charges of the firm for legal fees. The court held
that irrespective of that policy, the practice could not be enforced
since it violated public policy. Such a policy, it held, would have
had an in terrorem effect on the attorney/fiduciary, who had a duty to
approve only reasonable fees. The policy put him in a position of
conflict between approving excessive fees (to avoid personal loss) or
agreeing to reasonable fees (and absorbing the difference out of his
own commissions). The firm was held not entitled to collect the
claimed fees from the former partner.
These criteria, and others, are the underpinnings of the decisional
law governing the determination of appropriate charges for legal
services. (See §§ 18:72 et seq.)
§ 18:3. --NO FEE WHEN RULES BREACHED
It is axiomatic that counsel may not be awarded legal fees where there
is a breach of the CPR. Brill v. Friends World College, 133 A.D.2d
729, 520 N.Y.S.2d 160, 42 Ed. Law Rep. 827 (2d Dep't 1987); Shelton v.
Shelton, 151 A.D.2d 659, 542 N.Y.S.2d 719 (2d Dep't 1989).
Example: One attorney may not represent clients who have conflicting
interests. DR 5-105 (A),(B). Counsel placed himself in a conflict
situation by representing both the decedent's mother (designated
beneficiary of a policy) and the executor of decedent's estate, then
filing a claim in opposition to the decedent's mother. The fee was
denied. Matter of Fee, NYLJ 3/18/93, 36:3 (Sur. Ct. Suffolk County).
§ 18:4. --PUTNAM/WEINSTOCK RULES
Estate practice has developed a singular set of rules covering those
instances -- all too frequent -- in which lawyer/drafters, or others
in a position to influence a testator's choice, become beneficiaries
or fiduciaries under wills.
These rules owe their origin to two precedent-setting decisions. One
urged attorneys to have some other lawyer draw a client's will if the
client planned to give the lawyer a bequest. In re Putnam's Will, 257
N.Y. 140, 177 N.E. 399, 79 A.L.R. 1423 (1931). See §§ 18:17 et seq..
The other concluded that letters testamentary could be denied to
attorney found to have induced a testator to name her/him as executor.
Matter of Weinstock's Estate, 40 N.Y.2d 1, 386 N.Y.S.2d 1, 351 N.E.2d
647 (1976). See §§ 18:21 et seq..
As a general matter, nominations of lawyer/drafters as fiduciaries can
be justified, but can still present problems because of the potential
for excessive compensation.
§ 18:5. --DUAL ROLE OF ATTORNEY AND PERSONAL REPRESENTATIVE
Frequently a lawyer is asked to serve in the role of personal
representative. Special concerns arise regarding how the nomination
originated, the testator's freedom of choice in making that nomination
and the compensation payable if the representative/lawyer (or the
lawyer's firm or an affiliated attorney) renders legal services in the
matter. These have been forcefully addressed by the courts.
Further, 1995 legislation imposed new disclosure requirements on the
lawyer. Failure to comply results in loss of half of any commission
due under SCPA 2307. See § 18:21.
§ 18:6. --COURT ROLE IS PREEMINENT
It has become clear that the court has absolute supervisory power to
review legal fees claimed by estate practitioners. Stortecky v.
Mazzone, 85 N.Y.2d 518, 626 N.Y.S.2d 733, 650 N.E.2d 391 (1995),
related reference, 218 A.D.2d 904, 630 N.Y.S.2d 155 (3d Dep't 1995).
This is the rule notwithstanding the existence of a retainer, and even
in absence of an objection to a fee. See § 18:7.
§ 18:7. RETAINER AGREEMENTS
It is sound practice to enter into a retainer agreement, and in some
cases it is required. To justify a fee, services must be performed,
and performed satisfactorily. Matter of Estate of Mehr, 152 Misc. 2d
419, 576 N.Y.S.2d 993 (Sur. Ct. 1991); but see Matter of Veccio's
Estate, 49 A.D.2d 380, 375 N.Y.S.2d 637 (3d Dep't 1975).
Even if satisfactory services are rendered, however, the agreement is
subject to the Surrogate's review if compensation is to come from the
estate, and the court is not bound by the terms of that agreement.
[Matter of Meng, 227 N.Y. 264 (1919); Matter of Schanzer, 7 A.D.2d
275, 185 N.Y.S.2d 475 (1st Dept 1959), affd, 8 N.Y.S.2d 972 (1960);
see generally 22 NYCRR § 207.45] ; Matter of Milam, NYLJ 5/17/00, 31:3
(Sur. Ct. N.Y. County).
The law is clear that the terms of a retainer agreement are subject to
court approval. Gair v. Peck, 6 N.Y.2d 97, 188 N.Y.S.2d 491, 160 N.E.
2d 43, 77 A.L.R.2d 390 (1959), reargument denied, 6 N.Y.2d 999, 191
N.Y.S.2d 1025, 161 N.E.2d 756 (1959) and reargument denied, remittitur
amended, 6 N.Y.2d 983, 191 N.Y.S.2d 951, 161 N.E.2d 736 (1959); First
Nat. Bank of East Islip v. Brower, 42 N.Y.2d 471, 398 N.Y.S.2d 875,
368 N.E.2d 1240 (1977). (See also § 18:74).
Nevertheless, a retainer agreement can limit the amount of a fee or
hourly rate to those agreed to be charged. Matter of Pinkus, N.Y.L.J.
1/5/98, 22:5 (Sur. Ct. N.Y. County).
A client is entitled to cancel his contract of retainer at any time,
and if he does, the discharged attorney is relegated exclusively to an
action or proceeding for the reasonable value of his services up to
the time of his discharge. In re Scanlon's Estate, 2 Misc. 2d 65, 150
N.Y.S.2d 511 (Sur. Ct. 1956). After cancellation of a retainer
agreement, its terms no longer serve as a standard for the attorney's
compensation, but they may be taken into consideration as a guide for
valuing the services in quantum meruit. Matter of Sathue, N.Y.L.J.
5/1/00, 37:5 (Sur. Ct. Westchester County), citing Tillman v. Komar
(State Report Title: Matter of Tillman), 259 N.Y. 133, 181 N.E. 75
(1932).
Infant interested parties would not be bound by the provisions of a
retainer agreement. Matter of Zeidman, N.Y.L.J. 8/25/99, 23:2 (Sur.
Ct. Bronx County), citing Matter of Muccini's Estate, 118 Misc. 2d 38,
460 N.Y.S.2d 680 (Sur. Ct. 1983); In re Estate of Gluck, 279 A.D.2d
575, 720 N.Y.S.2d 149 (2d Dep't 2001).
However, when the fiduciary is also a beneficiary of the estate, the
terms of the retainer are binding and chargeable against the
fiduciary's share of the estate even though the attorney compensation
awarded is thereby in excess of the amount deemed reasonable by the
court unless the agreement was fraudulently or otherwise wrongfully
procured. Matter of Devonish, NYLJ 6/20/00, 23:1 (Sur. Ct. N.Y.
County).
§ 18:7.5. --ENGAGEMENT LETTERS
Effective March 2, 2002, the Rules of all four Appellate Divisions
require that an attorney who undertakes to represent a client and
enters into an arrangement, charges or collects any fee from a client,
must provide the client with a written letter of engagement before
commencing the representation, or within a reasonable time thereafter.
NYCRR § 1215.1. The requirements for NYCRR § 1215.1 (current through
May 31, 2002) are as follows:
(a) Effective March 4, 2002, an attorney who undertakes to represent a
client and enters into an arrangement for, charges or collects any fee
from a client shall provide to the client a written letter of
engagement before commencing the representation, or within a
reasonable time thereafter:
(1) if otherwise impractible; or
(2) if the scope of services to be provided cannot be determined at
the time of the commencement of representation.
For purposes of this rule, where an entity (such as an insurance
carrier) engages an attorney to represent a third party, the term
client shall mean the entity that engages the attorney. Where there is
a significant change in the scope of services or the fee to be
charged, an updated letter of engagement shall be provided to the
client.
(b) The letter of engagement shall address the following matters:
(1) explanation of the scope of the legal services to be provided;
(2) explanation of attorney's fees to be charged, expenses and billing
practices; and
(3) where applicable, shall provide that the client may have a right
to arbitrate fee disputes under Part 137 of this Title.
(c) Instead of providing the client with a written letter of
engagement, an attorney may comply with the provisions of subdivision
(a) of this section by entering into a signed written retainer
agreement with the client, before or within a reasonable time after
commencing the representation, provided that the agreement addresses
the matters set forth in subdivision (b) of this section.
Exceptions are allowed if the fee is expected to be less than $3,000
or the attorney's services are of the same general kind as previously
rendered to and paid for by the client. NYCRR § 1215.2. The exceptions
for NYCRR § 1215.2 (current through May 31, 2002) are as follows:
This section shall not apply to:
(a) representation of a client where the fee to be charged is expected
to be less than $3,000;
(b) representation where the attorney's services are of the same
general kind as previously rendered to and paid for by the client;
(c) representation in domestic relations matters subject to Part 1400
of this Title; or
(d) representation where the attorney is admitted to practice in
another jurisdiction and maintains no office in the State of New York,
or where no material portion of the services are to be rendered in New
York.
Sample forms of retainer letters are set forth in the American College
of Trust and Estate Counsel publication "Engagement Letters: A Guide
for Practitioners."
§ 18:8. --CONTRACT RULES APPLY WHEN CLIENT IS LEGATEE
Where a retainer agreement provides for compensation from a legatee,
not from the estate, it is a contract that can be enforced according
to its terms. Matter of Mazzola, NYLJ 9/27/90, 31:1 (Sur. Ct.
Westchester County); see also Greenberg v. Jerome H. Remick & Co., 230
N.Y. 70, 129 N.E. 211 (1920); Proceedings of NYS Bar Association
Trusts and Estates Law Section Meeting April 23-24, 1987, Attorneys'
Compensation.
§ 18:9. --ROLE OF LOCAL RULES
The rules of the particular court in which a matter is or will be
pending should always be checked to see whether there are any rules
regarding retainer agreements -- or fee applications -- that must be
met. For example, Suffolk County Surrogate's Court requires execution
of a written retainer agreement covering the terms of employment of
the fiduciary's attorney. Order dated Feb. 9, 1990; see Advance Sheet
551 NYS2d 220 (No. 3, April 4, 1990), pp. 34-35. (A copy of the rule
may also be obtained from the court.)
However, there are some limits on the Surrogate's rulemaking. In one
case the Appellate Division held that the fact that an attorney did
not enter into a retainer agreement, without more, could not be the
basis for denying letters. Matter of Smolley, 144 A.D.2d 366, 533
N.Y.S.2d 925 (2d Dep't 1988), related reference, 188 A.D.2d 535, 591
N.Y.S.2d 441 (2d Dep't 1992).
§ 18:10. ESTATE TAX CONCERNS
Legal fees are properly deductible on estate or income tax returns. In
recent years, the Internal Revenue Service has taken an aggressive
role in reviewing claims for deductions for fees in estate tax
proceedings.
§ 18:11. --DEDUCTIBILITY OF ATTORNEYS' FEES
Attorneys' fees paid or expected to be paid in connection with the
administration of an estate are deductible in determining the taxable
estate if reasonable and allowable under local law. IRC § 2053; Treas
Reg § 20.2053-3(c).
In general, see BNA Tax Management Portfolio 234-2d, Estate Tax
Deductions-Sections 2053, 2054 and 2057.
§ 18:12. ----FIDUCIARY'S OPTION TO CLAIM DEDUCTION
The fiduciary may elect to claim such fees as income tax deductions on
fiduciary income tax return. IRC § 642(g).
§ 18:13. ----NEW YORK LAW PATTERNED ON INTERNAL REVENUE CODE
Treatment of deductions in New York under the Tax Law is identical to
that under the Internal Revenue Code. Tax Law §§ 955, 956.
References in the Tax Law to the Code are deemed to be references both
to the Code and to its amendments as of November 5, 1990. See Chapter
16, New York State Estate Taxation, §§ 16:26, 16:38. See also Matter
of Lagergren, NYLJ 8/24/95, 28:4 (Sur. Ct.. Nassau County),
distinguishing Federal "needs" test from New York Tax Law, which has
no "needs" test but supports deductibility of legal fees on basis of
"advantage" or "benefit" to estate.
§ 18:14. FIDUCIARY'S OPTION TO SELECT ATTORNEY
As a matter of custom, a corporate fiduciary usually retains as its
attorney for the administration and settlement of an estate the
attorney/drafter who prepared the will. Because the selection of the
attorney is the fiduciary's prerogative, however, he/she is not
obligated to select the drafter.
A direction in a will to the fiduciary to use a particular attorney is
not binding. In re Caldwell, 188 N.Y. 115, 80 N.E. 663 (1907).
§ 18:15. --ATTORNEY AS FIDUCIARY OR COFIDUCIARY
The propriety of whether an attorney/drafter can be appointed as a
fiduciary or as cofiduciary, particularly with a professional
corporate fiduciary, is undergoing serious judicial scrutiny.
Practice Tip: The courts seem to be heading towards imposing on
nondrafter/attorney fiduciaries the burden of questioning the
propriety of the attorney's appointment, including any sign of
overreaching, before qualification. In one instructive decision, a
bank and the drafting attorney were limited to a single executor's
commission in the final accounting. Although the Surrogate was
reversed on the facts of the case, it still stands as a cautionary
tale. Matter of Corya, 148 Misc 2d 753, 563 NYS2d 581 (Sur. Ct.
Suffolk County 1990), revd on other grounds, 175 AD2d 162, 572 NYS2d
51 (2d Dept 1991); see also, Groppe, The "New" Putnam Rule: Problems
Facing the Attorney/Legatee/Fiduciary, NYS Bar Journal, January 1989.
See §§ 18:16 et seq.
§ 18:16. EXERCISE OF INDEPENDENT PROFESSIONAL JUDGMENT IS KEY
The Code of Professional Responsibility provides: "A Lawyer should
exercise independent professional judgment on behalf of a client."
Canon 5.
The difficulties begin at the point where the lawyer's personal
interest enters the picture, as this can cloud the attorney's
professional judgment on behalf of the client.
By accepting a gift or other benefit, such as nomination as executor
of a substantial estate, a lawyer is peculiarly susceptible to the
charge that he/she unduly influenced or overreached the client in the
service of the lawyer's own interests.
§ 18:17. PUTNAM: LAWYER SHOULD NOT DRAFT OWN LEGACY
The number of cases in which lawyers and others in positions of trust
and confidence receive legacies from clients may fairly be described
as astounding.
The insensitivity that drafters display both to the appearance of such
legacies and to the delays that will result in administering the
estate of a decedent who makes such a disposition is also astounding.
An attorney who drafts a will containing a bequest to his spouse must
be cognizant that such a will is suspicious. Matter of Iversen, NYLJ
8/5/96, 34:12 (Sur. Ct.. Westchester County); see also § 1:80.
As was stated years ago in the seminal case in this area: "Attorneys
for clients who intend to leave them or their families a bequest would
do well to have the will drawn by some other lawyer. . . . In the
absence of any explanation, of the circumstances of the bequest, a
jury may be justified in drawing the inference of undue influence,
although the burden of proving it never shifts from the contestant."
In re Putnam's Will, 257 N.Y. 140, 177 N.E. 399, 79 A.L.R. 1423
(1931).
The Putnam rule against encouraging or accepting a legacy from one
whose interests the attorney has been engaged to protect should be
part of every lawyer's training; indeed, it should be instinctive.
Moreover, these types of cases have spawned a great deal of
litigation, and the rule has been expanded to situations involving
nomination of attorney/drafters as fiduciaries.
Example: The attorney/drafter/proponent of a will failed to reveal
that the legatee under a codicil she had prepared for the decedent was
the proponent's own granddaughter. The surrogate's decision to set
aside a probate settlement and impose sanctions and costs was
affirmed. Matter of Yter, 225 A.D.2d 702, 639 N.Y.S.2d 838 (2d Dep't
1996), leave to appeal dismissed in part, denied in part, 88 N.Y.2d
961, 647 N.Y.S.2d 712, 670 N.E.2d 1344 (1996). The attorney/drafter/
proponent had prepared a will for his stepmother under which a power
of appointment had not been exercised, resulting in the unappointed
property passing to the attorney/drafter and his siblings. The
surrogate denied probate and was reversed. The appellate court
determined that there was no clear and convincing evidence of fraud
and that, moreover, the evidence demonstrated that the decedent had
rejected the attorney/drafter's advice to have her will drafted by a
non-interested attorney. Mere evidence of opportunity and motive is
insufficient to support a finding of fraud. Matter of Gross, 242 A.D.
2d 333, 662 N.Y.S.2d 62 (2d Dep't 1997), leave to appeal denied, 90
N.Y.2d 812, 666 N.Y.S.2d 101, 688 N.E.2d 1383 (1997).
Material issues of fact such as whether the attorney/draftsman can
explain a bequest to himself and thus rebut the presumption of undue
influence that attaches in these circumstances are likely to preclude
a summary disposition on whether such a will should be admitted to
probate. Matter of McKean, NYLJ 12/3/98, 30:4 (Sur. Ct. N.Y. County).
§ 18:18. --HEARING MAY RESULT EVEN WHEN ATTORNEY DID NOT DRAFT
Even when the attorney/legatee did not draft the will, the facts and
circumstances of a particular case may justify the Surrogate's
decision to grant a hearing on Putnam issues. Matter of Henderson, 80
N.Y.2d 388, 590 N.Y.S.2d 836, 605 N.E.2d 323 (1992).
§ 18:19. --ABA MODEL RULES BANS ALL SUBSTANTIAL CLIENT GIFTS
Because of the potential for abuse, the American Bar Association has
indicated that a flat ban on gifts to drafting attorneys who are not
relatives would be appropriate. Proposed ABA Model Rules of
Professional Conduct, Rule 1.8 bars a lawyer from preparing an
instrument giving the lawyer or relative of the lawyer "any
substantial gift . . . including a testamentary gift, except where the
client is related to that donee."
§ 18:20. ----NEW YORK HAS NOT ADOPTED FLAT BAN
Unlike other states, New York has not invalidated such gifts ipso
facto by statute. For example, California Probate Code § 21350
disqualifies attorneys from receiving donative transfers under
instruments they drafted. The ban also covers relatives, cohabitants
and certain employees of the attorney.
There is, however, a good deal of New York case law on the subject.
§ 18:21. WEINSTOCK: INDUCED NOMINATION FORBIDDEN
The Weinstock decision is the leading case for the proposition that
overreaching by an attorney/fiduciary to induce nomination by the
testator can result in denial of letters by the Surrogate at the
probate stage. Matter of Weinstock's Estate, 40 N.Y.2d 1, 386 N.Y.S.2d
1, 351 N.E.2d 647 (1976); see also Matter of Estate of Stalbe, 130
Misc. 2d 725, 497 N.Y.S.2d 237 (Sur. Ct. 1985).
This is an extension of the Putnam rule.
Only in limited circumstances may an attorney/drafter prepare a will
in which he/she is named both as executor and as a beneficiary. NYS
Bar Association Committee on Professional Ethics Opinion 610, June 20,
1990.
Weinstock-type cases resulted in the enactment of legislation
establishing disclosure rules that attorney/fiduciaries must meet,
with harsh consequences for violators. They became effective August 2,
1995. SCPA 2307-a; see Groppe, The "New" Putnam Rule: Problems Facing
the Attorney/Legatee/Fiduciary, NYS Bar Journal, January 1989. See
also §§ 1:81, 18:140 and 18:207.5.
§ 18:22. --PARAMETERS FOR SELECTION OF PERSONAL REPRESENTATIVE
Selection of a personal representative -- be it trustee, executor or
lawyer -- is a sensitive matter. Because attorneys have specialized
knowledge and enjoy confidential relationships with clients, the
opportunity is present and they are often asked to serve.
Nevertheless, a question that often must be faced is whether the
nomination of the attorney was freely made.
This is not a localized phenomenon. See, e.g., Heckscher, The Special
Problems Which Arise When an Attorney Serves As Fiduciary, 17 ACTEC
Notes, Fall 1991, NO 2, P 137; Link, Developments Regarding The
Professional Responsibility Of The Estate Administration Lawyer: The
Effect Of The Model Rules Of Professional Conduct, Real Property,
Probate And Trust Journal, Spring 1991, Vol 26, NO 1, PP 1-131;
Johnson And Maracini, Serving In Dual Capacities As Fiduciary/
Attorney, Probate & Property, January/February 1992, Vol 6, NO 1, P
54.
§ 18:23. ----CODE OF PROFESSIONAL RESPONSIBILITY
A lawyer should not consciously influence a client to name him as
executor, trustee, or lawyer in an instrument. In those cases where a
client wishes to name his lawyer to such a position, care should be
taken by the lawyer to avoid even the appearance of impropriety. EC
5-6.
There is no similar provision in the proposed ABA Model Rules of
Professional Conduct.
§ 18:24. ----NYS BAR ASSOCIATION COMMITTEE ON PROFESSIONAL ETHICS
Opinion 481, March 28, 1978, asks: "May a Lawyer in the course of
drafting his client's will, offer to serve as executor?" The
qualifications and conditions under which such an offer may be made
emphasize the attorney's burden of avoiding overreaching.
§ 18:25. --ISSUE MAY BE RAISED AS LATE AS THE ACCOUNTING STAGE
Objections to a nomination of an attorney/fiduciary do not have to be
made at the probate stage; at that point beneficiaries who eventually
receive the estate are often not even parties. (See Chapter 2,
Jurisdiction, Venue and Parties, §§ 2:81 et seq.)
Objections by beneficiaries can be reviewed by the Surrogate as late
as the final accounting stage of an estate. Matter of Estate of
Harris, 123 Misc. 2d 247, 473 N.Y.S.2d 125 (Sur. Ct. 1984); Matter of
Laflin, 111 A.D.2d 924, 491 N.Y.S.2d 35 (2d Dep't 1985); Matter of
Estate of Thron, 139 Misc. 2d 1045, 530 N.Y.S.2d 951 (Sur. Ct. 1988);
Matter of Liberman, NYLJ 4/10/91, 26:6 (Sur. Ct. Westchester County);
Matter of Will of Klenk, 151 Misc. 2d 863, 574 N.Y.S.2d 438 (Sur. Ct.
1991), order aff'd in part, 204 A.D.2d 640, 612 N.Y.S.2d 220 (2d Dep't
1994) ; Matter of Iversen, NYLJ 8/5/96 at 34, col. 12 (Sur. Ct.
Westchester County); see also § 1:80.
Example: In a proceeding to remove of two [of five] nominated
executors for alleged overreaching and abuse of fiduciary relationship
in being appointed executor, Surrogate Preminger determined that
petitioners' claims amounted to only unsupported allegations and did
not support a claim under Matter of Weinstock's Estate, 40 N.Y.2d 1,
386 N.Y.S.2d 1, 351 N.E.2d 647 (1976). Citing Laflin, Harris, Lken and
Thron, she held that "in the context of attorney-draftpersons
nominated as executors, courts are reluctant to apply Judicial
estoppel unless a party was represented by separate counsel, actively
investigated the nomination, . . . and then concluded that no
objection should be filed." Nevertheless, the decision notes that SCPA
719 and "the cases support the proposition that inquiry into a
person's overreaching in being named executor can occur at any time,
even during the executor's account." Matter of Berkman, NYLJ
1/24/2003, 19:3 (Sur. Ct. NY County).
§ 18:26. ----SANCTIONS
Sanctions can be imposed against the attorney/fiduciary under
Weinstock principles and can include loss of commissions. Matter of
Estate of Thron, 139 Misc. 2d 1045, 530 N.Y.S.2d 951 (Sur. Ct. 1988);
Matter of Corya, 148 Misc 2d 753, 563 NYS2d 581 (Sur. Ct. Suffolk
County 1990), revd on other grounds, 175 AD2d 162, 572 NYS2d 51 (2d
Dept 1991).
Disciplinary action may also be taken. Matter of Klenk, 204 A.D.2d
640, 612 N.Y.S.2d 220 (2d Dep't 1994); Matter of Reilly, 210 A.D.2d
696, 620 N.Y.S.2d 516 (3d Dep't 1994), related reference, 221 A.D.2d
716, 633 N.Y.S.2d 622 (3d Dep't 1995).
In egregious cases, the courts have characterized the attorney/
nominee's conduct as constructive fraud. Matter of Thron, supra.
§ 18:27. ----MULTIPLE FIDUCIARY CASES
Another area of increasing concern to the courts is the number of
wills that appoint multiple fiduciaries. Although the practice is
permitted by statute, see SCPA 2307(5), there are circumstances under
which the Surrogate may limit the executors to a single commission.
Example: The Surrogate "deplored" the lack of independent evidence of
a decedent's desire for multiple appointments, and permitted only a
single commission to be shared among three fiduciaries. The Appellate
Division reversed on the facts of the case, but did observe that the
better practice would have been for the testator to document why the
multiple appointments were being made, and her awareness of the
consequences of such nomination. Matter of Atterbury, 173 A.D.2d 817,
571 N.Y.S.2d 46 (2d Dep't 1991).
§ 18:28. ----STATEMENT REQUIRED OF ATTORNEY/FIDUCIARY
If the person requesting letters to administer an estate as sole
executor or administrator is a New York attorney, he/she must file
with the petition a statement disclosing (1) that the fiduciary is an
attorney; (2) whether the petitioner or affiliated law firm will act
as counsel; and (3) whether, if applicable, the petitioner was the
drafter of the will offered for probate. 22 NYCRR § 207.19(g).
Practice Tip: By its terms, Uniform Rule 207.19(g) applies only when
the petitioner is to act as sole fiduciary, but in practice the courts
require that the statement be filed in any case in which a lawyer/
fiduciary will act. The official form prescribed by the Chief
Administrative Judge for probate proceedings (Form P-1, April 1995)
specifically addresses this issue. It requires the petitioner to state
whether the proposed executor or administrator c.t.a. is or is not an
attorney. If he/she is an attorney, the statement required by Uniform
Rule 207.19(g) must be filed.
§ 18:29. ------ADDITIONAL AFFIDAVIT REQUIRED OF ATTORNEY/FIDUCIARY
In addition to the affidavit required by Uniform Rule 207.19(g), the
rules require that within 12 months after letters are issued (24 if
the estate must file a federal tax return), the attorney/fiduciary
must file another affidavit stating the commissions and legal fees
paid or to be paid in the matter. 22 NYCRR § 207.45.
The rules also allow the court to ask for as much additional
information as it deems necessary. This could include a cash flow
statement and a full accounting. Failure to file the affidavit may
result in disallowance of commissions or legal fees.
In addition to the affidavit required by Uniform Rule 207.19(g) at the
time of requesting letters, Uniform Rule 207.45 requires that an
attorney file an affidavit of services in any proceeding, see SCPA
2110, 2111, for determination of attorney compensation or for an
allowance for expenses of counsel. The affidavit must state when and
by whom the attorney was retained; terms of the retainer; the amount
of compensation requested; whether the client has been consulted as to
the fee requested and whether the client has consented to the fee, or,
if not, the extent of any disagreement or controversy; the period
during which the services were rendered; the details of the services
rendered; the time spent the method or basis by which the requested
compensation was determined. The affidavit must state whether the
requested fee includes all services rendered and to be rendered up to
and including settlement of the decree and distribution and whether
the attorney waives a formal hearing as to compensation.
§ 18:30. ------RULE IN SUFFOLK COUNTY
In Suffolk County, rules that were dated April 30, 1991, and
superseded all prior rules, require affidavits of either the attorney
or testator as to legal fees and commissions. With respect to wills
dated on or after February 1, 1991, the affidavit must disclose
estimated dollar amounts of compensation and state reason for the
attorney/fiduciary's nomination.
Practice Tip: Ironically, the modern trend nationwide is to encourage
nomination of attorneys as fiduciary. See, Role of the Probate Lawyer
in a Changing Environment, 22 Real Property Probate And Trust Journal,
Winter 1987, P 753; Brosterhous, Draft Statement Of Principles Comes
Not A Moment Too Soon, 127 Trusts & Estates, December 1988, P 12.
§ 18:31. STATUTES GOVERN FEES, BUT NO SCHEDULE EXISTS
Unlike the situation in other large states such as California and
Florida, there is no statutory legal fee schedule in New York.
Numerous New York statutes provide mechanisms for collecting or fixing
fees, but they do not set percentage or dollar amounts.
This is in contrast to statutes that fix commissions for fiduciaries,
which apply percentages based on asset values. (See § 18:115)
§ 18:32. FEES ARE PRIORITY CLAIMS AS ADMINISTRATION EXPENSE
Administration expenses, including legal fees, are priority claims
against an estate, even ahead of funeral expenses. SCPA 1811; Matter
of Evans, NYLJ 10/26/88, 21:4 (Sur. Ct. Westchester County).
Practice Tip: Often other "nonfiduciaries" -- e.g., "trust protector,"
"tie breakers," and other experts -- are named to perform specific
functions. Whether and to what extent such advisors are entitled to
compensation, including whether payment should be at a fiduciary's
rate or based on quantum meruit, remains unsettled. Therefore, this
should be anticipated in the will and specific compensation
established. See Valente and Palumbo, Advisors to Fiduciaries, NYLJ
7/30/92, 3:1.
Example: In a proceeding to settle the executor's account, the
petitioner, as executor of the will, was not obligated to apply the
balance of funds remaining in the estate toward payment of estate
taxes because the payment of reasonable fees for the executor and
attorney in an estate are matters entitled to higher priority as
administration expenses. In re Karl, 266 A.D.2d 392, 701 N.Y.S.2d 66
(2d Dep't 1999).
§ 18:33. ISSUES ADDRESSED IN ESTATES, POWERS AND TRUSTS LAW
The EPTL contains a number of statutes that are relevant to fixing
legal fees.
§ 18:34. --ESTATE PRINCIPAL IS USUAL SOURCE OF FEES
EPTL 11-2.1(1)(2) and (4) relate to charging legal fees against income
or principal. Normally, legal fees are charged to the principal of the
estate, not against income.
Practice Tip: The fact that any income tax deduction allowed for the
charge may inure to the benefit of an income (and not a principal)
beneficiary does not necessarily require an equitable adjustment. See
Matter of Ziegler, NYLJ 8/2/95, 22:3 (Sur. Ct. N.Y. County) affd sub
nom, Application of Ziegler, 184 A.D.2d 201, 584 N.Y.S.2d 302 (1st
Dep't 1992); Newman and Kalter, Principal-Income Adjustments, NYLJ
12/18/78, 1:1; Dobris, Equitable Adjustments in Postmortem Income Tax
Planning: An Unrelenting Diet of Warms, 65 Iowa L Rev 103 (1979).
Further, not every incongruity in the way expenses are treated for tax
and fiduciary accounting purposes is cured by an equitable adjustment.
See Carrico and Bondurant, Equitable Adjustments: A Survey and
Analysis of Precedents and Practice, 36 Tax Lawyer 545; CF., Will of
Pross, 90 Misc. 2d 895, 396 N.Y.S.2d 309 (Sur. Ct. 1977): In re Dick's
Estate, 29 Misc. 2d 648, 218 N.Y.S.2d 182 (Sur. Ct. 1961).
§ 18:35. ----RULE ON EXPENSES PAID FROM PRINCIPAL
If expenses paid from principal (including legal fees and commissions)
are claimed as income tax deductions rather than estate tax
deductions, so that income taxes are decreased and estate taxes are
increased, the statute requires that income must reimburse principal
for the increased tax. The statute sets forth the formula to be used.
EPTL 11-1.2(a); see also Gibbs and Ordover, Principal and Income
Adjustments, NYLJ 10/19/88, 3:1.
§ 18:36. ----FEE MAY BE OUT OF INCOME DEPENDING ON WHO BENEFITS
In certain cases it is necessary to consider who benefitted from the
services rendered. For example, the court may direct payment of
expenses (including legal fees) from income if a judicial proceeding
"primarily concerns income." EPTL 11-2.1. See, e.g., Matter of
Openhym, NYLJ 9/24/96, 27:4 (Sur. Ct.. Westchester County), in which
60% of the fees were charged to the income account since ". . . the
primaryfocus of the construction proceeding was the trustees'
responsibilityfor the disposition of income.")
The court may also charge all or part of fees directly to a party
whose behavior caused the need for the charge. See §§ 18:100 et seq.
§ 18:37. --FEES OUT OF APPORTIONED NONTESTAMENTARY ASSETS
The Surrogate may assess against nontestamentary assets "an equitable
share of the expenses" of a tax apportionment proceeding.
If an attorney renders services that result in excluding a
nontestamentary asset from the gross taxable estate, the attorney may
be compensated from that property for such services. EPTL 2-1.8(h).
§ 18:38. ----TAX RETURN PREPARATION
Tax return preparation services may be compensable from such assets
even if no tax was due but a return had to be prepared and filed due
to the size of gross estate. IRC § 6018; see Matter of Estate of
Warmsley, 144 Misc. 2d 809, 545 N.Y.S.2d 535 (Sur. Ct. 1989).
§ 18:39. ----OTHER APPORTIONMENT SITUATIONS
EPTL 2-1.8(h) may also apply to proceedings brought to compel
contribution toward payment of federal and state estate taxes
collectible from beneficiaries of other nontestamentary assets. See,
e.g., EPTL 2-1.12; IRC § 2207A (recipients of certain marital
deduction, QTIP, property); EPTL 2-1.13, IRC § 2207B ("retained
interests"); IRC §§ 2206 (life insurance) and 2207 (power of
appointment property). See Chapter 16 New York State Estate Taxation,
§ 16:49.
§ 18:40. SURROGATE'S COURT PROCEDURE ACT
Other statutes relating to legal fees are contained in the Surrogate's
Court Procedure Act.
§ 18:41. --ATTORNEYS-IN-FACT
The court may inquire into, determine the validity and reasonableness
of and fix the compensation and expenses payable to an attorney-in-
fact under a power of attorney relating to a decedent's estate. SCPA
2112.
The effect of the statutes is to apply the same standards, remedies
and procedures applicable to attorneys. In re Di Filippo's Estate, 162
Misc. 423, 294 N.Y.S. 802 (Sur. Ct. 1937); In re Stemmler's Estate,
171 Misc. 318, 12 N.Y.S.2d 478 (Sur. Ct. 1939).
Practice Tip: Reference should be made to EPTL 13-2.3 and to Uniform
Surrogate's Court Rule § 207.48 regarding use of powers of attorney in
Surrogate's Court.
§ 18:42. ----ACCOUNTABILITY
The Surrogate has the jurisdiction to order and settle the account of
an attorney-in-fact for actions up to the decedent's death. Matter of
Estate of Cohen, 139 Misc. 2d 1082, 529 N.Y.S.2d 958 (Sur. Ct. 1988).
§ 18:43. --GUARDIANS AD LITEM
When a guardian ad litem is necessary, see Chapter 2, Jurisdiction,
Venue and Parties, §§ 2:92 et seq., compensation to the guardian is
fixed by the court. SCPA 405.
§ 18:44. ----STANDARDS FOR GUARDIAN'S FEE
A guardian ad litem is entitled to fair and reasonable compensation
for services rendered. Will of Ault, 164 Misc. 2d 272, 624 N.Y.S.2d
351 (Sur. Ct. 1995).
The amount of compensation is to be determined by the same standards
applicable to attorneys generally in estate matters. In re Burk's
Will, 6 A.D.2d 429, 179 N.Y.S.2d 25 (1st Dep't 1958); Matter of
LaSala, NYLJ 2/7/91, 30:5 (Sur. Ct. Nassau County).
Freeman/Potts factors are applicable in fixing fee of guardian ad
litem. Matter of Simpson, N.Y.L.J. 11/3/99, 36:3 (Sur. Ct..
Westchester County), citing Matter of Berkman, 93 Misc. 2d 423, 402
N.Y.S.2d 776 (Sur. Ct. 1978), and Matter of Ault, supra; see also
Matter of Schoen-Teitell, N.Y.L.J. 2/8/00, 31:3 (Sur. Ct. Nassau
County).
Example: The guardian ad litem for the beneficiary of one of three
testamentary trusts provided "yeoman efforts" without which the
matter, "with its pervasive family animosity and suspicion, would not
have been resolved." Compensation was granted in the amount requested,
to be paid from the trusts on a pro rata basis because his services
benefited all interested parties. Matter of Druckman, N.Y.L.J.
2/28/00, 28:6 (Sur. Ct. N.Y. County). Court applied Freeman/Potts
factors. Guardian ad litem had requested an interim allowance of
$61,482.75. Although the guardian had been appointed nine years ago
and matter was not yet resolved, the court nevertheless allowed an
interim allowance of $26,000. Matter of Goldenstein, NYLJ 12/5/00,
31:1 (Sur. Ct. Westchester County). Court appointed guardian ad litem
in New York in order for surviving spouse's notice of election to be
filed with the Surrogate. As a result of settlement, surviving spouse
received approximately one- third of estate. Spouse sought to have
guardian's fee charged entirely to the estate; estate beneficiaries
sought to charge it to widow's one-third share. The Surrogate
concluded that the "statutory services" rendered by the guardian had
benefitted the executors and the beneficiaries in New York as well as
the widow and apportioned the fees 2/3 from estate assets and 1/3 from
the surviving spouse's funds. Matter of Stanton, NYLJ 4/9/01, 35:6
(Sur. Ct. Sullivan County).
§ 18:45. ------FEE LIMITED BY AMOUNT OF WARD'S INTEREST
The fee is limited by the amount of the ward's interest. Matter of
MacKay, NYLJ 2/24/93, 23:2 (Sur. Ct. N.Y. County); Matter of Logallo,
NYLJ 5/12/93, 31:6 (Sur. Ct. Suffolk County).
§ 18:45.1. ----STANDARDS FOR REFEREE'S FEE
A rate for the fee of a special referee is set forth in CPLR 8003[a],
but case law provides that the fee is subject to the statutory figure
only if the court does not fix, or the parties do not agree to, other
compensation. Garay v. Soling, 169 A.D.2d 616, 564 N.Y.S.2d 755 (1st
Dep't 1991), decision clarified, 172 A.D.2d 342, 568 N.Y.S.2d 873 (1st
Dep't 1991). In Garay, the court described the fee as "absurdly low"
and fixed a fee after the parties sought to limit the amount to the
statutory rate.
Without referring to the Potts and Freeman standards (see § 18:80),
Surrogate Roth set compensation that "reflects the Referee's
qualifications and professional standing, the complexity of the
proceeding in which he has served, and the extent and value of his
services." Matter of Grossman, NYLJ 6-27-01, 18:5 (Sur. Ct. N.Y.
County).
§ 18:45.5. ----STANDARD FOR REFEREE'S FEE
The fee to a referee reflects time spent, but may be reduced if an
"unduly excessive amount of time" was involved. A bill for $111,000 by
a referee who reported 318.75 hours over three years and also sought
$45,000 for time spent by an associate was reduced to $60,000 by the
Appellate Division. It found "no justification for the expenditure of
so much time" and found that the fee was properly directed to be paid
by the objectant personally (SCPA 2301). In re Sall, 292 A.D.2d 195,
739 N.Y.S.2d 363 (1st Dep't 2002), leave to appeal denied, 98 N.Y.2d
606, 746 N.Y.S.2d 456, 774 N.E.2d 221 (2002).
See also § 18:100.
§ 18:46. ----SOURCE OF PAYMENT
Compensation of a guardian ad litem may be payable from any or all of
the following in such proportion as the court shall direct:
• the general estate assets
• the interest of the person under disability
• for good cause shown, from any other party
SCPA 405.
In determining whether all or any part of the compensation should be
paid from estate assets, an important factor is whether the guardian's
services benefitted or were of value to the estate, in addition to the
person under disability. In re Thaw, 182 A.D. 368, 169 N.Y.S. 430 (1st
Dep't 1918); Matter of Kimmelman, NYLJ 2/3/88, 12:1 (Sur. Ct. N.Y.
County).
§ 18:47. ------ESTATE IS USUALLY THE PAYOR
As a general rule, the compensation is payable from the estate rather
than from the ward's interest, because the guardian's presence is
jurisdictional and the finality of the decree benefits all the
litigants. Livingston v. Ward, 248 N.Y. 193, 161 N.E. 468 (1928); In
re Burk's Will, 6 A.D.2d 429, 179 N.Y.S.2d 25 (1st Dep't 1958);
Application of Ziegler, 184 A.D.2d 201, 584 N.Y.S.2d 302 (1st Dep't
1992).
A party may be charged with the payment of the compensation of the
guardian only where the actions of such person generated unnecessary
unfounded or purely self-serving litigation that resulted in the
appointment of the guardian. Matter of Bobst, NYLJ 5/1/96, 31:1 (Sur.
Ct. N.Y. County).
These principles may be adapted to fit special circumstances affecting
the need for a guardian.
Example: A guardian's compensation was charged against the general
assets of the estate, but the Surrogate authorized the administrator
to seek to recover half of it from the unsuccessful claimant whose
claims had given rise to the litigation, without which the guardian's
appointment would not have been necessary. Matter of Allen, NYLJ
10/10/95, 27:4 (Sur. Ct. N.Y. County). While recognizing that the
Court had authority and grounds to assess the guardian ad litem's fee
against the attorneys personally, Will of Ault, 164 Misc. 2d 272, 624
N.Y.S.2d 351 (Sur. Ct. 1995), one Court declined to exercise its
discretion to do so because of the need to stem the costs of the
litigation and to preserve trust assets. Matter of Stern, NYLJ
2/18/97, 32:4 (Sur. Ct. Nassau County). The petitioner instituted an
administration proceeding in the estate of an alleged decedent. The
guardian ad litem located the absentee--very much alive. The Court
charged the guardian ad litem's fee to the petitioner personally since
the petitioner took the risk of initiating what the Court called a
"self-serving" proceeding. Matter of Lewis, NYLJ 1/12/98, 29:1 (Sur.
Ct. N.Y. County). A turnover proceeding was instituted against an
executor by her sister in a dispute over tangibles bequeathed in equal
shares to them. The sister argued that the share of legal fees
relating to determining the executor's share of tangibles should be
charged to the executor personally because those fees did not benefit
the estate, but were for her personal benefit. The court disagreed,
ruling that defense of the turnover proceeding was necessary for the
executor, to fulfill her obligations in properly carrying out the
terms of the will. Matter of Ackerman, NYLJ 5-20-02, 22:1 (Sur. Ct.
N.Y. County) See also § 18:90.
§ 18:48. --WILL CONSTRUCTION PROCEEDING
Although theoretically there are no "winners" or "losers" in a will
construction proceeding held to ascertain the decedent's intention,
the court is empowered to pay fees to an attorney who provides
services to aid the court in making that determination. The court may
award compensation to counsel for a party who did not benefit from the
construction. SCPA 1420; SCPA 2302(6).
The factors to be considered in awarding legal fees for a construction
proceeding are primarily the amount involved and the results obtained.
In re Cairo's Estate, 68 Misc. 2d 823, 328 N.Y.S.2d 208 (Sur. Ct.
1972). Other factors include whether there was a justifiable doubt
requiring construction, who instituted the proceeding, whether the
petitioner acted solely in his own interest or in the common interest
of himself and the estate, whether the entire estate or only the
petitioner benefitted from the attorney's services, and the effect
that the payment of any award has on the estate share of the
successful party. Matter of Estate of Greatsinger, 67 N.Y.2d 177, 501
N.Y.S.2d 623, 492 N.E.2d 751 (1986). In a case that benefitted all
parties by providing certainty with respect to the administration of
trusts, a $30,000 attorney fee was approved, with payment to be made
all of the beneficiaries in proportions equivalent to the ratio of
their assets to the total trust estate. Matter of Welsh, NYLJ 9/22/98,
21:3 (Sur. Ct. Westchester County). See also § 19:258.
Example: An individual co-executor, one of three co-executors of the
estate, retained separate counsel to represent him in a construction
proceeding instituted by another co-executor to construe decedent's
Will to determine entitlement to a bequest of certain artwork that the
individual co-executor claimed against the claim of a museum and
foundation. Individual co-executor sought payment from the estate of
his counsel's fees. The court held the need for will construction in
this case was dubious, and that, although petitioner was a co-
executor, it was clear that attorneys represented the petitioner in
his individual capacity and not as fiduciary. Petitioner was not
entitled to have his attorneys' fees charged to the estate. Matter of
Tully, NYLJ 6/5/00, 23:4 (Sur. Ct. N.Y. County). There was no
"justifiable doubt" regarding the decedent's intention, warranting a
construction proceeding. The proceeding that objectant commenced was
clearly to advance its own interests to the corresponding detriment of
the income beneficiaries. Such circumstances do not support award of
fees to counsel for objectant (Matter of Greatsinger, supra).
Consideration of these same factors, however, did permit the court to
award attorneys' fees to the income beneficiaries who defended the
construction proceeding because that representation benefited all the
income beneficiaries by preserving their interests and aided the court
in effectuating decedent's intent. Matter of Hughes, NYLJ 11/27/00,
28:4 (Sur. Ct. N.Y. County).
Example: Out of requested fee of $39,438.67, the court allowed only
$18,000 as the portion of the fee associated with the construction
proceeding only. The balance of the fee request related to other
issues. All disbursements except for client's filing fee were
disallowed. Matter of Schepps, NYLJ 7-25-01, 25:1 (Sur. Ct.
Westchester County).
§ 18:49. ----PAYMENT USUALLY FROM GENERAL ASSETS OF ESTATE
Generally, fees are payable "off the top" on the theory that the
briefs are of benefit to the court and the construction generally
benefits the estate. In re Ablett's Will, 3 N.Y.2d 261, 165 N.Y.S.2d
63, 144 N.E.2d 46 (1957); cf. Matter of Estate of Greatsinger, 67 N.Y.
2d 177, 501 N.Y.S.2d 623, 492 N.E.2d 751 (1986); Matter of Axe, NYLJ
6/10/94, 36:6 (Sur. Ct. Westchester County).
There are exceptions, however, as indicated below.
§ 18:50. ------DECISION IS ULTIMATELY COURT'S
In awarding compensation for legal services pertaining to construction
of a will, the court may direct payment out of assets of the estate or
out of the share or interest of any person, or both.
The court considers whether there was a justifiable doubt that
necessitated construction; who instituted the proceeding; whether the
party seeking the fee award acted solely out of self-interest or in
the common interest of the beneficiaries and the estate; whether he/
she was successful; whether there was benefit only to the share of the
party seeking the award; and what the effect of the payment will be on
the estate share of the successful party. Matter of Estate of
Greatsinger, 67 N.Y.2d 177, 501 N.Y.S.2d 623, 492 N.E.2d 751 (1986);
Matter of Axe, NYLJ 6/10/94, 36:6 (Sur. Ct. Westchester County).
Example: Three law firms that represented three of the charitable
residuary legatees asked the court to fix fees that could be collected
from the estate in a construction proceeding brought by the co-
executor. Citing precedents that authorize any party who assists the
court in reaching the proper construction of a decedent's to be
compensated from the general estate on the theory that the proceeding
benefits the entire estate, the court found that the petitioners could
not be found to have provided no assistance "simply because their
arguments were made orally which made it possible to settle the matter
before briefs were filed and additional time was expended by all of
the attorneys involved." The court allowed a total of $18,000,
slightly more than one-sixth of the requested amount, to be paid from
estate assets "without prejudice to the right of counsel to seek from
their respective clients such additional compensation as may be just
and proper." Matter of Stern, NYLJ 3/16/99, 28:4 (Sur. Ct. Bronx
County).
§ 18:51. ------CHARITY'S EXPENSE MAY BE ALLOWED AS GENERAL EXPENSE
The court may allow the legal expense of a charity to be paid from the
estate as a general expense of administration. Matter of Newell, NYLJ
3/25/93, 34:4 (Sur. Ct. Westchester County).
§ 18:52. --CONTESTED PROBATE
In a contested probate proceeding, the nominated executor, guardian ad
litem, guardian, committee or conservator, whether successful or not,
may be awarded costs and allowance for counsel fees and expenses in
the contest or attempt to sustain the will. SCPA 2302(3)(a).
§ 18:53. ----UNSUCCESSFUL CONTESTANT MAY HAVE TO PAY
The court may direct that such costs and allowances be paid by the
unsuccessful contestant if the court finds that the contest was
brought in bad faith or was frivolous. See Matter of Aguilar, NYLJ
2/22/95, 33:1 (Sur. Ct. Bronx County).
SCPA 2302(3)(a) allows an unsuccessful will proponent to recover fees
only if the will was propounded in good faith. Legal fees may be
denied, however, if a will proponent is found to have acted in bad
faith. Matter of Winckler, 234 A.D.2d 307, 651 N.Y.S.2d 69 (2d Dep't
1996).
§ 18:54. JUDICIARY LAW
The Judiciary Law also contains general statutes relating to legal
fees that affect matters in the Surrogate's Court.
§ 18:55. --ATTORNEY COMPENSATION GOVERNED BY AGREEMENT
Compensation of attorneys is generally governed by agreement, provided
that agreement is not restrained by law. Special procedures are
outlined when services are rendered to the guardian of an infant. Jud
Law § 474.
§ 18:56. --ATTORNEY LIEN ACTIONS
The Judiciary Law also provides that the attorney who renders services
has an enforceable lien against a client's cause of action/proceeding
ending in the client's favor, and any resulting proceeds, irrespective
of the hands into which the proceeds come. Jud Law § 475; seeMatter of
Pretsch, NYLJ 2/14/79, 17:1 (Sur. Ct. Westchester County); In re
Cusimano's Will, 174 Misc. 1068, 22 N.Y.S.2d 677 (Sur. Ct. 1940).
Practice Tip: Where an attorney represented the legal representative
and has been discharged, the Surrogate ordinarily will not permit the
attorney to retain estate files under any charging or retaining lien.
See, e.g., Matter of Franco, NYLJ 12/28/95, 31:2 (Sur. Ct. N.Y.
County). Rather, the legal representative is either restrained by
court order from distributing the estate, or is required to escrow an
amount sufficient to cover the outstanding fee.
An attorney who is discharged without cause is entitled to a lien for
unpaid fees based on quantum meruit. Demov, Morris, Levin & Shein v.
Glantz, 53 N.Y.2d 553, 444 N.Y.S.2d 55, 428 N.E.2d 387 (1981); In re
Montgomery's Estate, 272 N.Y. 323, 6 N.E.2d 40, 109 A.L.R. 669 (1936);
Matter of Sakow, NYLJ 5-17-02, 19:6 (Sur. Ct. Bronx County).
§ 18:57. PROCEEDING TO FIX COMPENSATION UNDER SCPA 2110
SCPA 2110, together with SCPA 2111, see §§ 18:65 et seq., provides a
mechanism for an attorney to seek compensation. The goal of the
proceeding is to have the court direct payment to the attorney, either
from the estate generally, or from the funds in the hands of the
fiduciary, which may belong to a legatee, devisee, distributee, or any
person interested.
Provided the attorney supervised, compensation for nonattorneys who
performed services may also be available as part of the overall award
of fees. SCPA 2110(4).
§ 18:58. --TIME AND METHOD OF COMMENCEMENT
An SCPA 2110 proceeding may be instituted at any time during
administration. It is on notice to interested parties.
§ 18:59. --TO WHOM AVAILABLE
The proceeding is not limited to being used only by the attorney for
the estate. It can be instituted by a fiduciary, any "person
interested," by an attorney claiming expenses or in a proceeding to
compel delivery of papers or funds. SCPA 2105.
A proceeding is also available to a party, e.g., a legatee. SCPA 2110.
Example: Fees may be claimed by an attorney hired by a legatee to
oppose someone (in one case a brother) as executor. Matter of Mazzola,
NYLJ 9/27/90, 31:1 (Sur. Ct. Westchester County). Provisions related
to fees claimed by attorneys-in-fact are found in SCPA 2112. Attorney
was hired by client who was both a co-fiduciary and a legatee of an
estate. The attorney performed services that benefitted both the
estate and the individual beneficiary. The Appellate Division affirmed
the Surrogate's determination that she had jurisdiction to make an
award against the client personally for the services that furthered
only the client's interest either as a legatee or as a challenged co-
fiduciary whose conduct was found to be against the interest of the
estate and resulted in his removal. In re Steinberg, 262 A.D.2d 80,
692 N.Y.S.2d 32 (1st Dep't 1999). The Surrogate did not exceed her
discretion in awarding fees of $250,000 to attorneys who exposed
misconduct of preliminary executor. In re Estate of Marsh, 265 A.D.2d
253, 697 N.Y.S.2d 25 (1st Dep't 1999), leave to appeal denied, 95 N.Y.
2d 755, 712 N.Y.S.2d 447, 734 N.E.2d 759 (2000).
§ 18:59.5. --MULTIPLE CLIENTS
Although representation of multiple interests by an attorney for
fiduciary raises questions of loyalty, representation of multiple
interests is not per se barred. Where adverse interests are not
involved, counsel is free to represent multiple clients. In such a
situation, the Surrogate allocated the fee based on usual factors
among the trust and the partnership, the other client. Matter of
Brandman, N.Y.L.J. 11/15/99, 29:3 (Sur. Ct. Kings County).
While the ACTEC Commentaries on the Model Rules of Professional
Conduct, Third Ed. (March 1999), relate to the Model Rules of
Professional Conduct, which are not applicable to New York State,
rather than to the Code of Professional Responsibility, which is, the
Brandman decision cited the Commentaries with approval as appropriate
guides to ethical conduct of estate attorneys in New York.
It is well-settled that an attorney who has represented multiple
fiduciaries cannot subsequently represent some of them in a proceeding
against the others involving the same estate. Compensation may be
allowed, however, for services provided before a dispute arose. Matter
of Druckman, N.Y.L.J. 2/28/00, 28:6 (Sur. Ct.. N.Y. County), citing
Kelly v. Greason (State Report Title: Matter of Kelly), 23 N.Y.2d 368,
296 N.Y.S.2d 937, 244 N.E.2d 456 (1968); Matter of Winston, 174 A.D.2d
748, 573 N.Y.S.2d 878 (2d Dep't 1991).
§ 18:60. --REFUND OF FEES CAN RESULT
The proceeding can result in a direction to refund fees received.
Estate of DiJurico, 134 Misc. 2d 263, 510 N.Y.S.2d 465 (Sur. Ct.
1987); see also Matter of Radin, NYLJ 2/28/91, 29:4 (Sur. Ct. Kings
County); Matter of Preuss, NYLJ 9/28/83, 15:5 (Sur. Ct. Westchester
County); Matter of Lowenstein, NYLJ 6/14/83, 12:4 (Sur. Ct.
Westchester County).
This can occur, for example, if there has been noncompliance with the
provisions of either SCPA 2110 or SCPA 2111. See § 18:68.
Examples:
• Appellant proffered no evidence concerning the difficulty of the
matter, the skill, time and labor required, her experience, ability
and reputation, or the customary fee for similar services. She thus
failed to sustain burden of proving that $26,500 fee paid by estate
was fair and reasonable. The surrogate's order directing return of the
fees, together with interest, was upheld. Application of Jeffrey, 214
A.D.2d 353, 625 N.Y.S.2d 894 (1st Dep't 1995).
• Attorneys forfeited all rights to fees when they failed to establish
the reasonable value of their services and also abandoned the matter.
They were ordered to return the $10,000 fee they had received. Matter
of Siegel, NYLJ 10/8/98, 32:1 (Sur. Ct. Nassau County).
• Attorney's fee was fixed at an amount less than he had already been
paid and he was directed to make refund. Matter of Luongo, N.Y.L.J.
3/3/00, 30:5 (Sur. Ct. Kings County), citing Matter of Radine,
N.Y.L.J. 2/28/91, 29:4 (Sur. Ct. Kings County) and Harris 5th, New
York Estate Probate Admin & Litigation § 18:60.
• Evidence demonstrated that the appellant, while acting in a trusted
role as the decedent's attorney and friend, misrepresented to the
court that the funds of the estate were intact and that he would
immediately turn them over to the estate, when in fact he had spent
much of the money. Surrogate did not exceed her discretion in finding
that attorney was not entitled to any compensation and directing him
to return the legal fees he received. In re Stuart, 261 A.D.2d 550,
690 N.Y.S.2d 644 (2d Dep't 1999), citing Pessoni v. Rabkin, 220 A.D.2d
732, 633 N.Y.S.2d 338 (2d Dep't 1995); Matter of Winston, 214 A.D.2d
677, 625 N.Y.S.2d 927 (2d Dep't 1995).
• After completing one-half of legal services, attorneys presented
bill for $10,000. The executor and sole beneficiary paid the $10,000
but thereafter refused to pay the requested balance of $9,739.86. The
Surrogate fixed the legal at $3,000 plus $210 in disbursements and
directed the attorney to refund $6,790. On appeal the attorney argued
that the Surrogate abused discretion "in failing to award a legal fee
amounting to 5% of decedent's estate," which he asserted was the
customary fee charged in Ulster County. The Appellate Division
affirmed the Surrogate's decision, finding there was no abuse of
discretion in light of a record showing that the 80 hours of time
allegedly invested was not allocated between the two attorneys or
among the services they performed. In re Estate of Middagh, 267 A.D.2d
593, 699 N.Y.S.2d 506 (3d Dep't 1999), citing Matter of Estate of
Graham, 238 A.D.2d 682, 656 N.Y.S.2d 434 (3d Dep't 1997); Matter of
Stellis, 216 A.D.2d 473, 628 N.Y.S.2d 384 (2d Dep't 1995); Matter of
Bobeck, 196 A.D.2d 496, 600 N.Y.S.2d 758 (2d Dep't 1993).
• The attorney's brief representation of clients resulted in "little
advancement" of clients' objectives. Court directed attorneys to
refund amount received in excess of fee fixed by court within 30 days
after date of decree to be submitted, or if not timely repaid, to pay
said sum together with interest at 9% per annum (CPLR 5004) from the
date of clients' last payment of fees to date of ultimate repayment.
Matter of Pappas, NYLJ 12/29/00, 27:4 (Sur. Ct. Westchester County).
§ 18:60.5. ----IMPLICATION OF DISCIPLINARY RULES
An attorney's numerous acts of professional misconduct in connection
with collecting and failing to report cash advance fees in estate
matters can warrant a suspension from practice. warranted a one-year
suspension from practice. In re Santangelo, 265 A.D.2d 69, 701 N.Y.S.
2d 355 (1st Dep't 2000).
In Santangelo, the Surrogate had approved a fee of $345,000 without
knowledge that the attorney had received cash payment of $8,500. This
made fee received excessive. DR 2-106(a). Failure to inform the
Surrogate as part of fee application was conduct involving dishonesty,
fraud, deceit or misrepresentation. DR 1-102 (a)(4). Failure to
disclose rendered an affidavit false. DR 7-102 (a)(3). Failure to keep
records also volated rules. DR 9- 102(d); DR 1-102 (a)(8).
§ 18:61. --MAY BE JOINED WITH MOTION TO WITHDRAW AS COUNSEL
The proceeding may be used in conjunction with an application under
CPLR 321(b)(2) for leave to withdraw as counsel. See Matter of
Michals, NYLJ 4/15/92, 25:1 (Sur. Ct. N.Y. County).
Matter of Manfredi, NYLJ 2/13/96, 35:2 (Sur. Ct. Westchester County),
setting forth criteria for granting leave to withdraw.
An attorney who represents a client involved in litigation cannot
withdraw from the case without the client's consent, unless the Court
where the proceeding is pending has granted the attorney's application
to be relieved upon a showing of good cause. The attorney should not
be compelled to provide pro bono services where the client has agreed
to pay. Matter of Zeidman, NYLJ 3/9/98, 29:4 (Sur. Ct. Bronx County).
In Zeidman, theretainer agreement also provided a right to withdraw if
bills were unpaid for 30 days. Leave to withdraw was allowed.
However, a motion to withdraw is addressed to the sound discretion of
the trial court. Consideration of the motion requires balancing of the
reasons for withdrawal against the other circumstances of the matter.
Failure to pay a reasonable fee may justify permission to withdraw but
in and of itself does not entitle attorney to withdraw. Estate of
Steinberg v Steinberg Brothers, Inc., NYLJ 8/17/98, 29:4 (Sur. Ct.
N.Y. County). In Steinberg,the Surrogate held that the attorney
voluntarily subjected himself to a difficult relationship and had
already received substantial fees and then sought to withdraw when
funds were depleted and the estate was unable to obtain other counsel.
Leave to withdraw was denied.
Practice Tip: If the attorney wishes to withdraw (and also apply for
fees in conjunction with that application), the proceeding must be
brought on by way of an order to show cause, because the CPLR calls
for service by the withdrawing attorney on the client and to the
attorneys of the other parties (or the parties themselves, if pro se)
"on such notice . . . as the court may direct." CPLR 321(b)(2).
Pursuant to the Code of Professional Responsibility DR 2- 110(c)(1)
(d), a lawyer may withdraw when the client renders it unnecessarily
difficult for the lawyer to carry out the engagement effectively. This
decision to grant or deny permission for counsel to withdraw lies in
the discretion of the Court. Matter of Radner, NYLJ 1/13/98, 31:1
(Sur. Ct. Suffolk County).
§ 18:62. ----SEVERANCE COST MAY BE CHARGED TO COUNSEL
The cost of severing the attorney-client relationship may be charged
to the attorney personally. Matter of Vasbinder, NYLJ 2/27/95, 37:1
(Sur. Ct. Westchester County).
§ 18:63. --PROCEEDING CAN GIVE RISE TO MALPRACTICE ACTION
Because the court is being asked to determine the attorney's
entitlement to fees, which depends in part on the quality of the
attorney's work, the proceeding can be the basis for a legal
malpractice action raised by a respondent's objection. Estate of
Zalaznick, 84 Misc. 2d 715, 375 N.Y.S.2d 522 (Sur. Ct. 1975).
Where attorneys instituted SCPA 2110 proceeding against executor to
fix their fees, and respondent counterclaimed based on alleged
malpractice, the Appellate Division reversed the Surrogate, who had
stricken the executor's jury demand, and held that SCPA 2110
proceeding standing alone, would not require a jury trial, but
executor was not thereby precluded from asserting a legal counterclaim
sounding in malpractice and demanding a jury trial. Since it was a
claim at law rather than in equity, it was a claim that would be
entitled to a jury trial in the Supreme Court. A jury trial was
appropriate. Matter of Sackler, 222 A.D.2d 9, 644 N.Y.S.2d 796 (2d
Dep't 1996); see § 19:144.
A court's jurisdiction to fix and determine attorney's fee in probate
proceeding also encompasses a client's counterclaim for malpractice
and breach of contract. In re Warsaski, 190 Misc. 2d 553, 739 N.Y.S.2d
883 (Sur. Ct. 2002). In Warsaki, because all the remained at issue was
a typical fee dispute, the matter proceeded with a jury. The decision
by Surrogate Roth provides extensive coverage of the applicable rules.
§ 18:64. --AUTHORITY OF APPELLATE DIVISION
A decision involving an appeal from an order fixing fees of attorneys
and guardians, see §§ 18:65 et seq., such as in a removal proceeding,
illustrates the Appellate Division's authority to review fee
determinations by the Surrogate. In re Estate of Schoonheim, 158 A.D.
2d 183, 557 N.Y.S.2d 907 (1st Dep't 1990).
§ 18:65. EX PARTE APPLICATION FOR FEES UNDER SCPA 2111
SCPA 2111 provides for an ex parte application to the court for
determination and allowance of fees. This is unlike a proceeding under
SCPA 2110, which is on notice.
SCPA 2111 is the method to be used, for example, when an attorney/
fiduciary wishes to take a payment on account of legal fees during the
course of the administration of the estate. Because it is wholly
inappropriate to pass judgment on one's own fees, this section
provides access to the court.
The expenses of the proceeding including any required bond are to be
borne by the petitioner personally.
§ 18:66. --APPLICATION NOT NEEDED IF FIDUCIARY APPROVES FEES
SCPA 2111 is not needed if there is at least one cofiduciary who is
not rendering legal services who can approve attorneys' fees, and all
cofiduciaries concur.
§ 18:67. ----EXCEPTIONS
Clearly, a fiduciary who is also his own attorney cannot pay himself
in advance without a court order.
Further, in a case in which the "attorney of record" was the spouse of
the fiduciary, the court noted that the marital relationship itself
"should have been sufficient notice . . . that the circumscription" of
SCPA 2111 "would bar such payment." Matter of Erden, NYLJ 11/3/89,
31:1 (Sur. Ct. Westchester County).
"A Will may authorize a fiduciary to pay himself legal fees from
estate assets without prior court approval (SCPA 2111 [2]). Even in
the absence of such provision, payments from a wholly owned
corporation for the legal fees of the attorney executor do not
automatically require prior court approval (see Matter of Luckenback
[sic], 46 Misc. 2d 864, aff'd 35 AD 2d 852)." Matter of McConville,
NYLJ 3/20/95, 29:1 (Sur. Ct. NY Co.).
The Court may nevertheless inquire as to the reasonableness of all
such fees. Matter of Penn, NYLJ 5/30/95, 29:1 (Sur. Ct. NY Co.).
§ 18:68. --PENALTY FOR NONCOMPLIANCE
Failure to make use of the procedures under SCPA 2110 or SCPA 2111 can
result in direction against the attorney/fiduciary to refund fees and
pay interest at the legal rate (CPLR 5004 fixes that at 9%) on fees
improperly paid in advance. See Matter of Preuss, NYLJ 9/28/83, 15:5
(Sur. Ct. Westchester County); Estate of Gillett, 139 Misc. 2d 188,
527 N.Y.S.2d 690 (Sur. Ct. 1988).
Example: The sole attorney/fiduciary had taken fees in advance without
court approval. The fee award was reduced by statutory rate (CPLR
5004) to compensate for interest lost to the estate. Matter of
Dickman, NYLJ 8/8/00, 28:3 (Sur. Ct. Nassau County).
§ 18:69. COMMISSIONS AND FEES WHEN ATTORNEY IS ALSO FIDUCIARY
The SCPA provides for commissions of fiduciaries other than trustees
(e.g., executors and administrators). See §§ 18:115 et seq.. An
attorney who applies for fees may also apply for court-approved
commissions. SCPA 2307. Rubenstein, J.S., "Compensation of Attorney/
Executor," NYLJ 4/29/96 at a, col. 1.
§ 18:70. --BASIS OF DUAL AWARD
Commissions are awarded as compensation for performance of fiduciary
function. If the fiduciary is an attorney in New York and has
"rendered legal services in connection with his official duties," he/
she may receive such compensation for legal services as appears to the
court to be "just and reasonable," in addition to commissions. SCPA
2307.
Thus, in New York the attorney/fiduciary can hire herself/himself to
render legal services to herself/himself in the estate.
§ 18:71. ----COMMISSIONS AFFECT REASONABLENESS OF FEE REQUEST
If the attorney was also a fiduciary, the Surrogate must, in
determining the reasonableness of the legal fee, take into account
whether the attorney also received statutory commissions. Matter of
Orza, NYLJ 9/18/81, 6:5. (Sur. Ct. N.Y. County); Matter of Goldfarb,
NYLJ 6/14/83, 6:3 (Sur. Ct. N.Y. County); Estate of Moore, 139 Misc.
2d 26, 526 N.Y.S.2d 377 (Sur. Ct. 1988); Matter of Estate of Thron,
139 Misc. 2d 1045, 530 N.Y.S.2d 951 (Sur. Ct. 1988); Matter of Corya,
148 Misc 2d 753, 563 NYS2d 581 (Sur. Ct. Suffolk County 1990), revd on
other grounds, 175 AD2d 162, 572 NYS2d 51 (2d Dept 1991); Matter of
Robbins, NYLJ 9/23/92, 23:1 (Sur. Ct. N.Y. County); Matter of Kelly,
NYLJ 5/12/93, 29:6 (Sur. Ct. N.Y. County); Matter of Seles, NYLJ
5/12/93, 29:6 (Sur. Ct. N.Y. County); Matter of Morrison, NYLJ 2/9/94,
22:4 (Sur. Ct. N.Y. County); Matter of Berglund, NYLJ 11/14/94, 31:3
(Sur. Ct. Suffolk County); Matter of Salant, NYLJ 11/22/94, 33:1 (Sur.
Ct. Suffolk County); Matter of Cueff, File No. 1028 p 1982 12/8/83
(Sur. Ct. Suffolk County).
§ 18:72. INDIVIDUAL SURROGATE FIXES FEES UNDER CASE LAW PRECEDENTS
Because there is no "statutory" legal fee for services rendered in
estate practice, the standards for fixing fees are supplied by
numerous cases, as applied by the individual Surrogates.
§ 18:73. --SURROGATE MAKES ULTIMATE DETERMINATION
The Surrogate bears the ultimate responsibility to decide what
constitutes reasonable legal compensation. Stortecky v. Mazzone, 85
N.Y.2d 518, 626 N.Y.S.2d 733, 650 N.E.2d 391 (1995), related
reference, 218 A.D.2d 904, 630 N.Y.S.2d 155 (3d Dep't 1995); Matter of
Bobeck, 196 A.D.2d 496, 600 N.Y.S.2d 758 (2d Dep't 1993); Matter of
Estate of Verplanck, 151 A.D.2d 767, 543 N.Y.S.2d 138 (2d Dep't 1989);
Matter of Estate of Mergentime, 207 A.D.2d 452, 615 N.Y.S.2d 760 (2d
Dep't 1994); related decision, Matter of Estate of Mergentime, 207 A.D.
2d 453, 615 N.Y.S.2d 761 (2d Dep't 1994). Matter of Vitole, 215 A.D.2d
765, 627 N.Y.S.2d 444 (2d Dep't 1995); In re Estate of Gluck, 279 A.D.
2d 575, 720 N.Y.S.2d 149 (2d Dep't 2001); Matter of Estate of Graham,
238 A.D.2d 682, 656 N.Y.S.2d 434 (3d Dep't 1997); In re Gottschen, 256
A.D.2d 519, 682 N.Y.S.2d 861 (2d Dep't 1998); Matter of Marquis, NYLJ
12/12/00, 27:6 (Sur. Ct. N.Y. County); Matter of Germann, NYLJ
12/6/00, 31:5 (Sur. Ct. Westchester County); see § 18:83.
Despite the absence of objections to a fee paid to counsel, the court
has the inherent and statutory power to supervise the charging of fees
for legal services rendered. Cf. Jud Law § 53, Jud Law § 90, Jud Law
art 15; Gair v. Peck, 6 N.Y.2d 97, 188 N.Y.S.2d 491, 160 N.E.2d 43, 77
A.L.R.2d 390 (1959), reargument denied, 6 N.Y.2d 999, 191 N.Y.S.2d
1025, 161 N.E.2d 756 (1959) and reargument denied, remittitur amended,
6 N.Y.2d 983, 191 N.Y.S.2d 951, 161 N.E.2d 736 (1959); First Nat. Bank
of East Islip v. Brower, 42 N.Y.2d 471, 398 N.Y.S.2d 875, 368 N.E.2d
1240 (1977).
The court may limit compensation to such sum as appears to be just and
reasonable under the circumstances. Matter of Mingoia, NYLJ 3/18/93,
36:2 (Sur. Ct. Suffolk County).
The Surrogate is in the best position to determine which legal
services benefitted the estate and which benefitted only the
individual interest of the respondent as nominated executrix and
legatee. To the extent that appellant/attorney's services benefitted
only the respondent individually and not the estate, the Surrogate may
direct the respondent to personally pay a reasonable fee. In re
Driscoll, 273 A.D.2d 381, 709 N.Y.S.2d 597 (2d Dep't 2000); see also §
18:100 and § 18:73.
Even in a case where the executor is surcharged for failing to
exercise care in administration of estate and was surcharged, a legal
fee may be awarded to counsel for the executor in exercise of
discretion. In re Labua, 276 A.D.2d 630, 714 N.Y.S.2d 131 (2d Dep't
2000), leave to appeal denied, 96 N.Y.2d 710, 727 N.Y.S.2d 696, 751
N.E.2d 944 (2001).
Fiduciaries are normally entitled to be reimbursed for reasonable
attorneys' fees incurred in administering estates and trusts for
litigation costs. Such award will not be interfered with "unless it is
so manifestly wrong as to indicate abuse of power." In a case where
the fiduciary's "precipitous conduct" was the "root cause" of the
litigation and the action was without authority, the Surrogate
properly denied reimbursement for fees. Barnum v. Cohen, 228 A.D.2d
957, 644 N.Y.S.2d 828 (3d Dep't 1996).
Example: The parties had agreed to settle counsel's fee request of
$15,343,713.50 for $9,591,199.25. The court rejected the agreement,
stating: "While the court appreciates that this agreement was reached
as a result of good faith efforts and extensive negotiations, it is
the court which has the ultimate responsibility to decide what
constitutes reasonable legal compensation, regardless of whether the
interested parties have consented to the amount of fees requested."
Matter of Duke, N.Y.L.J. 5/3/00, 28:6 (Sur. Ct. N.Y. County).
§ 18:74. ----COURT NOT LIMITED BY RETAINER AGREEMENTS
The court's right and duty to review fees applies regardless of the
existence and terms of a retainer agreement. Matter of Lanyi, 147 A.D.
2d 644, 538 N.Y.S.2d 183 (2d Dep't 1989); Matter of Muccini's Estate,
118 Misc. 2d 38, 460 N.Y.S.2d 680 (Sur. Ct. 1983).
If the court determines that a retainer agreement was unconscionable,
it may be set aside. Matter of Sold, NYLJ 3/7/94, 34:5 (Sur. Ct.
Queens County).
Practice Tip: The practitioner is referred to the Muccini decision for
an evaluation of the role of the Surrogate in the fixing of fees in
the face of a retainer agreement. Among other issues, the case
involved the relationship of fees to structured payments under a
settlement where infants were parties.
The general rule with respect to the enforcement of retainer
agreements between attorneys and legatees is that, absent proof that a
written retainer agreement was fraudulently or otherwise wrongfully
processed, the contract is to be enforced without interference from
the Court as long as it is valid and has been completed according to
its terms. In this regard, in seeking to enforce the retainer
agreement, the burden is on the attorney to show that the terms were
fair and reasonable and that the client fully comprehended them. The
Court must view the evidence in a light most favorable to the client.
The Court, however, determined that the petitioning attorney had
agreed to have his fee fixed by application of the usual Freeman/Potts
factors. Matter of Cesario, NYLJ 7/10/96 at 35, col. 1 (Sur. Ct.
Westchester County); see §§ 18:7, 18:80.
See also Matter of Davis, N.Y.L.J. 6/26/98, 29:2 (Sur. Ct. Bronx
County); Matter of Mettler, N.Y.L.J. 3/2/00, 31:2 (Sur. Ct. N.Y.
County), citing In re Meng, 227 N.Y. 264, 125 N.E. 508 (1919),
reargument denied, 227 N.Y. 669, 126 N.E. 914 (1920); Matter of Estate
of Goldstein, 134 Misc. 2d 57, 509 N.Y.S.2d 984 (Sur. Ct. 1986).
The existence of a retainer agreement does not preclude the court's
further inquiry or setting a fee that varies from the retainer. Matter
of Farrell, N.Y.L.J. 4/12/00, 35:1 (Sur. Ct. Nassau County), citing
Matter of Bobeck, 196 A.D.2d 496, 600 N.Y.S.2d 758 (2d Dep't 1993);
Matter of Phelan, 173 A.D.2d 621, 570 N.Y.S.2d 202 (2d Dep't 1991).
For a retainer agreement to be enforceable, the attorney must
"establish that the terms of the agreement were fully and fairly
presented to, and understood by, the client and that the agreement in
its entirety is fair and reasonable, [and] in determining
reasonableness the court will consider the circumstances at the time
of the agreement as well as the work actually performed by the
attorney under the contract." Matter of Estate of Warhol, 165 Misc. 2d
726, 629 N.Y.S.2d 621 (Sur. Ct. 1995), related reference, 224 A.D.2d
235, 637 N.Y.S.2d 708 (1st Dep't 1996), leave to appeal denied, 88 N.Y.
2d 803, 645 N.Y.S.2d 446, 668 N.E.2d 417 (1996), reargument denied, 88
N.Y.2d 1008, 649 N.Y.S.2d 374, 672 N.E.2d 600 (1996); see also In re
Schanzer's Estate, 7 A.D.2d 275, 182 N.Y.S.2d 475 (1st Dep't 1959),
order aff'd, 8 N.Y.2d 972, 204 N.Y.S.2d 349, 169 N.E.2d 11 (1960).
Where the attorney does not meet this standard, the fee will be
determined on a quantum meruit basis. Matter of Lanyi, 147 A.D.2d 644,
538 N.Y.S.2d 183 (2d Dep't 1989). See also Matter of Milam, NYLJ
5/17/00, 31:3 (Sur. Ct. N.Y. County).
However, when the fiduciary is also a beneficiary of the estate, the
terms of the retainer are binding and chargeable against the
fiduciary's share of the estate even though the attorney compensation
awarded is thereby in excess of the amount deemed reasonable by the
court unless the agreement was fraudulently or otherwise wrongfully
procured. Matter of Devonish, NYLJ 6/20/00, 23:1 (Sur. Ct. N.Y.
County).
Example: The respondent clients understood the contract and had
negotiated two earlier agreements. Moreover, they had initiated all
the changes in subsequent agreements and had an advisor assist them in
negotiating the final agreement. The court applied the terms of the
retainer. Matter of Markowitz, N.Y.L.J. 3/14/00, 28:1 (Sur. Ct. N.Y.
County), citing Warhol, Schanzer and Lanyi, supra.
§ 18:74.5. ------RETAINER NEED NOT BE FILED WITH OCA
The executor hired an attorney to bring a legal malpractice action
against the estate's former counsel. The Surrogate concluded that the
attorney was not entitled to a fee because he had not filed a retainer
statement with the Office of Court Administration pursuant to 22 NYCRR
691.20[a][1]. The Appellate Division reversed, holding that the claim
for legal malpractice was not an "action or claim for damages for
personal injury or for property damages." In re Seigel, 300 A.D.2d
668, 754 N.Y.S.2d 300 (2d Dep't 2002).
However, because the retainer agreement in Siegel related to recovery
of property for the estate, the attorney was not entitled to a
percentage based on an increase in the value of property already in
the executor's possession when petitioner consulted the attorney, and
the Surrogate was directed to determine if the agreed fee was
reasonable.
§ 18:75. ----COURT NOT LIMITED BY CONSENT OF PARTIES
The right and duty to review fee applications exists even if all
interested parties have consented to the amount of fees requested.
Stortecky v. Mazzone, 85 N.Y.2d 518, 626 N.Y.S.2d 733, 650 N.E.2d 391
(1995), related reference, 218 A.D.2d 904, 630 N.Y.S.2d 155 (3d Dep't
1995); Matter of Von Hofe, 145 A.D.2d 424, 535 N.Y.S.2d 391 (2d Dep't
1988); Matter of Mazepa, NYLJ 6/30/92, 23:3 (Sur. Ct. Bronx County).
Example: Petitioner had filed accounting proceeding in a $187,000
estate seeking legal fees of $20,000. Subsequently, all parties
furnished general releases and petitioner sought to withdraw the
accounting. Surrogate Feinberg denied the application to withdraw the
accounting and directed counsel to file an amended affirmation of
legal services and a statement showing amounts previously paid to
counsel. "Despite the absence of objections . . . the court has the
inherent and statutory power to supervise the charging of legal fees
for services rendered. . . . The court's authority to review fees
extends to where the parties have consented to the fees charged by
counsel." Matter of Martino, NYLJ 8/16/00, 25:3 (Sur. Ct. Kings
County).
§ 18:76. ------MAY DIFFER FROM APPROVAL OF ACCOUNTING
The view that the court may review fees, even if all parties consent
and approve, contrasts with cases holding that when there is no
objection by any interested party to an accounting and absolutely no
indication of fraud or concealment in obtaining waivers and consents,
the Surrogate is without authority to refuse to approve an accounting.
Matter of Estate of Dolan, 176 A.D.2d 1019, 574 N.Y.S.2d 871 (3d Dep't
1991); Matter of Veccio's Estate, 49 A.D.2d 380, 375 N.Y.S.2d 637 (3d
Dep't 1975).
Practice Tip: It is quite possible that both Dolan and Veccio,
although they did not deal with fees as an issue, have been undercut
as authority by Stortecky, cited in the preceding section. The latter
case, while cautioning the Surrogates to exercise care in reviewing
accountings, did not bar inquiries even in the absence of objections.
(See also Chapter 23, Contested Accountings, § 23:4-5.
§ 18:77. ----SURROGATE SETS FEE ON DISCHARGE OF ATTORNEY
The Surrogate has the authority to the fix fee of a discharged
attorney on a quantum meruit basis. In re Montgomery's Estate, 272
N.Y. 323, 6 N.E.2d 40, 109 A.L.R. 669 (1936); Matter of Koehler, NYLJ
12/23/92, 26:1 (Sur. Ct. N.Y. County).
Matter of Robbins, NYLJ 6/6/96, 32:1 (Sur. Ct. N.Y. County); Matter of
Herink, NYLJ 8/16/96, 25:2 (Sur. Ct. Suffolk County); Matter of Ross,
NYLJ 12/30/96, 22:3 (Sur. Ct. N.Y. County); Matter of Pappas, NYLJ
12/29/00, 27:4 (Sur. Ct. Westchester County).
Upon turnover to a successor attorney of all papers, records and
documents in their possession concerning the estate, the discharged
attorneys have a lien on the estate assets in the amount of their fees
until their compensation has been fixed and paid. In re Dunn, 205 N.Y.
398, 98 N.E. 914 (1912); Matter of Pietsch, NYLJ 2/14/79, 17:1 (Sur.
Ct. Westchester County); Matter of Flynn, NYLJ 3/14/96, 29:1 (Sur. Ct.
N.Y. County).
When an attorney is discharged without cause, the attorney may recover
the fair and reasonable value of the services rendered, computed on
the basis of quantum meruit and determined as of the time of the
discharge. Such a cause of action accrues immediately upon discharge
and the attorney is not compelled to wait until the end of the
administration of the entire estate. Matter of Leopold, 244 A.D.2d
411, 664 N.Y.S.2d 323 (2d Dep't 1997), appeal after remand, 264 A.D.2d
777, 696 N.Y.S.2d 825 (2d Dep't 1999).
When the client terminates an attorney's services, a contingency
retainer agreement is no longer binding and the attorney is instead
compensated on a quantum meruit basis. Although the retainer agreement
itself is not enforceable, the quantum meruit value of the services
may be informed by the terms of the retainer agreement. Matter of
Devonish, NYLJ 6/20/00, 23:1 (Sur. Ct. N.Y. County), citing (Smith v.
Boscov's Dept. Store, 192 A.D.2d 949, 596 N.Y.S.2d 575 (3d Dep't
1993); Brill v. Chien Yuan Kao, 61 A.D.2d 1000, 402 N.Y.S.2d 642 (2d
Dep't 1978)); see also Matter of Milam, NYLJ 5/17/00, 31:3 (Sur. Ct.
N.Y. County).
§ 18:77.5. ------QUANTUM MERUIT, WITHDRAWING ATTORNEY
The Surrogate has the authority to fix the fee of a withdrawing
attorney on a quantum meruit basis when an attorney has sought leave
and been authorized to withdraw. The court may consider but is not
bound by any retainer agreement. Matter of Mozzanica, NYLJ 5/17/00,
35:4 (Sur. Ct. Westchester County).
§ 18:78. ------DISCHARGE FOR CAUSE ENDS RIGHT TO FEE
If an attorney is discharged for sufficient cause, there is no right
of recovery. In re Dunn, 205 N.Y. 398, 98 N.E. 914 (1912).
§ 18:79. ----DISCRETION SUBJECT TO REVIEW
The Surrogate's authority is not without limits. A determination may
be set aside as an "improvident exercise of discretion." Matter of
Estate of Bitzer, 208 A.D.2d 723, 617 N.Y.S.2d 524 (2d Dep't 1994).
Example: Executors successfully appealed from an order allowing
$39,955 in attorney's fees. The appellate court held that the
surrogate had erred in allowing the fees and in accepting the
attorney's summary of services at face value without making any
inquiry into the reasonableness of the services and fees. The
surrogate had never acknowledged the appellants' assertion that the
respondent was not the attorney for the estate and the fees were not
premised upon any authorized legal services rendered to the estate.
Matter of Murphy, 248 A.D.2d 475, 669 N.Y.S.2d 374 (2d Dep't 1998).
§ 18:80. POTTS AND FREEMAN ESTABLISH STANDARDS
The Potts and Freeman cases have become synonymous with the standards
applied in determining how legal fees are to be fixed -- either by the
attorney charging them or by the court. In re Potts' Estate, 123 Misc.
346, 205 N.Y.S. 797 (Sur. Ct. 1924), aff'd, 213 A.D. 59, 209 N.Y.S.
655 (4th Dep't 1925), aff'd, 241 N.Y. 593, 150 N.E. 568 (1925); In re
Freeman's Estate, 34 N.Y.2d 1, 355 N.Y.S.2d 336, 311 N.E.2d 480
(1974).
In Freeman, the Court of Appeals noted: "Long tradition and just about
a universal one in American practice is for the fixation of lawyers'
fees to be determined" on eight specific factors. The factors are:
• the time and labor required (see § 18:83)
• the difficulty of the questions involved (see § 18:86)
• the skill required to handle the problems presented (see § 18:87)
• the lawyer's experience, ability and reputation (see § 18:87)
• the amount involved and benefit resulting to the client from the
services (see § 18:88-18:90)
• the customary fee charged by the Bar for similar services (see §
18:91)
• the contingency or certainty of compensation
• the responsibility involved (see § 18:92)
Although a given decision may not cite each in turn, or may combine
several factors in an analysis, all are considered to a greater or
lesser extent.
The standards in Potts and Freeman also apply to fixing fees of
attorneys and other professional attendant to the administration of a
trust. Matter of McGowan, NYLJ 3/3/99, 33:5 (Sur. Ct. Westchester
County).
The standards may also be applied in setting fees for a guardian ad
litem and trial counsel in a trust accounting proceeding. Matter of
Brownstone, NYLJ 5/18/99, 27:3 (Sur. Ct. N.Y. County).
The Potts and Freeman standards apply in fixing fees for attorneys for
trustees as well as attorneys for executors. See Matter of White, NYLJ
7/30/2002, 21:5 (Sur. Ct. Suffolk County).
§ 18:81. --BURDEN OF PROOF RESTS WITH ATTORNEY
The burden of establishing the reasonable value of legal services
rests on the attorney. Matter of Spitzer, NYLJ 2/4/92, 27:6 (Sur. Ct.
Nassau County); In re Spatt's Trust, 32 N.Y.2d 778, 344 N.Y.S.2d 959,
298 N.E.2d 121 (1973); In re Potts' Estate, 123 Misc. 346, 205 N.Y.S.
797 (Sur. Ct. 1924), aff'd, 213 A.D. 59, 209 N.Y.S. 655 (4th Dep't
1925), aff'd, 241 N.Y. 593, 150 N.E. 568 (1925).
§ 18:82. POTTS/FREEMAN FACTORS IN INDIVIDUAL CASES
There is ample authority regarding how courts have applied the Potts
and Freeman standards in individual cases. The practitioner must be
familiar with these standards.
Moreover, these standards guide the Internal Revenue Service and New
York State tax auditors in their review of a deduction for legal fees
in an estate tax return. These tax authorities have an independent
duty to determine whether fees claimed are deductible, and will make
their own evaluation of whether Potts/Freeman factors have been
applied.
§ 18:83. --TIME SPENT: EXPEDITIOUS HANDLING OF ESTATE
A key factor is the efficiency and expeditiousness with which the
estate administration is handled. Matter of Traub, NYLJ 5/11/82, 15:4
(Sur. Ct. Westchester County); Matter of Condoras, NYLJ 4/17/92, 37:4
(Sur. Ct. Westchester County).
The Court is not bound by the attorney's summary of the number of
hours expended working on a legal matter. Matter of Bobeck, 196 A.D.2d
496, 600 N.Y.S.2d 758 (2d Dep't 1993); see also Matter of Vitole, 215
A.D.2d 765, 627 N.Y.S.2d 444 (2d Dep't 1995); Matter of Stellis, 216
A.D.2d 473, 628 N.Y.S.2d 384 (2d Dep't 1995); Matter of Kelly, 187 A.D.
2d 718, 590 N.Y.S.2d 289 (2d Dep't 1992); see also Matter of Meravy,
NYLJ 3/21/96 at 31, col. 4 (Sur. Ct. Westchester County), in which the
Court referred to ". . . too much wheel spinning without achieving
results. . . . the cost of the effort was hardly worth it and counsel
should have perceived this." The fee requested was reduced by almost
one-third; Matter of Ross, NYLJ 12/30/96, 22:3 (Sur. Ct. N.Y. County).
§ 18:84. ----CRUCIAL ROLE OF TIME RECORDS
The courts repeatedly refer to the "time spent" in handling the estate
as the "least important" of the Potts/Freeman factors, a concept
traceable to an early Surrogate's decision. In re Kentana's Estate,
170 Misc. 663, 10 N.Y.S.2d 811 (Sur. Ct. 1939).
Despite its alleged unimportance, time spent on a matter is never
overlooked by the court, or by tax authorities.
Indeed, it appears that, in practice, time spent is regarded as the
only or most important factor. Illustrative is the importance the
courts have attached in more recent years to keeping contemporaneous
time records. Matter of Phelan, 173 A.D.2d 621, 570 N.Y.S.2d 202 (2d
Dep't 1991); Matter of Guimares, NYLJ 11/4/92, 30:5 (Sur. Ct. Nassau
County); Matter of Spitzer, NYLJ 2/4/92, 27:6 (Sur. Ct. Nassau
County).
An attorney is required to establish by contemporaneously maintained
time records the amounts alleged to have been expended and describe
with adequate particularity the precise nature of the services. The
court is not obligated to accept at face value the attorney's summary
of the hours expended and may independently review the record to
arrive at a reasonable fee. Matter of Kelly, 187 A.D.2d 718, 590 N.Y.S.
2d 289 (2d Dep't 1992); Matter of Van Dyke, NYLJ 12/2/98, 32:3 (Sur.
Ct. Nassau County); Matter of Ross, NYLJ 12/30/96, 22:3 (Sur. Ct. N.Y.
County); Matter of Cesario, NYLJ 7/130/96, 35:1 (Sur. Ct. Westchester
County).
Example: An affidavit of services was considered insufficient on its
face to support the fee requested because, although it set forth the
nature of the services preformed, it did not include a contemporaneous
time record, with a fee corresponding to the time expended. The
$20,000 request was cut in half. Matter of Von Hofe, 145 A.D.2d 424,
535 N.Y.S.2d 391 (2d Dep't 1988); see also Matter of Pasqua, NYLJ
9/20/90, 29:1 (Sur. Ct. Suffolk County); Estate of Gilman, 112 Misc.
2d 452, 446 N.Y.S.2d 975 (Sur. Ct. 1981); Matter of Bryan, NYLJ
3/5/94, 25:6 (Sur. Ct. Westchester County); Matter of Hughes, NYLJ
2/17/95, 30:5 (Sur. Ct. N.Y. County).
Example: As proof of reasonableness of the attorney's fees paid by the
executor, she submitted "almost fifty pages of invoices and
indecipherable handwritten time sheets" form the attorney. The court
held that the executor had not established the reasonableness of the
fee paid and surcharged her $34,375. Matter of Palcic, NYLJ 5-18-01,
21:1 (Sur. Ct. Richmond County).
Absence of records may be waived by the court when none were requested
by the client, no legal objection was raised in this respect, and the
challenges to the amounts billed were otherwise insufficient to
warrant a hearing as to reasonableness. Matter of Estate of Greenleaf,
256 A.D.2d 179, 681 N.Y.S.2d 537 (1st Dep't 1998). In Greenleaf, the
court found that any duplication in amounts billed by the executors'
attorney and outside litigation counsel involving defaulting purchaser
of decedent's co-op apartment was offset by undisputed waiver of fees
for services rendered during testatrix' lifetime.
§ 18:85. ------MATTER MAY NOT JUSTIFY TIME
If the time records indicate that too much time was spent on a matter,
however, the court will make its own determination of reasonableness.
Examples:
• In a case in which the attorney claimed to have spent 120 hours on
various services, the court noted the uncomplicated nature of the
estate, the lack of difficult legal issues, and the fact that the one
court conference on the one legal issue of substance that did arise
took only an hour. The court concluded that "it is difficult for the
court to imagine how the attorney could have spent all that time on
this estate." Matter of Radin, NYLJ 2/28/91, 29:4 (Sur. Ct. Kings
County).
• In an estate involving separate claims by an original and a
successor attorney, the court analyzed the services rendered and
concluded that many "took an inordinate amount of time. No task, no
matter how simple, took either attorney less than half an hour to
complete." The Surrogate arrived at a total fee comparable to what a
single attorney's fee would have been. Matter of Hanrahan, NYLJ
6/22/94, 30:2 (Sur. Ct. Bronx County).
• In an accounting for a trust, the court paid particular attention to
the "difficulties involved, results achieved, and time spent." The
trustees overcame serious difficulties and the results achieved were
considerable. However, a total of 1,028 hours spent in preparing 10
annual accountings was found excessive, there were omissions and
errors in the accountings as filed, and inefficiencies were found in
transforming the annual accounts into aggregate accounts. The court
substantially reduced the fee request. Matter of Brownstone, N.Y.L.J.
3/16/00, 31:3 (Sur. Ct. N.Y. County).
• In measuring the time spent on a matter, the court considers not
only the number of hours expended but also the time within which the
services should have been performed. Further, given the hourly rates
charged, it should be assumed that the attorney knows the leading
cases or, at the very least, can find them with reasonable expedition.
Matter of Carbone, NYLJ 3/28/2003, 20:4 (Sur. Ct. Bronx County).
§ 18:86. --DIFFICULTY OF ISSUES TO BE RESOLVED
Clearly, a complex matter occasions a higher fee. A prolonged
litigated estate entitles the attorney to a higher rate of
compensation. Matter of Sabatino's Estate, 66 A.D.2d 937, 411 N.Y.S.2d
439 (3d Dep't 1978) ; In re Pagnotta's Estate, 161 Misc. 415, 292
N.Y.S. 327 (Sur. Ct. 1936); Matter of Schlesinger, NYLJ 3/15/96, 32:4
(Sur. Ct. Westchester County), where litigation between the fiduciary
and beneficiary led to additional legal services, the Court may
approve fees beyond that which might have normally been incurred;
Matter of De Angelo, NYLJ 4/12/91 at 28, col. 1 (Sur. Ct. Westchester
County); Matter of Marshak, NYLJ 4/30/96, 26:6 (Sur. Ct. N.Y. County).
However, genuinely complex matters -- such as difficult litigation or
an extensive estate tax audit -- must be involved. Mere time spent is
not determinative. See Matter of Mingoia, NYLJ 3/18/93, 36:2 (Sur. Ct.
Suffolk County); see also Matter of DeFeo, NYLJ 10/15/92, 29:6 (Sur.
Ct. Suffolk County); Matter of Tobias, NYLJ 6/5/95, 27:3 (Sur. Ct.
N.Y. County) affirmed, 232 A.D.2d 341, 649 N.Y.S.2d 16 (1st Dept
1996).
Example: Counsel sought $48,305. Approximately one-quarter of the
lawyer's time was spent in determining how the principal was to be
distributed, which the court found difficult to justify in view of the
clearly relevant legal principles. The fee was cut to $22,000. The
court held that the estate was "essentially routine and did not
present counsel with difficulties." Matter of Gans, NYLJ 5/4/93, 22:5
(Sur. Ct. N.Y. County). Additional examples:
• The legal services were made necessary by an earlier proceeding in
which the objectant challenged the trusts's continuance (a challenge
found to be frivolous) and a second proceeding for his removal as co-
trustee. The court determined that the fees of petitioner's counsel
were a "self- inflicted injury" and allowed substantial fees in the
amount requested. Matter of Richards, NYLJ 1/21/98, 27:1 (Sur. Ct.
N.Y. County).
• A beneficiary's counsel successfully sought fees pursuant to SCPA
2110. The beneficiary was required to incur substantial and unusual
legal expenses in order to respond to the hostile stance taken by the
fiduciary and other beneficiaries. The court allowed substantial
compensation ($118,472.45), taking into account benefit of the
services, attorneys' standing, size of the estate and the protracted
litigation. Matter of Winer, NYLJ 1/14/98, 27:4 (Sur. Ct. N.Y.
County).
• The decedent's estate consisted mainly of bank accounts, mutual
funds, U.S. Treasury Bills and individual stocks and information
regarding many investments was difficult to locate, requiring
"considerable effort." However, "other than the foregoing, this estate
was essentially routine, devoid of significant difficulties. The
Surrogate allowed a separate accountant's fee (in addition to legal
fees) but directed payment of the balance of the accountant's fee out
of the legal fee of $22,000. Matter of Hanover, NYLJ 6/19/98 29:2
(Sur. Ct. Kings County).
§ 18:87. --LAWYER'S SKILL AND ABILITY
Additionally, the skill possessed and employed by the attorney is
taken into account. In re Brehm's Estate, 37 A.D.2d 95, 322 N.Y.S.2d
287 (4th Dep't 1971); Matter of Jorans, NYLJ 12/18/79, 10:4 (Sur. Ct.
Bronx County). In re Saperstone's Estate, 258 A.D. 776, 14 N.Y.S.2d
816 (4th Dep't 1939), reargument denied, 258 A.D. 860, 16 N.Y.S.2d 698
(4th Dep't 1939); Matter of Schlesinger, NYLJ 3/15/96, 32:4 (Sur. Ct.
Westchester County).
§ 18:88. --AMOUNT INVOLVED IN THE ESTATE
Although no percentage test is used in New York to fix fees, the size
of the estate is to be taken into account.
In larger estates, the cost of potential mistakes is also larger and
may justify a bigger fee. A sizeable estate permits adequate
compensation. Martin v. Phipps, 21 A.D.2d 646, 249 N.Y.S.2d 179 (1st
Dep't 1964), motion granted, 14 N.Y.2d 871, 252 N.Y.S.2d 83, 200 N.E.
2d 769 (1964) and order aff'd, 16 N.Y.2d 594, 261 N.Y.S.2d 54, 209 N.E.
2d 102 (1965); Matter of Yancey, NYLJ 2/18/93, 28:1 (Sur. Ct.
Westchester County); Matter of Reede, NYLJ 10/28/91, 37:2 (Sur. Ct.
Nassau County).
The fee can be increased in a large estate. In re Snell's Estate, 17
A.D.2d 490, 235, 235 N.Y.S.2d 855 (3d Dep't 1962); see also Matter of
Evans, NYLJ 10/26/88, 21:4 (Sur. Ct. Westchester County).
On the other hand, the size of smaller estates is a cap on what is
reasonable. The size of the estate operates as a limitation on the fee
payable. Matter of Estate of McCranor, 176 A.D.2d 1026, 575 N.Y.S.2d
181 (3d Dep't 1991); In re Kaufmann's Will, 26 A.D.2d 818, 273 N.Y.S.
2d 902 (1st Dep't 1966), order aff'd, 23 N.Y.2d 700, 296 N.Y.S.2d 146,
243 N.E.2d 751 (1968);
The "size of the estate cannot increase the value of the
services. . . . A sizable estate permits adequate compensation, but
nothing beyond that." Martin v. Phipps, 21 A.D.2d 646, 249 N.Y.S.2d
179 (1st Dep't 1964), motion granted, 14 N.Y.2d 871, 252 N.Y.S.2d 83,
200 N.E.2d 769 (1964) and order aff'd, 16 N.Y.2d 594, 261 N.Y.S.2d 54,
209 N.E.2d 102 (1965); see also, Matter of Cohen, NYLJ 12/5/97, 35:1
(Sur. Ct. Nassau County).
The percentage approach does not necessarily bear a direct
relationship to time spent or services rendered. Matter of Farrell,
N.Y.L.J. 4/12/00, 35:1 (Sur. Ct. Nassau County), citing In re Young's
Will, 52 Misc. 2d 398, 275 N.Y.S.2d 879 (Sur. Ct. 1966).
Example: "While the size of this estate allowed for the retention of
reputable lawyers to render the array of administration, litigation,
and other specialty services needed here, it did not relieve the
lawyers of the responsibility to exercise sound judgment in operating
as efficiently as possible and in preparing only to the extent it was
necessary to accomplish particular goals." Matter of Duke, N.Y.L.J.
5/3/00, 28:1 (Sur. Ct. N.Y. County). The Surrogate sharply reduced
requested fees requested that had exceeded 10% of total of accounting
value stating: "The size of the estate or total fund is also a very
significant factor. A sizeable estate permits adequate compensation,
but nothing beyond that [citing Martin v. Phipps, 21 A.D.2d 646, 249
N.Y.S.2d 179 (1st Dep't 1964), motion granted, 14 N.Y.2d 871, 252
N.Y.S.2d 83, 200 N.E.2d 769 (1964) and order aff'd, 16 N.Y.2d 594, 261
N.Y.S.2d 54, 209 N.E.2d 102 (1965); Matter of Reede, NYLJ 10/28/91,
37:2; Matter of Yancey, NYLJ 2/18/93, 28:1]. Moreover, the size of the
estate can operate as a linitation on the fees payable [citing Matter
of Estate of McCranor, 176 A.D.2d 1026, 575 N.Y.S.2d 181 (3d Dep't
1991); In re Kaufmann's Will, 26 A.D.2d 818, 273 N.Y.S.2d 902 (1st
Dep't 1966), order aff'd, 23 N.Y.2d 700, 296 N.Y.S.2d 146, 243 N.E.2d
751 (1968)]" Matter of Kelly, NYLJ 4/24/01, 25:1 (Sur. Ct. Nassau
County).
§ 18:89. ----FEE'S RELATIONSHIP TO SIZE OF ESTATE IS CENTRAL
As a general rule, a fee must bear a reasonable relation to the size
of an estate. Matter of Lane, NYLJ 10/13/80, 16:2 (Sur. Ct. Suffolk
County); Matter of Logallo, NYLJ 5/12/93, 31:6 (Sur. Ct. Suffolk
County); Matter of Vasbinder, NYLJ 2/27/95, 37:1 (Sur. Ct. Westchester
County); Matter of Hughes, NYLJ 2/17/95, 30:5 (Sur. Ct. N.Y. County).
In re Kaufmann's Will, 26 A.D.2d 818, 273 N.Y.S.2d 902 (1st Dep't
1966), order aff'd, 23 N.Y.2d 700, 296 N.Y.S.2d 146, 243 N.E.2d 751
(1968); Matter of Marshak, NYLJ 4/30/96, 26:6 (Sur. Ct. N.Y. County);
Matter of Meringola, NYLJ 5/25/83 at , col. (Sur. Ct. Bronx County);
Matter of Woodruff, NYLJ 9/9/96, 21:4 (Sur. Ct. Kings County).
§ 18:90. --BENEFITS OF SERVICES FOR THE CLIENT
An important factor is the result achieved through the attorney's
efforts. Randall v. Packard, 142 N.Y. 47, 36 N.E. 823 (1894); Matter
of Shalman's Estate, 68 A.D.2d 940, 414 N.Y.S.2d 70 (3d Dep't 1979);
Matter of Condoras, NYLJ 4/17/92, 37:4 (Sur. Ct. Westchester County);
Matter of Tobias, NYLJ 6/5/95, 27:3 (Sur. Ct. N.Y. County). Matter of
Ross, NYLJ 12/30/96, 22:3 (Sur. Ct. N.Y. County).
Fiduciaries are not exempt from the rule that attorneys fees for
services rendered to an estate are compensable only where the services
result in a benefit to the estate as a whole. Matter of Stanley, NYLJ
6/9/00, 29:1 (Sur. Ct. N.Y. County).
Counsel fees are properly awarded where the services provided are for
the benefit of the entire estate or trust, rather than an individual,
and where the services rendered result in an outcome in favor of the
estate or trust (Matter of Estate of Greatsinger, 67 N.Y.2d 177, 501
N.Y.S.2d 623, 492 N.E.2d 751 (1986)). Thus, where the trustee in
defense of an action commenced by an objectant successfully sought to
protect the corpus of the trust for the benefit of the beneficiaries
rather than to protect his personal interests, the trust was directed
to pay counsel fees. In re Estate of Matsis, 280 A.D.2d 480, 720 N.Y.S.
2d 179 (2d Dep't 2001).
See Valente, P.C. and Polumbo, J.T., "Legal Fees and Beneficiaries,"
NYLJ 11- 1-01, 3:1. See also § 18:47.
Example: Where more than half of the attorney's services involved the
exercise of the petitioner's right of election, the court held that
this was a benefit to the petitioner personally and was not chargeable
to the estate. Matter of Kehs, NYLJ 18-8-00, 28:4 (Sur. Ct. Kings
County).
Example: In a proceeding to set aside a trust, the Supreme Court
awarded fees to the corporate trustee. The trustee's duty is to the
trust and all its beneficiaries, and where threatened with litigation
to revoke the trust, it was certainly proper to defend the trust
against such action, at least when done in good faith. Matter of
Rozen, NYLJ 8/6/2002, 22:2 (Supreme Ct Nassau County).
§ 18:91. --CUSTOMARY CHARGES FOR SIMILAR SERVICES
To the extent that they can be ascertained, comparable charges made by
other attorneys are relevant.
"Recommended Fee" Schedules, if they exist, see Goldfarb v. Virginia
State Bar, 421 U.S. 773, 95 S. Ct. 2004, 44 L. Ed. 2d 572 (1975),
reh'g denied, 423 U.S. 886, 96 S. Ct. 162, 46 L. Ed. 2d 118 (1975) and
(abrogation recognized on other grounds by, Lender's Service, Inc. v.
Dayton Bar Ass'n, 758 F. Supp. 429 (S.D. Ohio 1991)), are merely
guides to prevailing local practices and are not controlling. In re
Freeman's Estate, 34 N.Y.2d 1, 355 N.Y.S.2d 336, 311 N.E.2d 480
(1974).
Example Attorney asserted that a fee amounting to 5% of the decedent's
estate was customary in Ulster County. The Surrogate reduced a
requested fee of $19,739.86 to $3,000 for fees plus $210 in
disbursements, finding that although one of the two attorneys involved
had more than 30 years' experience in probate, the attorney/petitioner
fell short of his burden of demonstrating that the fee sought was
reasonable. The Appellate Division found no abuse of discretion by the
Surrogate, noting that the record did not contain any breakdown of how
80 hours allegedly spent on the matter had been allocated between the
two attorneys or among the various services performed. In re Estate of
Middagh, 267 A.D.2d 593, 699 N.Y.S.2d 506 (3d Dep't 1999).
§ 18:92. --LEGAL FEES ONLY FOR LEGAL SERVICES
If a lawyer's fee application requests "legal" fees for nonlegal work,
e.g., investment advice, executorial services, see §§ 18:93 et seq.,
the lawyer will not be paid a legal fee for doing such work.
Compensated for that comes from fiduciary commissions. Matter of Von
Hofe, 145 A.D.2d 424, 535 N.Y.S.2d 391 (2d Dep't 1988); In re Potts'
Estate, 123 Misc. 346, 205 N.Y.S. 797 (Sur. Ct. 1924), aff'd, 213 A.D.
59, 209 N.Y.S. 655 (4th Dep't 1925), aff'd, 241 N.Y. 593, 150 N.E. 568
(1925); In re Churchman's Estate, 17 Misc. 2d 931, 187 N.Y.S.2d 919
(Sur. Ct. 1959).
However, an expense such as investment advisory fees may be payable
(in addition to commissions) if the will expressly authorizes such a
payment. Matter of Goldstick, 177 A.D.2d 225, 581 N.Y.S.2d 165 (1st
Dep't 1992), opinion modified on reargument, 183 A.D.2d 684, 586 N.Y.S.
2d 490 (1st Dep't 1992); see also Matter of Axe, NYLJ 6/10/94, 36:6
(Sur. Ct. Westchester County).
Legal services, whether they be performed by trial or appellate
counsel, are legal services and not disbursements. Retained counsel
was required to absorb the legal fee it paid to appellate counsel out
of legal fee it received pursuant to contingent fee arrangement.
Matter of Bastian, N.Y.L.J. 4/11/00, 28:3 (Sur. Ct. Bx. County); see
also Matter of Beaustein, N.Y.L.J. 4/18/91, 26:5 (Sur. Ct. Bronx
County).
§ 18:93. ----OTHER NONLEGAL WORK MAY BE DISALLOWED BY COURT
Courts have disallowed fees to attorneys for entering areas outside
the attorney's usual area of practice, or profession. Thus, the court
will not allow fees to an attorney for research in a profession in
which he/she has no training. Matter of Kent, NYLJ 6/28/89, 27:6 (Sur.
Ct. Nassau County).
Similarly an award of legal fees cannot be made to an attorney not
admitted to practice in New York State, except for services
necessarily performed for services in the State in which the attorney
is admitted to practice. Matter of Israels, NYLJ, 10/11/95, 32:3 (Sur.
Ct. Suffolk County); In re Nunno's Estate, 161 Misc. 707, 293 N.Y.S.
827 (Sur. Ct. 1937).
§ 18:94. ------CUSTODIAL SERVICES FEES
Fees claimed by a law firm for custodial services rendered to trustees
were not allowed. The statute allows such fees only to bank or trust
company, EPTL 11-1.1(b)(9) or broker/dealer, EPTL 11-1.10).
§ 18:95. ----EXECUTORIAL SERVICES
An increasingly vexatious problem is the determination of fees when
the fee application discloses that the attorney performed "executorial
services" and has labeled them as legal services. Executorial services
are to be rendered by the executor, who is compensated by commissions.
If the attorney renders those services, and the executor has been or
will be paid for them, the attorney should seek payment from the
executor. In re Schmitt's Estate, 65 Misc. 2d 1021, 319 N.Y.S.2d 869
(Sur. Ct. 1971); see also Roth, Retention, Compensation of Attorneys
in Estates, NYLJ 9/18/78, 1:1.
Practice Tip: The likelihood of the attorney billing her/his own
executor/client is remote. Nevertheless, fee determination in this
area must receive early and close attention in the administration of
an estate. In practice, it is common -- perhaps routine and expected
-- that the attorney or law firm will "do the work" to administer the
estate. Distinguishing between legal services and executorial services
therefore becomes a necessary evil. If the executor/client intends to
claim a commission but expects the lawyer to perform executorial
services, the lawyer must address this problem or risk not getting
paid. The law establishing this rule is clear: an attorney will not be
allowed "legal fees" for performing "executorial services," because
they are compensated by the commissions. Matter of Jones, 168 A.D.2d
448, 562 N.Y.S.2d 568 (2d Dep't 1990); In re Hallock's Estate, 214
A.D. 323, 212 N.Y.S. 82 (3d Dep't 1925); Matter of Estate of McCranor,
176 A.D.2d 1026, 575 N.Y.S.2d 181 (3d Dep't 1991); Matter of Corya,
148 Misc 2d 753, 563 NYS2d 581 (Sur. Ct. Suffolk County 1990), revd on
other grounds, 175 AD2d 162, 572 NYS2d 51 (2d Dept 1991); Matter of
Fanelli, NYLJ 10/27/92, 37:6 (Sur. Ct. Westchester County); Matter of
Robbins, NYLJ 9/23/92, 23:1 (Sur. Ct. N.Y. County); Matter of
Bachrach, NYLJ 6/4/93, 31:4 (Sur. Ct. Suffolk County); Matter of
Tsakis, NYLJ 12/3/93, 30:2 (Sur. Ct. Suffolk County); Matter of
Hughes, NYLJ 2/17/95, 30:5 (Sur. Ct. N.Y. County).
Matter of Estate of McCranor, 176 A.D.2d 1026, 575 N.Y.S.2d 181 (3d
Dep't 1991); Matter of Phelan, 173 A.D.2d 621, 570 N.Y.S.2d 202 (2d
Dep't 1991); Matter of Marshak, NYLJ 4/30/96, 26:6 (Sur. Ct. N.Y.
County); Matter of Woodruff, NYLJ 9/9/96, 21:4 (Sur. Ct. Kings
County).
The difficulty in applying the rule barring consideration of
"executorial services" in fixing attorneys' compensation may have been
heightened--or perhaps resolved--by the Appellate Division in In re
Estate of Warhol, 224 A.D.2d 235, 637 N.Y.S.2d 708 (1st Dep't 1996),
leave to appeal denied, 88 N.Y.2d 803, 645 N.Y.S.2d 446, 668 N.E.2d
417 (1996), reargument denied, 88 N.Y.2d 1008, 649 N.Y.S.2d 374, 672
N.E.2d 600 (1996). The Surrogate, in Matter of Estate of Warhol, 165
Misc. 2d 726, 629 N.Y.S.2d 621 (Sur. Ct. 1995), had awarded the
attorney for the executor of the Andy Warhol estate $7.2 million in
legal fees holding among other things that ". . . the customary
distinctions between executorial and legal services are of little
meaning in this estate."
The Appellate Division majority reduced the award to $3.2 million.
While alluding to the characterization of the estate as "unique," the
Appellate Division simply restated the rule that executorial services
"may not properly be considered in the setting of the legal
fee." (Justice Kupferman dissented and would have relied on the
Surrogate's consideration of the executorial services and would have
approved the fee award).
The rule may, therefore, now be that no matter how complicated,
successful or "unique" the executorial services are, they do not count
towards fixing a legal fee. What remains is to define what are (and
are not) executorial services.
The Appellate Division's review is limited to determining whether the
Surrogate's Court abused its discretion in arriving at the amount of
fee awarded. Matter of Estate of Graham, 238 A.D.2d 682, 656 N.Y.S.2d
434 (3d Dep't 1997). Thereafter, limiting the award of legal
compensation to the time spent on legal matters (see Matter of Estate
of Passuello, 184 A.D.2d 108, 111, 591 N.Y.S.2d 542 (3d Dep't 1992),
the appellate review ends. In re Guattery, 278 A.D.2d 738, 717 N.Y.S.
2d 764 (3d Dep't 2000). See also In re Estate of Klein, 285 A.D.2d
718, 726 N.Y.S.2d 814 (3d Dep't 2001).
Example: The surrogate had awarded the attorney for the executor of
the will of Andy Warhol $7.2 million in fees as attorney for the
estate and additional fees of up to $250,000 for services performed in
contesting the value of the estate. The Appellate Division reduced the
total fee to $3.5 million. While acknowledging that the surrogate had
properly considered all of the relevant Freeman/Potts factors, the
appellate court ruled that services performed by the attorney that are
executorial in nature may not properly be considered in establishing
the legal fee. It rejected the surrogate's determination that "the
customary distinctions between executorial and legal services are of
little meaning in this unique estate." In re Estate of Warhol, 224 A.D.
2d 235, 637 N.Y.S.2d 708 (1st Dep't 1996), leave to appeal denied, 88
N.Y.2d 803, 645 N.Y.S.2d 446, 668 N.E.2d 417 (1996), reargument
denied, 88 N.Y.2d 1008, 649 N.Y.S.2d 374, 672 N.E.2d 600 (1996).
Respondent attorneys failed to sustain their burden of justifying that
the services they performed were legal, as opposed to executorial, in
nature. Application of Jeffrey, 214 A.D.2d 353, 625 N.Y.S.2d 894 (1st
Dep't 1995); Matter of Warhol, supra. Further, while smooth
administration of the estate may have been impeded by a co-executor
who was unable to agree with the other three on ordinary matters of
administration, such was hardly an unusual situation. See EPTL
10-10.7. The vague entries in the attorneys' invoices do not
demonstrate that this was the source of most of the charges. Nor do
the invoices show that the services were unique or difficult or added
to estate value. The Surrogate's direction to refund $56,078.05 out of
fee paid of $118,078.05 was upheld. In re Estate of Ellis, 277 A.D.2d
102, 716 N.Y.S.2d 53 (1st Dep't 2000).
Example: In an estate of $29,937, attorney fees were not allowed for
tasks such as marshaling of assets, and after reviewing all factors,
"particularly the modest size of this estate," the court awarded
$3,500 as reasonable counsel fees for all services rendered through
final decree and distribution. Matter of Toledano, NYLJ 10- 29-01,
39:5 (Sur. Ct. Kings County).
Example: After reviewing "all of the special issues and problems
outlined in the affidavits of legal services" in an estate that
exceeded $36 million, the fair value of legal services was fixed in
the reduced sum of $1.15 million for all services rendered and to be
rendered through final decree and distribution, including a claim for
legal services rendered to the decedent before death. Specifically
disallowed were fees for time the attorney-fiduciary devoted to
executorial functions such as the marshaling of assets, determinating
the decedent's debts and liabilities, payment of bills, opening of
estate accounts and reconciliation of bank statements.
§ 18:96. ------EXAMPLES OF EXECUTORIAL SERVICES
The following is a useful but not exhaustive list of executorial
services:
• making funeral and burial arrangements
• assembling data for preparation of a decedent's final income tax
return
• transferring the decedent's securities to the estate
• determining the value of estate assets
• undertaking the steps needed to market and sell a parcel of
unimproved real property
• distributing legacies
• making an inventory of the safe deposit box
• regular monitoring of the estate's portfolio of securities
• reviewing brokerage statements monthly
• keeping records
• monitoring income
Matter of Seidl, NYLJ 10/31/90, 26:6 (Sur. Ct. Westchester County);
see also Matter of Hughes, NYLJ 2/17/95, 30:5 (Sur. Ct. N.Y. County).
Something such as removal of a termite infestation is also executorial
in nature. Matter of Famera, NYLJ 8/23/95, 26:1 (Sur. Ct. Suffolk
County).
In Matter of Ross, NYLJ 12/30/96, 22:3 (Sur. Ct. N.Y. County),
Surrogate Roth contrasted executorial and legal services as follows:
We turn first to the services relating to decedent's estate. The work
performed by respondent compensable as legal services included
obtaining search orders to locate decedent's will; preparation and
filing of probate papers; locating decedent's distributees and
legatees; arranging for and reviewing appraisals; obtaining tax
waivers for the collection of assets; review of decedent's records and
correspondence with various organizations to identify decedent's
assets; engaging in negotiations to prevent eviction from decedent's
apartment and sale of decedent's property stored in a warehouse; and
handling distribution and termination issues related to decedent's
retirement assets. The time sheets also, however, disclose that a
substantial portion of this time was devoted to executorial tasks such
as reviewing decedent's mail, obtaining missing bank statements, not
compensable as legal services. Matter of Klein, NYLJ July 23, 1993, at
27, col. 3.
Example: The court noted the "idiosyncratic" nature of the attorney/
fiduciary's method of practicing law. "Rather than engage the services
of a secretary, clerk or process server, [he] performed all these
functions by himself. Of course, nothing prevents the attorney/
fiduciary from being the estate's chief cook and bottle washer, but he
cannot reasonably expect to be paid at the rate of the chief cook when
he is engaged in bottle washing." The attorney's affidavit detailed
one-third to one-half of the time spent as typing, copying, and
mailing various items and other clerical services. The requested fee
of $28,000 was reduced to $10,200. Matter of Dickman, NYLJ 8/8/00,
28:3 (Sur. Ct. Nassau County).
§ 18:97. ------HEARING TO DISTINGUISH LEGAL AND OTHER SERVICES
When the attorney herself/himself is the nominated fiduciary, there
are circumstances in which the Surrogate (or the Appellate Division)
will be unable to distinguish between legal services, on the one hand,
and services that were performed by an attorney in the role of
fiduciary, on the other, for purposes of evaluating the merits of a
legal fee application.
A hearing may be needed to make that distinction, as well as to make
findings of fact in accordance with the criteria set forth in Freeman.
Matter of Rees, 141 A.D.2d 649, 529 N.Y.S.2d 996 (2d Dep't 1988).
§ 18:98. --COURTS FROWN ON FAILURE TO APPLY POTTS/FREEMAN
In a number of cases, attorneys have resorted to unorthodox standards
for determining fees -- none of which the courts have found
acceptable.
Examples:
• The Surrogate noted that counsel had "deluged the court with papers
by the pound." Matter of Badstein, NYLJ 2/17/95, 34:1 (Sur. Ct.
Westchester County).
• One lawyer calculated the linear measurement of the papers in the
proceeding to be 10 feet. He then calculated that one inch equalled
260 pages, applied his rate of reading time (two minutes a page) to
determine the time he spent and, multiplying the result by his hourly
rate, calculated his fee at $436,800. He was awarded $90,000 based on
standard factors. Matter of Devine, NYLJ 4/22/93, 26:2 (Sur. Ct. N.Y.
County).
• Counsel sought to justify his claim for a high fee by stating that
he was "a graduate of Harvard Law School, possibly one of the very few
in this county." The court was not impressed and directed the lawyer
(who had also received an executor's commission) to refund 80% of his
fee, with interest. Matter of Lindblad, NYLJ 1/10/86, 15:1 (Sur. Ct.
Queens County).
§ 18:99. ONLY SERVICES FOR TESTAMENTARY ASSETS PAID FROM ESTATE
Fees can be charged to the estate only when the services concern
testamentary assets.
Fees charged for services rendered in the collection or maintenance of
nontestamentary assets or for the benefit of surviving joint owners of
property can be charged only to those same surviving joint owners, not
to the estate assets. Matter of Mazepa, NYLJ 6/30/92, 23:3 (Sur. Ct.
Bronx County); Matter of McElroy, NYLJ 10/4/94, 23:3 (Sur. Ct. Bronx
County); see also Matter of Paris, NYLJ 9/22/94, 33:4 (Sur. Ct. Kings
County).
This rule is a corollary of the rule that prohibits collection of a
commission on the value of nontestamentary assets. See § 18:127.
§ 18:100. --CHARGING BENEFICIARY AND NOT ESTATE
In certain cases, courts have charged fees to a beneficiary and not to
the estate based on the conduct of the beneficiary during the
proceeding.
SCPA 2110 does not authorize payment for legal services rendered a
party to be charged against the share of other individual parties. In
re Dillon's Estate, 28 N.Y.2d 597, 319 N.Y.S.2d 850, 268 N.E.2d 646
(1971); In re Estate of Urbach, 252 A.D.2d 318, 683 N.Y.S.2d 631 (3d
Dep't 1999).
Examples:
• In a case involving two distributees whose actions were vexatious
and without merit, causing unnecessary legal attention and delay, the
court charged two-thirds of the legal fee against legatees' shares,
not to the general estate. Matter of Walsh, NYLJ 10/10/91, 27:4 (Sur.
Ct. Westchester County); see also Matter of Denend, NYLJ 3/23/93, 25:5
(Sur. Ct. Westchester County).
• Having apparently learned nothing in 1993,when she was surcharged
twice with costs and sanctions, the decedent's spouse was charged
personally with $53,212.50, out of approximately $66,000 in legal fees
for her pursuit of "groundless actions and proceedings" and "meritless
litigation." Surrogate Emmanuelli decided that she had no one to blame
but herself. In addition, the balance on her spousal share of the
estate was directed to be held as a reserve against possible future
assessment of legal fees against her in other pending litigation.
Matter of Denend, N.Y.L.J. 4/22/96, 31:4 (Sur. Ct. Weschester
County).
• In a case involving "tortured litigation," the Appellate Division
upheld the Surrogate's action directing the respondent to pay $1,500
in sanctions to the executors' attorneys pursuant to 22 NYCRR 130-1.1,
but ruled that the Surrogate had abused his discretion by directing
that the legal fee and disbursements ($37,552.90) of the executor's
attorneys be charged against the unsuccessful respondent-litigant's
share of the estate. In re Estate of Urbach, 252 A.D.2d 318, 683 N.Y.S.
2d 631 (3d Dep't 1999). Relying on an earlier decision. In re Dillon's
Estate, 28 N.Y.2d 597, 319 N.Y.S.2d 850, 268 N.E.2d 646 (1971) that
refused to allow the fees of the executor's attorney to be charged
personally to the unsuccessful litigant, the Urbach decision concluded
that SCPA 2110 does not authorize the Surrogate to depart from that
principle to sanction frivolous conduct.
• Where the court found that the petitioner and his counsel were
required to expend substantial time and effort to compel the executor
of the estate to account and to defend the meritless objections raised
by him, the expenses where charged to the estate. Matter of Estate of
Piltch, 175 Misc. 2d 56, 667 N.Y.S.2d 668 (Sur. Ct. 1997).
• The executor, who was also a beneficiary, sought to charge a major
portion of the legal fees of his attorney against the shares of two
beneficiaries, because of extended proceedings resulting in the need
to evict them. The court held: "Although SCPA 2110 authorizes the
court to fix the amount of counsel fees for services rendered to an
executor or testamentary beneficiary and to 'direct payment therefor
from the estate generally or from the funds in the hands of the
[executor] belonging to [a testamentary beneficiary],' unfortunately,
the Court of Appeals has held that SCPA 2110 'does not authorize
payment for legal services rendered to a party to be charged against
the share of other individual parties.' " The court was constrained by
the precedents of Dillon and Urbach, supra, and denied the
application. The court fixed fees for general administration of the
estate and scheduled an inquest to fix the reasonable value of the
services required to evict the defaulting beneficiaries from the
estate property. Matter of Rudnick, N.Y.L.J. 3/21/00, 31:5 (Sur. Ct.
Nassau County).
• Petitioner trustee successfully countered all objections to his
accounting made by one beneficiary. All objections were dismissed.
Petitioner requested that all fees for legal services rendered by
attorney for the fiduciary be charged to objectant's share of income.
The court held that the objections had a "colorable legal basis" and
that objectant had a right to raise them. The court further held that
"binding case law prohibits that result." Matter of White, NYLJ
1/19/01, 30:3 (Sur. Ct. Nassau County), citing Matter of Urbach,
supra.
• However, where the services benefited only the respondent personally
and not the estate, the Surrogate may direct respondent to personally
pay a reasonable fee. In re Driscoll, 273 A.D.2d 381, 709 N.Y.S.2d 597
(2d Dep't 2000).
• A referee's recommendation that legal fees in a contested accounting
by a preliminary executor be charged against her share of the estate
was rejected. Matter of Marsh, NYLJ 8/20/02, 18:4 (Sur. Ct. NY
County). See also Matter of Rudin, NYLJ 3/10/2003, 22:4 (Sur. Ct. NY
County).
• "Notwithstanding that a large portion of the legal services were
necessitated by objectants' unwarranted litigiousness," the
Surrogate's discretion does not authorize charging charge a
beneficiary for the counsel fees incurred by an executor. In re Sall,
292 A.D.2d 195, 739 N.Y.S.2d 363 (1st Dep't 2002), leave to appeal
denied, 98 N.Y.2d 606, 746 N.Y.S.2d 456, 774 N.E.2d 221 (2002). See
also § 18:45.5.
See also § 18:73.
§ 18:101. --CHARGING THE FIDUCIARY AND NOT ESTATE
An estate should not be charged with the burden of legal services
rendered in an accounting party's unsuccessful opposition to
meritorious objections. In re Della Chiesa's Will, 23 A.D.2d 562, 256
N.Y.S.2d 519 (2d Dep't 1965); Matter of Newhoff's Will, 107 Misc. 2d
589, 435 N.Y.S.2d 632 (Sur. Ct. 1980), decree aff'd by, 107 A.D.2d
417, 486 N.Y.S.2d 956 (2d Dep't 1985); Matter of Holmberg, NYLJ
8/9/91, 28:5 (Sur. Ct. Suffolk County); Matter of Rozycki, NYLJ
10/4/89, 25:3 (Sur. Ct. Bronx County).
Nor can fiduciaries be reimbursed for legal services rendered to
enhance their individual interests at the expense of a beneficiary and
to promote their self interest and personal gain. Matter of Fuchs,
NYLJ, 5/21/96 35:2 (Sur. Ct. Nassau County); In re La Grove's Estate,
31 A.D.2d 928, 299 N.Y.S.2d 80 (2d Dep't 1969), order aff'd, 30 N.Y.2d
624, 331 N.Y.S.2d 439, 282 N.E.2d 329 (1972); In re Burlein's Estate,
26 A.D.2d 667, 272 N.Y.S.2d 429 (2d Dep't 1966).
It has long been established that absent special circumstances, the
fees paid to an accountant for routine accounting or tax services are
the responsibility of the personal representative (Matter of Wolf, 147
A.D.2d 487, 537 N.Y.S.2d 585 (2d Dep't 1989); Matter of Acker, 128 A.D.
2d 867, 513 N.Y.S.2d 786 (2d Dep't 1987); In re Badenhausen's Estate,
38 Misc. 2d 698, 237 N.Y.S.2d 928 (Sur. Ct. 1963); In re Musil's
Estate, 254 A.D. 765, 4 N.Y.S.2d 577 (2d Dep't 1938). Payment out of
the estate for services rendered by an accountant is proper and
allowable where it is shown that difficult or unusual issues
necessitate such expenses. In re Valente's Estate, 24 A.D.2d 945, 265
N.Y.S.2d 370 (1st Dep't 1965), motion granted, 17 N.Y.2d 785, 270
N.Y.S.2d 634, 217 N.E.2d 681 (1966); In re Hopson's Will, 213 A.D.
395, 211 N.Y.S. 128 (4th Dep't 1925); In re Kramer's Will, 70 N.Y.S.2d
239 (Sur. Ct. 1947); Matter of Brown, NYLJ 9/9/96 30:6 (Sur. Ct.
Westchester County); see also Matter of Alper, NYLJ 12/27/95, 33:6
(Sur. Ct. Westchester County).
The Surrogate may direct refund of fees paid. SCPA 2215 (3); see
Matter of Kellner, 215 A.D.2d 560, 626 N.Y.S.2d 854 (2d Dep't 1995).
Example: Counsel for a co-trustee successfully opposed an appeal by
another co-trustee on behalf of the trust. The Surrogate observed that
the Appellate Division decision demonstrated that the appeal was
without merit and recognized the "frivolous and dilatory motion
practice" of the unsuccessful appellant. The Surrogate assessed the
counsel fees against the unsuccessful appellant/fiduciary personally.
Matter of Scuderi, NYLJ 8/10/98, 34:2 (Sur. Ct. Nassau County).
kuacou
The imposition of costs and sanctions is discretionary with the court.
SCPA 2301(2), 22 NYCRR 130-1.1. Part 130 of the Rules of the Chief
Administrator of the Courts is designed to deter and penalize
frivolous motion practice.
Example: In a case in which the Surrogate determined that the attorney/
trustee had made a motion to disqualify a beneficiary's attorney that
clearly lacked merit in law or fact, placed an unnecessary burden on
opposing counsel, and abused the judicial process, the Surrogate
imposed $3,500 costs on the attorney representing reasonable
attorneys' fees in defending against the disqualification motion.
Matter of Ellner, NYLJ 2/3/03, 20:4 (Sur. Ct. NY County).
§ 18:102. ----FIDUCIARY MAY HIRE COUNSEL TO RESIST REMOVAL
A fiduciary has the right to retain counsel to resist proceedings for
her/his/its removal.
A successful defense by a fiduciary against such an effort is a
defense of the trust itself, for which legal fees may be charged
against trust assets. Jessup v. Smith, 223 N.Y. 203, 119 N.E. 403
(1918); Estate of Berg, 91 Misc. 2d 939, 398 N.Y.S.2d 948 (Sur. Ct.
1977); see Matter of Iskyan, NYLJ 1/24/96, 29:6 (Sur. Ct. Nassau
County).
§ 18:103. ----BREACH OF DUTY DOES NOT ALWAYS MEAN LIABILITY FOR FEES
Even when there is a finding of breach of fiduciary duty, a fiduciary
is not necessarily personally liable for her/his own legal fees.
Matter of Shirk, NYLJ 4/25/91, 27:2 (Sur. Ct. N.Y. County); see Matter
of Wilhelm, 88 A.D.2d 6, 452 N.Y.S.2d 957 (4th Dep't 1982); see also
Matter of Golding, NYLJ 9/1/89, 25:5 (Sur. Ct. Nassau County).
§ 18:104. PRESUMPTION AGAINST ALLOWING DISBURSEMENTS
There is a presumption against allowing most disbursements as a charge
against the estate. Estate of Zalaznick, 84 Misc. 2d 715, 375 N.Y.S.2d
522 (Sur. Ct. 1975); In re Levine's Estate, 26 Misc. 2d 307, 203 N.Y.S.
2d 643 (Sur. Ct. 1960).
However, there is special statutory authority for payment of
reasonable office expenses of certain Public administrators. SCPA
1207(4); Matter of Martin, NYLJ 3/4/95, 26:2 (Sur. Ct. Suffolk
County).
§ 18:105. --RULES VARY BY COURT
The area of disbursements and lawyer overhead is one that is very much
a matter of local practices.
Examples:
• In a case involving office overhead, one court enumerated
nonallowable overhead items but left open the possibility of allowing
them on proper showing of necessity. Matter of Diamond, NYLJ 10/23/92,
26:6 (Sur. Ct. Westchester County).
• In New York County, Surrogate Roth has announced a rule that
disbursements for supportive services will be allowed if the law firm
requesting the allowance states that salaries and costs for such
services are not taken into account in fixing billing rates, and that
it is the firm's normal practice to bill clients separately for those
disbursements. Matter of Will of Aitken, 160 Misc. 2d 587, 610 N.Y.S.
2d 436 (Sur. Ct. 1994).
• Surrogate Preminger of New York County, agreeing "with much" of
Aitken, adopted a general rule that attorneys may apply for
reimbursement of any out-of-pocket expenses (involving payment to an
outside supplier of goods or services) on the representation that it
is the attorney's normal practice to bill separately for such
disbursements and that an accurate method of allocation has been
established. Matter of Herlinger, NYLJ 4/28/94, 28:6 (Sur. Ct. N.Y.
County). Surrogate Radigan followed the "conservative approach" of
Herlinger. Matter of Corwith, NYLJ 5/3/95, 35:2 (Sur. Ct. Nassau
County).
• However, Surrogate Holzman of Bronx County has distinguished both
Aitken and Herlinger and held them inapplicable in estates where the
legal fee is fixed by a percentage rather than by hourly rates. Matter
of Sykes, NYLJ 8/1/94, 29:5 (Sur. Ct. Bronx County).
• Surrogate Roth allowed claims for reimbursement of overnight,
express and messenger services only when the services were used
because time was "of the essence." Matter of Milam, NYLJ 2-26-01, 26:6
(Sur. Ct. N.Y. County), citing Matter of Aitken, supra; see also
Matter of Corwith, NYLJ 5-3- 95, 34:2 (Sur. Ct. Suffolk County).
• Certified mail charges constitute office overhead and are not
reimbursable. Matter of Bacon, NYLJ 5-10-02, 22:3 (Sur. Ct. Suffolk
County).
• Travel expenses, overtime, courier services and local meal expenses
were disallowed when the court found the need or reasonableness was
not adequately demonstrated. Matter of Seiberman, NYLJ 5-1-02, 25:1
(Sur. Ct. Westchester County).
• Routine and incidental expenses such as meals, stationery, postage,
telephone and local travel expenses incurred by the executor are
usually absorbed by the commission. Matter of Erlich, NYLJ 6-6-01,
23:3 (Cur Ct Kings County).
§ 18:106. --ACCOUNTANTS' FEES
If necessary to the administration of the estate, accountants' fees
can be paid from estate assets. Otherwise, the attorney must bear the
expense. In re Badenhausen's Estate, 38 Misc. 2d 698, 237 N.Y.S.2d 928
(Sur. Ct. 1963); In re Musil's Estate, 254 A.D. 765, 4 N.Y.S.2d 577
(2d Dep't 1938); Matter of Pasqua, NYLJ 9/20/90 29:1 (Sur. Ct. Suffolk
County).
See also Matter of Smith, NYLJ 1/15/98, 36:6 (Sur. Ct. Nassau County);
Matter of Hanover, NYLJ 6/19/98, 29: 2 (Sur. Ct. Kings County).
Practice Tip: If attorneys hire an accounting firm for tax advice and
to prepare amended tax returns, the accountants' fees are likely to be
charged against the attorneys' fees. Matter of Paris, NYLJ 9/22/94,
33:4 (Sur. Ct. Kings County); Matter of Northrop, NYLJ 12/30/94, 26:6
(Sur. Ct. Suffolk County); Matter of Steel, NYLJ 4/12/94, 22:4 (Sur.
Ct. N.Y. County).
Without a sufficient explanation for why employment of accountant was
warranted, the accounting fee was charge to attorney's fee or to
commission. Matter of Erlich, NYLJ 7-6-01, 23:3 (Sur. Ct. Kings
County).
Where the proper administration of a trust requires the services of an
accountant, the court will allow a reasonable fee for the services
rendered. Matter of Straus, NYLJ 6/10/2003, 24:2 (Sur. Ct. Suffolk
County).
§ 18:107. ----INTENTION OF TESTATOR DETERMINATIVE
If the will authorizes the executor to retain an accountant and to
compensate the accountant from the estate, the testator's intent must
prevail. In re Arnton, 106 A.D. 326, 94 N.Y.S. 471 (3d Dep't 1905).
§ 18:108. --PARALEGALS
The cost of services rendered by supervised paralegals may be claimed
as disbursements. See SCPA 2111(4).
One court approved as part of an attorney's compensation the value of
services rendered by an outside paralegal administrative support
service under contract to the attorney who acted under the attorney's
supervision. Matter of Trotman, NYLJ 5/13/98, 32:1 (Sur. Ct. Nassau
County).
Where paralegal time was undocumented except for attorney time
attributed to supervising such paralegal services, fee was reduced.
Matter of Hurst, NYLJ 2/15/01, 26:1 (Sur. Ct. N.Y. County).
§ 18:109. --ASSESSING FEES AND COSTS AGAINST ATTORNEY
Certain fees and costs (and other sanctions) may be assessed against
an attorney. Matter of Petix, NYLJ 6/1/93, 32:2 (Sur. Ct. Suffolk
County); Matter of Turco, NYLJ 10/27/94, 37:4 (Sur. Ct. Nassau
County); Matter of Hein, NYLJ 8/25/94, 28:3 (Sur. Ct. Westchester
County).
Examples:
• In Petix, the Surrogate fined counsel $5,000 for "reprehensible"
conduct that unduly occupied the court's and the other parties' time.
• In Turco, the court noted counsel's unprofessional conduct, crude
trial tactics that provoked frequent objection, repeated reference to
inadmissible evidence and argument from facts not in evidence, and
fined counsel personally.
• In Hein, the court ordered that arrest and commitment of the
attorney/executor would occur if he persisted in failing to settle an
accounting.
§ 18:110. MULTIPLE ATTORNEYS MUST SHARE ONE FEE
The sum of all fees paid to several attorneys should not exceed a
"single" fee. In re Mattis' Estate, 55 Misc. 2d 511, 285 N.Y.S.2d 551
(Sur. Ct. 1967); In re Bloomingdale's Estate, 172 Misc. 218, 14 N.Y.S.
2d 845 (Sur. Ct. 1939); In re Scher's Estate, 147 Misc. 791, 264
N.Y.S. 579 (Sur. Ct. 1933); Matter of Hanrahan, NYLJ 6/22/94, 30:2
(Sur. Ct. Bronx County); Matter of Fuerher, NYLJ 2/1/93, 34:3 (Sur.
Ct. Suffolk County); Matter of Hickox, NYLJ 12/29/93, 27:1 (Sur. Ct.
Nassau County); Matter of Deutsch, NYLJ 3/17/95, 30:5 (Sur. Ct. Nassau
County). ; In re Lieberman's Estate, 151 N.Y.S.2d 166 (Sur. Ct. 1956).
Although the Surrogate bears the ultimate responsibility for deciding
what constitutes reasonable professional compensation, even where
there are no objections, the court may also allow requested fees where
there are no objections and the fees appear to be reasonable. Matter
of Hyman, N.Y.L.J. 2/2/200, 34:3 (Sur. Ct. Westchester County),
citing, among others, In re Musil's Estate, 254 A.D. 765, 4 N.Y.S.2d
577 (2d Dep't 1938); In re Levi's Will, 3 Misc. 2d 746, 157 N.Y.S.2d
320 (Sur. Ct. 1956); In re Badenhausen's Estate, 38 Misc. 2d 698, 237
N.Y.S.2d 928 (Sur. Ct. 1963); Matter of Kelly, NYLJ 4/24/01, 25:1
(Sur. Ct. Nassau County).
Example: The issues that arose in the estate of the heiress Doris Duke
ultimately included a request to approve the payment of more than $21
million in legal fees to the "remarkable number of law firms and
lawyers who represented the estate through the closing date of the
accounting." While conceding that it is "well established that where
co-fiduciaries employ separate or additional counsel, the fees awarded
to multiple attorneys should not exceed the amount that would be
reasonable had a single attorney performed the services," the court
said it would "temper this rule and allow compensation to the extent
that separate or additional counsel were engaged because the interests
of the preliminary co-executors may have diverged." The court took
into account both the time pressures under which counsel operated at
times and various unforeseeable, complex or exceptional circumstances,
but it said it would not approve compensation "where the use of
multiple lawyers from different firms was excessive or unnecessary."
Matter of Duke, N.Y.L.J. 28:6 5/3/2000 (Sur. Ct. N.Y. County), citing
numerous cases including Matter of Leopold, 244 A.D.2d 411, 664 N.Y.S.
2d 323 (2d Dep't 1997), appeal after remand, 264 A.D.2d 777, 696 N.Y.S.
2d 825 (2d Dep't 1999). Subsequently, the Appellate Division increased
the original award of fees, having found "that award to be somewhat
less than what is suggested by our review of the record." The court
affirmed the denial of reimbursement for in-house photocopying and, in
the case of one firm, long distance faxes of the type traditionally
disallowed by Matter of Will of Aitken, 160 Misc. 2d 587, 610 N.Y.S.2d
436 (Sur. Ct. 1994). In re Lafferty, 297 A.D.2d 469, 746 N.Y.S.2d 709
(1st Dep't 2002).
Practice Tip: When an attorney is retained by another attorney to do
the work in an estate in which the hiring attorney had been retained,
it is essential that the terms of the engagement and responsibility
for payment be clear. Matter of Davis, NYLJ 7/16/98, 23:5 (Sur. Ct.
Bronx County). In Davis, the petitioner was not paid by the attorney
who had hired him and moved against the estate fiduciary on an
"implied contract" theory and "unjust enrichment" to the estate by
denial of his fees. The Surrogate dismissed the unpaid attorney's
claim against the estate, noting that "it is not unjust to hold that
the petitioner is not entitled to relief against anyone other than the
party at whose behest he performed the services." See also § 1:84.
§ 18:111. --RULE SUBJECT TO EXCEPTION
Whether a coexecutor should be allowed the expense of hiring a
separate attorney depends in each case on her/his good faith,
reasonableness of her/his acts and the benefits accruing to the
estate. In re Fraser, 165 A.D. 441, 150 N.Y.S. 774 (1st Dep't 1914).
Example: In a matter that involved disagreement among the executors,
the court noted that the rule limiting fees to a "single" attorney's
fee had to be tempered because the adversary positions of the parties
necessitated hiring separate counsel, and the extra work was caused by
the intransigence of the parties. Matter of Pollack, NYLJ 1/5/93, 22:5
(Sur. Ct. Bronx County).
§ 18:112. FEES FOR SERVICES FOR PERSONS OTHER THAN FIDUCIARY
Fees for services to a legatee are generally not payable from an
estate without a showing of some value to the fund, e.g., bringing
assets into the estate or reducing a claim against the estate. Matter
of Kinzler, 195 A.D.2d 464, 600 N.Y.S.2d 126 (2d Dep't 1993); Matter
of Grupe, 30 AD2d 701, 291 NYS2d 945 (2d Dept 1968); In re Greer's
Estate, 198 Misc. 921, 100 N.Y.S.2d 254 (Sur. Ct. 1950); In re Storms'
Estate, 35 Misc. 2d 275, 230 N.Y.S.2d 348 (Sur. Ct. 1962); Matter of
Shongut, NYLJ 3/19/86, 16:6 (Sur. Ct. Westchester County).
Example: In a case where a lawyer was replaced by counsel to the
Public Administrator, the former lawyer was compensated for services
that were useful to the Public Administrator's administration. Matter
of Walker, NYLJ 3/20/79, 13:3 (Sur. Ct. N.Y. County). ; Matter of
Kinzler, 195 A.D.2d 464, 600 N.Y.S.2d 126 (2d Dep't 1993); Matter of
Weinstock, NYLJ 11/30/98, 32:3 (Sur. Ct. Kings County); Matter of
Quattrocchi, NYLJ 9/11/00, 29:3 (Sur. Ct. Richmond County).
Example: In light of objectant's efforts to compel the fiduciary to
list real property at realistic asking prices and their efforts to
augment the estate by saving it fiduciary commissions, the Surrogate
properly awarded attorney's fees to their attorney. In re Quattrocchi,
293 A.D.2d 481, 739 N.Y.S.2d 642 (2d Dep't 2002). See also § 18:206.
§ 18:113. NO FEE FOR TESTIMONY IN ATTESTING WITNESS EXAMINATION
An attorney cannot be compensated for providing testimony in an SCPA
1404 examination regarding due execution of the will. Matter of
Fiegener, NYLJ 2/10/92, 35:4 (Sur. Ct. Kings County).
§ 18:114. TIME SPENT ON FEE APPLICATION NOT COMPENSABLE
An attorney cannot be compensated for preparing her/his own fee
application. Matter of Bohata, NYLJ 1/17/83, 18:6 (Sur. Ct. Suffolk
County); Matter of Gallagher, NYLJ 2/2/93, 22:4 (Sur. Ct. Bronx
County). Wynward v. Beiny, NYLJ 11/25/94, 30:5 (Sur. Ct. N.Y. County);
Matter of Marshak, NYLJ 4/30/96, 26:6 (Sur. Ct. N.Y. County).
Further there can be no "fee on a fee," i.e., there can be no recovery
of counsel fees incurred in the collection of counsel fees as a
general rule. Doyle v. Allstate Ins. Co., 1 N.Y.2d 439, 154 N.Y.S.2d
10, 136 N.E.2d 484 (1956); Parkside Memorial Chapels, Inc. v. Garlick
Funeral Homes, Inc., 61 A.D.2d 1028, 403 N.Y.S.2d 95 (2d Dep't 1978).
Counsel fees are not recoverable absent statutory or other express
provision. Hempstead General Hosp. v. Allstate Ins. Co., 106 A.D.2d
429, 482 N.Y.S.2d 523 (2d Dep't 1984), judgment aff'd, 64 N.Y.2d 958,
488 N.Y.S.2d 651, 477 N.E.2d 1105 (1985); Schussler v. Schussler, 123
A.D.2d 618, 506 N.Y.S.2d 774 (2d Dep't 1986) (abrogated by, O'Shea v.
O'Shea, 93 N.Y.2d 187, 689 N.Y.S.2d 8, 711 N.E.2d 193 (1999)); Matter
of Scotti, NYLJ 11/14/96, 32:2 (Sur. Ct. Nassau County).
The attorney must bear the expense of establishing the amount of her/
his own fee. Matter of Cohen, NYLJ 12/5/97, 35:1 (Sur. Ct. Nassau
County).
The time spent for preparation and filing of the attorney's affidavit
of legal services is not properly chargeable to the estate. Matter of
Farrell, NYLJ 4/12/2000, 35:1 (Sur. Ct. Nassau County); see also
Matter of Kelly, NYLJ 4/24/01, 25:1 (Sur. Ct. Nassau County).
"Specifically disallowed is time spent on the legal fee dispute and
researching the advisability of bringing a proceeding to fix their
[own] legal fees." Matter of Kaplan, NYLJ 5/15/00, 32:6 (Sur. Ct.
Kings County).
§ 18:114.5. INTEREST ON FEES AWARDED
Interest at the statutory rate (CPLR 5002, 5004) may be awarded on
legal fees ordered to be paid from date of decision to date of
payment. Prejudgment interest is, however, rarely granted in
Surrogate's Court in cases of an award of legal fees unless the facts
are egregious. See, e.g., Matter of Kinzler, 195 A.D.2d 464, 600 N.Y.S.
2d 126 (2d Dep't 1993); Estate of Gillett, 139 Misc. 2d 188, 527 N.Y.S.
2d 690 (Sur. Ct. 1988); Estate of Bradley, 128 Misc. 2d 240, 490 N.Y.S.
2d 105 (Sur. Ct. 1985); Matter of Marsh, NYLJ 5/7/98, 30:2 (Sur. Ct.
N. Y. County). See § 23:169.
§ 18:115. COMMISSIONS, GENERALLY
Unlike attorneys' fees, compensation payable to a personal
representative and other fiduciaries is set by statute. See § 18:124.
Numerous questions still exist, however, including: the basis for
compensation, entitlement and calculation of amount receivable, and
the time and manner of collection.
There may also be (and usually is) a difference between the value of
an estate for commission purposes (the "commissionable estate") and
the value for estate tax determination. Although a personal
representative may have the primary duty to pay the estate taxes on
all taxable assets, the commissions the fiduciary receives may be
based on a lesser value.
Further, recent cases and legislation have created new concerns for an
attorney/fiduciary in connection with estate administration.
§ 18:116. --RIGHT TO COMPENSATION
There is no inherent right to compensation for services rendered as a
fiduciary. In re Corning's Will, 160 Misc. 434, 289 N.Y.S. 1101 (Sur.
Ct. 1936); In re Nelson's Will, 105 Misc. 2d 747, 433 N.Y.S.2d 314
(Sur. Ct. 1980); In re Gildersleeve's Estate, 75 Misc. 2d 207, 347
N.Y.S.2d 96 (Sur. Ct. 1973); Durham v. Perkins, 270 A.D. 739, 62 N.Y.S.
2d 205 (1st Dep't 1946), judgment aff'd, 296 N.Y. 514, 68 N.E.2d 454
(1946).
Unless otherwise provided by will, governing instrument or agreement
of the parties, a fiduciary's compensation is fixed by statute. In re
Povlsen's Estate, 62 Misc. 2d 239, 308 N.Y.S.2d 168 (Sur. Ct. 1970);
In re Jadwin's Estate, 58 Misc. 2d 809, 296 N.Y.S.2d 901 (Sur. Ct.
1969).
§ 18:117. ----DUTIES ARE BASIS OF ALL COMMISSIONS
The purpose of commissions is to compensate a fiduciary for taking
active control of property and assuming personal liability for it.
Matter of LoBono, NYLJ 3/1/85, 15:5 (Sur. Ct. Queens County).
Consequently, only fiduciaries with active duties to perform are
entitled to commissions. Bank of New York & Trust Co. v. Hamersley,
210 A.D. 57, 205 N.Y.S. 544 (1st Dep't 1924), aff'd, 240 N.Y. 558, 148
N.E. 704 (1925).
When a task of insufficient significance is undertaken, no commission
will be allowed. Estate of Buccola, 133 Misc. 2d 511, 507 N.Y.S.2d 363
(Sur. Ct. 1986).
These rules affect entitlement to commissions with respect to unsold
real and tangible personal property specifically disposed of, and
other nontestamentary assets that do not come into the control or
possession of the personal representative. Ordinarily, no commissions
are allowed with respect to their value. See § 18:127.
§ 18:118. ------FAILURE TO COMPLETE DUTIES
A personal representative who dies, resigns or otherwise fails to
complete the administration of an estate is not entitled as of right
to full statutory commissions. In re Bushe, 227 N.Y. 85, 124 N.E. 154,
7 A.L.R. 1590 (1919); In re Barker, 230 N.Y. 364, 130 N.E. 579 (1921);
In re Rosenberg's Estate, 124 Misc. 434, 207 N.Y.S. 557 (Sur. Ct.
1924); In re McGrath's Estate, 74 Misc. 2d 92, 344 N.Y.S.2d 688 (Sur.
Ct. 1973).
The court in its discretion may, however, compensate a deceased
fiduciary's estate in an amount not to exceed statutory commissions on
the estate as if it had been fully administered. Matter of Barker,
supra; Matter of Hitchcock, 99 Misc. 2d 860, 417 N.Y.S.2d 640 (Sur.
Ct. 1979); In re Vigeant's Will, 29 Misc. 2d 569, 215 N.Y.S.2d 187
(Sur. Ct. 1961). See § 18:202.
Conversely, the Court may deny any compensation to a deceased
fiduciary or her/his estate for failure to file a formal accounting.
Matter of LaBua, NYLJ 5/28/98, 31:6 (Sur. Ct. Suffolk County) In
LaBua, the petitioner had to take and state the account of the
deceased fiduciary who had never accounted.
§ 18:119. ----"EXTRA COMPENSATION"
Under certain limited circumstances, compensation in excess of
statutory amounts has been allowed for extraordinary additional
services. See § 18:195.
§ 18:120. ----DENIAL OF COMPENSATION
Commissions are allowed for actual services rendered, provided that
service has been performed adequately.
See Matter of Seabury, NYLJ 1/2/96, p. 30. col. 6 (Sur. Ct. Bronx
County), in which a Guardian's Commissions were denied when Guardian
failed to collect substantial assets and attempted to retain them for
his own benefit. Guardian was also surcharged for failure to pay taxes
timely.
In the event of a mistake or error not amounting to gross neglect,
indifference or intentional wrong or other egregious conduct,
commissions may nevertheless be allowed but will be offset by
surcharge for the amount of chargeable liability resulting from to
negligence.
If, taken together, all the actions of the fiduciary constitute gross
negligence and dereliction of duty, commissions will be denied.
Compare In re Kramer's Estate, 78 Misc. 2d 662, 356 N.Y.S.2d 984 (Sur.
Ct. 1974); Matter of Schaich's Estate, 55 A.D.2d 914, 391 N.Y.S.2d 135
(2d Dep't 1977); Matter of Tollner, NYLJ 6/7/95, 20:5 (Sur. Ct. Nassau
County). See § 18:207.
The rule, as stated in Kramer, is that while commissions may be denied
for misconduct, breach of trust or mismanagement, in the "absence of
bad faith, neglect of duty or wanton disregard of rights of persons
interested, commissions should not be not be denied an executor. . . .
An executor is not expected to be infallible in his judgments or
decisions. Like all mortals, he is liable to make mistakes. . . . Even
if the fiduciary acted erroneously, if there is no evidence of bad
faith, he should not be denied his commission."
Nevertheless, courts that find grossly negligent conduct, bad faith or
undue delay even when it causes no detriment to the beneficiaries may
deny commission to the fiduciary. In re Simpson's Estate, 61 Misc. 2d
307, 305 N.Y.S.2d 339 (Sur. Ct. 1969). See also In re Ducas' Estate,
109 N.Y.S.2d 17 (Sur. Ct. 1950), decree aff'd by, 279 A.D. 730, 108
N.Y.S.2d 1016 (1st Dep't 1951); Stevens v. Melcher, 152 N.Y. 551, 46
N.E. 965 (1897); In re Geffen's Estate, 129 N.Y.S.2d 311 (Sur. Ct.
1954); Matter of Palcic, NYLJ 5-18-01, 21:1 (Sur. Ct. Richmond
County).
Commissions must be awarded absent mathematical error or allegations
of misconduct amounting to dereliction of duty, complete indifference
or other comparable acts of misfeasance. Matter of Estate of Drier,
245 A.D.2d 787, 666 N.Y.S.2d 758 (3d Dep't 1997), leave to appeal
denied, 91 N.Y.2d 812, 674 N.Y.S.2d 278, 697 N.E.2d 179 (1998); see
also, Matter of Slagle, NLYJ 7/13/98, 29:5 (Sur. Ct. N.Y. County). See
also §§ 18:116, 18:208.
It is well-settled that a fiduciary who is derelict in the performance
of her/his duties may be denied commission. Matter of Hayes, NYLJ
9/3/98, 22:6 (Sur. Ct. N.Y. County). See also § 23:147.
In the absence of bad faith, neglect of duty, or wanton disregard of
right of interested persons, commissions should not be denied even if
the fiduciary acted erroneously. However, if the court were to "find
grossly negligent conduct, bad faith or undue delay even where it
causes no detriment to the beneficiaries," it may deny commission to
the fiduciary. (See e.g., In re Simpson's Estate, 61 Misc. 2d 307, 305
N.Y.S.2d 339 (Sur. Ct. 1969); In re Ducas' Estate, 109 N.Y.S.2d 17
(Sur. Ct. 1950), decree aff'd by, 279 A.D. 730, 108 N.Y.S.2d 1016 (1st
Dep't 1951); In re Stevens' Will, 92 N.Y.S.2d 226 (Sur. Ct. 1949); In
re Geffen's Estate, 129 N.Y.S.2d 311 (Sur. Ct. 1954). Matter of
Quattrocchi, NYLJ 9/11/00, 29:3 (Sur. Ct. Richmond County).
Examples: Where administrator c.t.a. delayed administration for almost
10 years, caused interest and penalties to accrue on late filings of
tax returns, failed to make distributions, failed to account, failed
to keep proper records, and turned over records to successor only
after contempt proceedings were brought against her, she was denied
commissions. "It is well settled that when the fiduciary is derelict
in the performance of his or her duties, the denial of commissions is
within the discretion of the Surrogate." In re Estate of Richmond, 187
Misc. 2d 872, 724 N.Y.S.2d 566 (Sur. Ct. 2001), citing Matter of
Smith's Estate, 91 A.D.2d 789, at 791 N.Y.S.2d 72(3d Dep't 1982).
While "egregious misconduct on the part of the fiduciary may call for
surcharge and denial of commissions," the fiduciary's administration
of the estate, "idiosyncratic though it may be, does not justify
denial of commissions." Matter of Dickman, NYLJ 8/8/00, 28:3 (Sur. Ct.
Nassau County).
The duty of the Surrogate to "effectuate the intent of a decedent and
protect the rights of his beneficiaries precludes countenancing, let
alone rewarding, any course which fosters the concept that the
assumption of fiduciary responsibility involves a duty which may be
lightly undertake and discharged cavalierly in exchange for lucrative
compensation. It is a job which must be taken seriously and property
performed, if the fiduciary hopes to be compensation and wishes to
avoid liabilities which can extend beyond mere loss of compensation.
This Court embraces this concept as being critical to maintaining the
fundamental premise that statutory commissions constitute compensation
for services well rendered, and not a gift from a decedent to the
fiduciary of his estate." Matter of Palcic, NYLJ 5-18-01, 21:1 (Sur.
Ct. Richmond County). The executor was found to have acted in bad
faith by engaging in self-dealing and favored treatment of her son.
Although the misfeasance fell short of "that would prevent her from
receiving any compensation," the court, in an exercise of its
discretion, denied her 25% of her statutory commission.
See also §§ 18:135, 18:136, 18:205-18:209.
§ 18:121. ------SURCHARGE FOR DIMINISHED VALUE OF ASSETS
In addition to denying commissions, a court may surcharge an executor
if assets diminish in value. In one notable case, a corporate executor
was denied commissions, surcharged more than $6 million plus interest
for negligent investment losses, and directed to pay its own
attorneys' fees and expenses. Matter of Estate of Janes, 165 Misc. 2d
743, 630 N.Y.S.2d 472 (Sur. Ct. 1995), judgment aff'd as modified, 223
A.D.2d 20, 643 N.Y.S.2d 972 (4th Dep't 1996), related reference, 223
A.D.2d 20, 643 N.Y.S.2d 462 (4th Dep't 1996) and leave to appeal
granted, 88 N.Y.2d 816, 651 N.Y.S.2d 406, 674 N.E.2d 336 (1996) and
order aff'd, 90 N.Y.2d 41, 659 N.Y.S.2d 165, 681 N.E.2d 332 (1997),
reargument denied, 90 N.Y.2d 885, 661 N.Y.S.2d 827, 684 N.E.2d 277
(1997).
The original award in Janes was subsequently reduced on the grounds
that where the fiduciary's imprudence consisted solely of negligent
retention of assets, the measure of damages should be the value of the
lost capital, not a computation based on "lost profits" or a "market
index." Matter of Janes, 223 A.D.2d 20, 643 N.Y.S.2d 972 (4th Dep't
1996), related reference, 223 A.D.2d 20, 643 N.Y.S.2d 462 (4th Dep't
1996) and leave to appeal granted, 88 N.Y.2d 816, 651 N.Y.S.2d 406,
674 N.E.2d 336 (1996) and order aff'd, 90 N.Y.2d 41, 659 N.Y.S.2d 165,
681 N.E.2d 332 (1997), reargument denied, 90 N.Y.2d 885, 661 N.Y.S.2d
827, 684 N.E.2d 277 (1997).
§ 18:122. APPLICABLE STATUTES
The statute applicable in a given case depends on the nature of the
fiduciary seeking compensation. The relevant statutes are as follows:
• SCPA 2307 -- Commissions of fiduciaries other than trustees. This
statute would, of course, apply to personal representatives
(executors, administrators, etc.). It also applies, rather awkwardly,
to guardians.
• SCPA 2307-a -- Effective August 2, 1995, as to all wills and
codicils executed on or after January 1, 1996, and to estates of all
testators (regardless of will date) dying after December 31, 1996.
This statute prescribes disclosure requirements to be met by attorney/
fiduciaries and will result in forfeiture of one-half of commissions
otherwise payable if the required disclosure is not made.
• SCPA 2308 -- Commissions of trustees under wills of persons dying,
or under lifetime trusts created, on or before August 31, 1956.
• SCPA 2309 -- Commissions of trustees under wills of persons dying,
or under lifetime trusts created, after August 31, 1956.
• SCPA 2312 -- Commissions of corporate trustees. This is the so-
called "reasonable compensation" statute, applicable only to corporate
trustees of certain trusts.
• SCPA 2313 -- This statute restricts the number of full commissions
payable to personal representatives and trustees under wills of
persons dying, or under lifetime trusts created, after August 31,
1993.
• SCPA 1412(7) -- This statute relates to commissions payable to a
preliminary executor after the will has been admitted to probate or to
reasonable compensation if the will has not been admitted to probate.
• SCPA 1106, SCPA 1207 -- These statutes relate to commissions payable
to Public Administrators.
• SCPA 2207(6) -- This statute relates to payment of reasonable
compensation to a "fiduciary of a deceased fiduciary" for services
rendered to the estate on behalf of the deceased fiduciary.
• SCPA 1307(1) -- This statute provides that no compensation is to be
payable to a voluntary administrator.
§ 18:123. --COMMISSIONS OF "FIDUCIARIES OTHER THAN TRUSTEES"
This awkward title of SCPA 2307 is intended to embrace all personal
representatives (executors, administrators, etc.), but its reference
to "fiduciaries" sweeps in all the offices encompassed in the
definition of that term contained in SCPA 103(21). However, voluntary
administrators, Public Administrators, preliminary executors -- all
listed in SCPA 103(21) -- are governed by different rules. See, e.g.,
Chapter 6, Uncontested Probate and Issuance of Letters, §§ 6:225 et
seq..
Further, the statute's application to guardians and donees of a power
during minority, also referred to in SCPA 103(1), is unfortunate. The
duties of those fiduciaries more closely resemble the duties of a
trustee.
For purpose of the following discussion, reference is made to
"personal representative" in lieu of the individual titles mentioned
in this section that are embraced by that term.
§ 18:124. STATUTORY COMMISSION RATES UNDER SCPA 2307
Except as provided in SCPA 2307(1)(f), and as limited by SCPA 2307(5)
and SCPA 2313 in the case of multiple fiduciaries, a personal
representative is entitled to commissions at the rates provided in
SCPA 2307. The statute prescribes:
on the settlement of the account of any fiduciary other than a trustee
the court must allow . . . the reasonable and necessary expenses
actually paid by, the personal representative, and if he [or she is]
an attorney of this state and shall have rendered legal services in
connection with his [or her] official duties, such compensation
for. . . legal services as appear to the court to be just and
reasonable and in addition thereto [the court] must allow to the
fiduciary for . . . services as fiduciary . . . the following
commissions:
a. (a) For receiving and paying out all sums of money not exceeding
$100,000 at the rate of 5%.
b. (b) For receiving and paying out any additional sums not exceeding
$200,000 at the rate of 4%.
c. (c) For receiving and paying out any additional sums not exceeding
$700,000 at the rate of 3%.
d. (d) For receiving and paying out any additional sums not exceeding
$4,000,000 at the rate of 2*%.
e. (e) For receiving and paying out all sums above $5,000,000 at the
rate of 2%.
SCPA 2307(1).
Practice Tip: SCPA 2307(5) limits multiple commissions in estates of
persons who died prior to September 1, 1993. SCPA 2313 limits multiple
commissions in estates of persons who died or die after August 31,
1993. Each of these provisions may be overridden by specific
provisions made by the testator. Thus, in cases where multiple
executors or trustees will serve, the number and apportionment of
commissions must be addressed at the drafting stage.
§ 18:125. --"RECEIVING AND PAYING" HAS PARTICULAR IMPORTANCE
The apparently simple statement that the percentages are applied to
the acts of "receiving and paying out" described "sums" of money can
be a trap.
First, commissions are not based only on the receipt and payment of
money. SCPA 2307(2) makes it clear that the value of property (to be
determined in the manner directed by the court) the increment thereof,
received, distributed or delivered, is to be considered as money in
computing commissions.
Second, the rates are split equally between "receiving" and "paying."
SCPA 2307(1)(f); see 29 Carmody-Wait 2d § 168:21. See Also §§ 18:126
et seq..
Practice Tip: In an embarrassing case (for counsel), the accounting
firm that prepared the accounting sought an additional $20,000 for
such services. The accountants calculated full commissions on values
received and full commissions on amounts paid out. In disallowing
fees, the court said: "Such error is inexcusable in view of the legal
and accounting backgrounds of the parties who were responsible for
submitting this accounting to the court." Matter of Tollner, NYLJ
6/7/95, 20:5 (Sur. Ct. Nassau County). In sum, one must not forget
that one-half of the rate is applied to "receiving" and one-half of
the rate is applied to "paying."
§ 18:126. --"RECEIVING" COMMISSIONS UNDER SCPA 2307
A number of factors can come into play affecting the right to and the
computation of commissions on "received" property.
§ 18:127. ----PROPERTY MUST BE RECEIVED
Property that does not come into the possession of the personal
representative is not subject to commissions. Matter of Salomon's
Ex'rs, 252 N.Y. 381, 169 N.E. 616 (1930); Kalbfleisch's Estate, Re, 84
N.Y.S.2d 146 (Sur. Ct. 1948); Callahan's Estate, Re, 85 N.Y.S.2d 95
(Sur. Ct. 1948).
Thus, the value of nontestamentary assets (e.g., joint property, life
insurance payable other than to the estate, Totten Trust accounts,
property held subject to a general power of appointment, all of which
are possibly taxable to the estate) is not included in the commission
base. These assets, and certain exceptional cases, are discussed in
following sections.
Proceeds received from other property (e.g., uncollected receivables,
property subject to pledge and proceeds of the liquidation of a
decedent's business or real estate if sold) are commissionable when
collected and at the net value received. (See § 18:129)
§ 18:128. ------CERTAIN PROPERTY NOT SUBJECT EVEN IF RECEIVED
The statute itself denies commissions on the value of property subject
to a "specific legacy or devise." SCPA 2307(2).
There are exceptions. See § 18:161.
§ 18:129. ----DETERMINING VALUES
SCPA 2307 contains no definition of value other than to provide that
it may "be determined in such manner as directed by the court."
Under case law, however, values for receiving commissions are those
fixed by the federal estate tax proceeding or, if none, the New York
estate tax proceeding. In either case, this would be the "fair market
value" of an asset at the appropriate valuation date.
It should be noted that the date property is deemed received is the
date of the decedent's death, even if the alternate valuation method
is selected for estate tax determination. See generally In re
Baldwin's Will, 157 Misc. 692, 284 N.Y.S. 754 (Sur. Ct. 1935), aff'd,
250 A.D. 767, 295 N.Y.S. 480 (2d Dep't 1937); In re Hoff's Estate, 186
Misc. 684, 65 N.Y.S.2d 234 (Sur. Ct. 1945), decree aff'd by, 270 A.D.
891, 62 N.Y.S.2d 577 (1st Dep't 1946), order aff'd, 296 N.Y. 650, 69
N.E.2d 814 (1946).
§ 18:130. ------INCREASES IN ASSET VALUE AFFECT COMMISSIONS
The statute allows commissions not only on the value of property
received, but also on "the increment thereof," i.e., any realized
increase on its value.
If commissionable property is sold or "distributed or delivered" at a
gain, the gross gain is deemed "received" for commission purposes.
Gains do not have to be netted against losses, and a receiving
commission therefore will be allowed on the entire gross gain. In re
Pratt's Will, 172 Misc. 756, 16 N.Y.S.2d 75 (Sur. Ct. 1939). See
Chapter 17, Accounting and Accounting Proceedings, §§ 17:30 et seq.
§ 18:131. ------DECREASES IN ASSET VALUE AFFECT PAYING COMMISSION
A loss is not considered distributed or delivered. Matter of Gimbel,
NYLJ 1/9/32, 57:1 (Sur. Ct. N.Y. County).
The paying commission is computed based on the net paid out,
distributed or delivered.
No commissions are allowed on the value of destroyed property. In re
Lester, 172 A.D. 509, 158 N.Y.S. 763 (3d Dep't 1916). See Chapter 17,
Accounting and Accounting Proceedings, §§ 17:30 et seq.
§ 18:132. ----INCOME IN GENERAL
SCPA 2307 does not expressly state that income receipts and
disbursements are subject to commissions. However, that can be
inferred from the second sentence of SCPA 2307(2).
Income received and paid out is commissionable. In practice, the
proration of the total commission between income and principal is set
forth in the appropriate schedule of the accounting. See Chapter 17,
Accounting and Accounting Proceedings, §§ 17:30 et seq..
§ 18:133. ------RENTS
A further provision allows additional commissions to a fiduciary who
is required both to collect rents of, and to manage, real estate. SCPA
2307(6). See § 18:157.
§ 18:134. --"PAYING" COMMISSIONS UNDER SCPA 2307
It is not necessary to reduce assets to cash to determine commissions.
An asset's value at the time it is "distributed or delivered" in kind
is subject to a paying commission. The proper measure of value is
"fair market value" at the date of distribution. EPTL 11-1.1(b)(21);
In re Pratt's Will, 172 Misc. 756, 16 N.Y.S.2d 75 (Sur. Ct. 1939).
The term "value" itself is not defined in either the SCPA or the EPTL.
However, consistent with receiving values, which are based on estate
tax values see § 18:129, the values of property for paying out
commissions, also should be based on the methodology for determining
estate tax values.
§ 18:135. --COURT'S DUTY TO ALLOW COMMISSIONS
Under certain circumstances, the court need not allow certain items;
indeed, it is not always necessary for there to be an accounting.
Further, even if the account is uncomplicated, commissions should not
be affected. Executors are not compensated in relation to the
complexity of an estate.
In short, the general rule is that, absent mathematical error or
allegation of fiduciary wrongdoing, statutory commissions must be
awarded. Matter of Reohr's Estate, 71 A.D.2d 161, 422 N.Y.S.2d 495 (3d
Dep't 1979); Matter of Estate of Farone, 162 A.D.2d 828, 557 N.Y.S.2d
849 (3d Dep't 1990); Matter of Russo, NYLJ 10/22/92, 27:5 (Sur. Ct.
Westchester County).
Only mathematical error, dereliction of duty, complete indifference or
other comparable acts of misfeasance can constitute grounds for
denying commissions. Matter of Estate of Drier, 245 A.D.2d 787, 666
N.Y.S.2d 758 (3d Dep't 1997), leave to appeal denied, 91 N.Y.2d 812,
674 N.Y.S.2d 278, 697 N.E.2d 179 (1998).
When there is no showing of negligence or failure to exercise
prudence, the court cannot deny a fiduciary her/his commissions.
Matter of Estate of Piltch, 175 Misc. 2d 56, 667 N.Y.S.2d 668 (Sur.
Ct. 1997).
See also § 18:120, §§ 18:205-18:209.
§ 18:136. ----FIDUCIARY MISCONDUCT CHIEF EXCEPTION
The most important exception to the court's duty to allow the
commissions is misconduct by the fiduciary. See §§ 18:205 et seq..
§ 18:137. ----PAYMENT BEFORE COMPLETION OF MATTER
SCPA 2310 and SCPA 2311 provide that at any time during the
administration of an estate, and regardless of the pendency of a
proceeding (and without an accounting), a fiduciary may request an
advance payment on account of commissions to which such fiduciary
would be entitled if he/she were then filing an account.
SCPA 2310 is based on notice and service of process; SCPA 2311
provides for an ex parte application.
The filing of a bond to cover advance payment of commissions is not
necessary where the will specifically dispenses with a bond. SCPA
2311(5) But usual "boiler plate" exoneration from bond is not
sufficient. See Matter of Estate of Dubin, 166 Misc. 2d 971, 636 N.Y.S.
2d 991 (Sur. Ct. 1995).
SCPA 2311 by its terms allows a "fiduciary" to apply for advance
payment of commissions, and SCPA 103 includes a "preliminary executor"
within the definition of fiduciary. SCPA 103(21). Nevertheless, SCPA
1412(7) provides that a preliminary executor shall not be entitled to
fiduciary commissions unless the Will be admitted to probate and
letters testamentary are issued. Nevertheless, the Court may allow
"reasonable compensation" to a preliminary executor based upon
"statutory intent and equitable considerations," viz., the desire not
to deprive the fiduciary and beneficiaries of tax advantages at least
where the preliminary executor had acted expeditiously, and there was
no one questioning his or her eligibility. Matter of Estate of
Kochovos, 132 Misc. 2d 577, 504 N.Y.S.2d 371 (Sur. Ct. 1986). However,
if it is not clear that the preliminary executor will be granted full
letters and become entitled to commissions, advance payment of
compensation will not be granted. Matter of Feelus, NYLJ 1/6/97, 27:1
(Sur. Ct. Bronx County).
SCPA 2311(3) permitting advance payment of "receiving commissions"
must be interpreted as referring to SCPA 2307(1), which provides for
"receiving and paying out all sums of money." The commissions provided
under SCPA 2307(6) for managing real property cannot be interpreted to
fall within "receiving commissions," and are expressly "in addition to
the commissions" otherwise provided. Thus, no "advance payment of such
management commissions is permitted under SCPA 2311. In re Estate of
Butta, 185 Misc. 2d 689, 713 N.Y.S.2d 923 (Sur. Ct. 2000).
§ 18:138. ------UNAUTHORIZED ADVANCE PAYMENT CAN LEAD TO REFUND
The statute reserves to the court the power to allow commissions.
Accordingly, if a personal representative who takes a payment of
commission before allowance on an accounting, or without an order
under SCPA 2310 or 2311, or without approval of all beneficiaries, the
court may direct her/him to make a refund and to pay interest at the
legal rate (CPLR 5004 now fixes that at 9%). In re Crippen's Estate,
32 Misc. 2d 1019, 224 N.Y.S.2d 116 (Sur. Ct. 1961).
Even if there is no opposition to the fiduciary's action in taking
advance commissions, the court may impose a penalty at the legal rate
from the date of the advance payment to the date of the decree. Matter
of Penn, NYLJ 1/13/99, 31:2 (Sur. Ct. Suffolk County); Matter of
Burns, NYLJ 12/21/95, 35:1 (Sur. Ct. Westchester County). A petition
directing an executor to return commissions taken in advance may be
granted with the executor also ordered to pay interest at the 9% rate.
Matter of Frewin, NYLJ 5/6/99, 34:5 (Sur. Ct. Queens County). See also
§ 23:165.
See also Matter of Dickman, NYLJ 8/8/00, 28:3 (Sur. Ct. Nassau
County).
Petitioner's payment of commissions without prior court approval is
grounds for automatic surcharge at the statutory rate of interest
(CPLR 5004) of 9% per annum. Matter of Conroy, NYLJ 4/18/01, 23:4
(Sur. Ct. Westchester County), citing Matter of Smith's Estate, 91 A.D.
2d 789, at 791, 458 N.Y.S.2d 72(3d Dep't 1982).
Example: Where the executor paid herself commission of $60,000 on
account of $66,690.16 in advance without prior court approval, the
court surcharged her with the interest at 9% per annum from the time
of receipt to the date of the decree. Matter of Kern, NYLJ 4-1-02,
25:4 (Sur. Ct. Nassau County), declining to apply Matter of Estate of
Pritchard, 138 Misc. 2d 945, 525 N.Y.S.2d 999 (Sur. Ct. 1988) to
approve the advance payments nunc pro tunc.
Example: The objectant had previously consented in writing to the
reasonableness of fees and commission and to their payment in advance.
The objectant was therefore estopped from raising this issue. Matter
of Goldschmidt, NYLJ 7/14/2003, 20:6 (Sur. Ct. NY County).
See also § 23:165.
Practice Tip: Even when all beneficiaries consent to the advance
payment, Surrogates seem to take umbrage at the fact that their
authority is being preempted. It is not uncommon for an opinion
settling an accounting proceeding to contain a reference to the
advance payment, even one based on full consent, with the added
statement by the Surrogate that "but for" the consent, the fiduciary
would have been surcharged. See, e.g., Matter of Meeker, NYLJ 6/27/95,
35:5 (Sur. Ct. Nassau County). If the estate accounting will be
judicially settled, it is therefore advisable to apply for judicial
approval of an advance payment and thereby avoid the criticism.
§ 18:139. --ATTORNEY/FIDUCIARY MAY RECEIVE FEE AND COMMISSIONS
SCPA 2307(1) expressly provides that if a fiduciary is also an
attorney rendering legal services in connection with her/his duties as
fiduciary, he/she can obtain separate compensation for such legal
services.
Thus, a personal representative may hire herself/himself (or her/his
own law firm) to perform legal services for the estate. As attorney,
he, she or the firm may receive additional compensation. The fiduciary
will still be entitled to commissions for performing estate
administration duties as the personal representative.
See §§ 6:71, 6:72, 18:207.
§ 18:140. ----SCPA 2307-A CALLS FOR DISCLOSURE TO TESTATOR
Because of the practical difficulties in distinguishing between the
separate duties of attorney and personal representative, a potential
for "double dipping" exists. For this reason, as well as the
possibility for deliberate abuse and the public displeasure with
excessive legal fees, SCPA 2307-a was enacted, and became effective
August 2, 1995.
This statute mandates that certain disclosures be made by an attorney/
fiduciary and acknowledged by the testator if the attorney/fiduciary
is to receive "full" commissions. Failure to comply with SCPA 2307-a
will result in reduced commissions. See § 18:207.
In an application to waive SCPA 2307-a, the attorney is not barred by
the Dead Man's Statute CPLR 4519 from testifying about communications
or transactions with the decedent on the subject of legal fees. Matter
of Estate of Waldman, 172 Misc. 2d 130, 658 N.Y.S.2d 565 (Sur. Ct.
1997).
Before SCPA 2307-a was enacted, questions existed not only about
whether attorneys who drafted wills designating themselves as
executors could receive full commissions but also about when
entitlement to commissions would be determined. SCPA 2307-a(7) now
provides that a determination shall be made in the probate proceeding.
Matter of Estate of Fleshler, 176 Misc. 2d 583, 672 N.Y.S.2d 1005
(Sur. Ct. 1998).
Failure to comply with SCPA 2307-a will result in reduced commissions
unless the court finds grounds to waive its provisions. See §
18:207.5.
The requirements of SCPA 2307-a were not waived when the attorney/
draftsman who prepared a codicil to the decedent's pre-1996 will made
the disclosure orally to the testator but failed to have the testator
sign a written affidavit when the codicil was executed. Matter of
Castelnuovo, NYLJ 6/23/99, 33:3 (Sur. Ct. Nassau County). The court
reasoned that the codicil effectively republished the entire will when
executed, thus making it will prepared on or after January 1, 1996,
will. The court saw nothing to excuse the non-compliance with the SCPA
2307-a(2) requirement that the testator execute a written
acknowledgment of disclosure.
The disclosure rules have been found applicable to attorney/executors
of wills made outside New York State for probate here. In re Estate of
Rosenak, 184 Misc. 2d 807, 710 N.Y.S.2d 813 (Sur. Ct. 2000).
In Rosenak, an attorney/executor was named in a 1997 will made in
Israel that was offered for original probate in Kings County, the
decedent's domicile. The decision by Surrogate Feinberg said there was
"no reason that the public policy behind disclosure should not be
afforded to a New York domiciliary who executes a will in another
jurisdiction" and noted that commissions of a New York fiduciary are
calculated in accordance with New York law. Will of McConville, 225
A.D.2d 455, 639 N.Y.S.2d 345 (1st Dep't 1996); In re Strauss' Estate,
75 Misc. 2d 454, 347 N.Y.S.2d 840 (Sur. Ct. 1973). He continued: "The
reduction of commissions pursuant to the statute is equally a question
of local law. Finally, the statute states that compliance with the
mandated disclosure shall be determined in the probate proceeding SCPA
2307-a [7]). However, the court has the discretion to hold the issue
in abeyance until the time of the accounting or other appropriate
proceeding Matter of Estate of Fleshler, 176 Misc. 2d 583, 672 N.Y.S.
2d 1005 (Sur. Ct. 1998). Accordingly, the decree admitting the will to
probate shall contain a provision that all issues as to the amount of
commissions under SCPA 2307-a shall be determined in an appropriate
future proceeding."
In contrast to the result in Rosenak, Surrogate Czygier of Suffolk
County granted a waiver of the disclosure requirements with respect to
a 1981 will by a testator who resided in Connecticut at the time. The
attorney/drafter (an alternate executor) was then a practicing
Connecticut attorney not admitted in New York. Connecticut then and
now had no statute comparable to SCPA 2307-a. Matter of Newell, NYLJ
6-6-02, 27:4 (Sur. Ct. Suffolk County).
See also § 18:140.5.
Practice Tip: Note that although SCPA 2307-a applied during 1996 only
to wills executed on or after January 1, 1996, it now applies,
regardless of the date the will was prepared, to anyone who has died
after December 31, 1996. See § 18:122.
SCPA 2307-a(9)(b) permits the court to waive compliance with the
statute only in cases of wills made prior to January 1, 1996. Matter
of Bollen, NYLJ 6/7/00, 28:4 (Sur. Ct. Bronx County).
In cases where the SCPA 2307-a disclosure was contained within the
text of the will and not in a separate instrument, executed separately
and apart from the will, courts have reached opposite results.
Surrogate Roth concluded that the SCPA 2307-a had to be contained in a
separate writing and denied a waiver. Matter of Pacanofsky and In re
Estate of Pacanofsky, 186 Misc. 2d 15, 714 N.Y.S.2d 433 (Sur. Ct.
2000). Surrogate Holzman allowed a waiver based on the special facts
of a case, although acknowledging that the safer course in all cases
is to use a separate writing. In re Estate of Winston, 186 Misc. 2d
332, 717 N.Y.S.2d 879 (Sur. Ct. 2000). Surrogate Riordan has followed
Paconofsky and Hinkson. Matter of Bruder, NYLJ 3/15/01, 25:3 (Sur. Ct.
Nassau County).
Examples:
• The attorney did not make required disclosure due to testatrix's age
[mid nineties] and state of health and possible confusion to her. No
waiver was granted. Matter of Contino, NYLJ 1/31/01, 32:4 (Sur. Ct.
Nassau County).
• The petitioner was the attorney/drafter and successor executor
designee. The primary executor had died before the testator. SCPA 2307-
a applied and no waiver was granted. Matter of Ferreroll, NYLJ
2/16/01, 25:6 (Sur. Ct. Richmond County).
• An attorney/executor named as a successor co-executor in a Will made
in 1982 and who became eligible to serve only due to the predecease of
the primary executor. The court reviewed the cases warranting waiver
and concluded that the petitioner "was in constant contact with the
testator. The decision not to review the wills in his file upon
enactment of SCPA 2307-a was his choice. Even after the death of the
last co-executor in 1999, petitioner did not discuss the matter with
the testator. Although he states this was because of the testator's
mental and physical condition, he admits that the testator was
competent. The implication is that the testator might react rashly to
such a discussion. The decision of petitioner to wait for a more
propitious time was petitioner's choice." A waiver was denied. Matter
of Katz, NYLJ 3/26/01, 30:2 (Sur. Ct. Kings County).
Practice Tip:
• Good sense and prudence dictate the use of a separate writing
attached to the will to clearly indicate that the decedent was
informed of the facts and that the disclosure was not "buried" in the
boiler plate for the will. Further, while SCPA 2307-a requires only
"substantial compliance" with the form of disclosure, good practice
would dictate use of the actual words of the disclosure statement
which the statute sets forth. See, e.g., Matter of Bruder, supra.
§ 18:140.5. ------GROUNDS FOR EXCUSING FAILURE TO MAKE DISCLOSURE
The Surrogate in Bronx County has established a procedure for notice
and hearing on an application to waive the requirement that there be a
written acknowledgment by the testator. To assure due process, the
Surrogate required that the attorney/draftsman then serving as
executor provide copies of the waiver request to the residuary
beneficiaries, who would ultimately be the persons affected by
payments if the waiver was approved. Matter of Estate of Newman, 177
Misc. 2d 72, 675 N.Y.S.2d 836 (Sur. Ct. 1998); see also Matter of
Haberer, N.Y.L.J. 1/5/00, 28:1 (Sur. Ct. Bronx County).
When no one appeared on the return date for an application seeking a
waiver, the Bronx court ruled that it would make a determination based
on uncontroverted allegation in the affidavits of attorney/executor
and his counsel. Matter of Johnston, N.Y.L.J. 3/20/00, 26:1 (Sur. Ct.
Bronx County).
In absence of any appearance in opposition to petitioner/attorney's
allegations in the verified pleadings to the effect that attorney/
drafter provided required disclosure to the testatrix, the facts were
deemed admitted and court dispensed with requirements of SCPA 2307-a.
Matter of Haberer, N.Y.L.J. 4/12/00, 31:6 (Sur. Ct. Bronx County).
When a court is satisfied that a will prepared by an attorney/
fiduciary/beneficiary without the SCPA 2307-a disclosure was
nevertheless the product of the decedent's wishes, the will can be
admitted to probate. Matter of Mullen, NYLJ 3/8/99, 32:1 (Sur. Ct.
Suffolk County) In Mullen, the court found no indication of
overreaching or undue influence requiring that the bequest to the
attorney/draftsman be disturbed. Separate counsel represented the
attorney/fiduciary/beneficiary in presenting the will for probate.
Absence of the written acknowledgment may be excused by the court when
the decedent had a long-term relationship with the attorney and
insisted that the attorney serve as a fiduciary despite the attorney's
recommendations otherwise. Matter of Roth, NYLJ 12/4/98, 38:6 (Sur.
Ct. Suffolk County) In Roth, the court was influenced by the fact that
the sole residuary beneficiary consented to the award of full
commissions.
The statute was found not to apply in the case of a testator who was a
practicing attorney and had prepared the first draft of her will
naming her attorney as its executor. Estate of Kent, NYLJ 2/5/99, 28:1
(Sur. Ct. Bronx County). The attorney/fiduciary simply had the first
draft retyped and supervised the execution. The surrogate allowed the
fiduciary to receive full commissions, reasoning that he had not
prepared the will. Further, since the Testator was an acting judge,
the surrogate assumed that she was aware of the disclosure statute and
therefore it would have been awkward for the attorney/fiduciary to
address a matter of the law already familiar to the judge.
See also § 18:207.5.
Attorney/fiduciary had prepared the 1981 Will but had retired from
practice. Another attorney, not associated with attorney/fiduciary,
handled the estate. That attorney had visited the decedent in hospital
in 1999, informed her of dual fees and commissions payable to attorney/
fiduciary. Testatrix acknowledged her familiarity with these facts and
reaffirmed the Will, but attorney did not request disclosure statement
because there was no immediate threat to her health. Testatrix
suddenly died. Court allowed waiver of SCPA 2307-a. Matter of Smith,
NYLJ 11/28/00, 29:3 (Sur. Ct. Nassau County).
Examples:
• The requirements of SCPA 2307-a were waived and full commissions
were allowed to an attorney/executor of a 1986 will (with a 1988
codicil) when the proof showed that a subsequent disclosure to the
testator was impossible because he had been admitted to a nursing home
in 1991 suffering from dementia and at all times thereafter was
incapable of understanding or acknowledging such a disclosure. Matter
of Heller, NYLJ 1-10-02, 32:3 (Sur. Ct. Westchester County).
• Petitioner's affirmation demonstrated to the court's satisfaction
sufficient "reasonable cause" to waive the disclosure requirements.
Matter of Everitt, NYLJ 4-17-02, 30:4 (Sur. Ct. Westchester County).
• The court directed procedure for notice to interested parties,
stating that, no objections were filed, it would decide waiver issue
on basis of the uncontroverted allegation in the petition. Matter of
Bauman, NYLJ 3- 7-02, 22:4 (Sur. Ct. Bronx County). Accord Matter of
Tores, NYLJ 6-6-02, 23:4 (Sur. Ct. Bronx County).
• After an exhaustive review of the cases, the Surrogate allowed a
waiver on a will executed in Connecticut in 1981 when there was no
anticipation that the testator would have died a domiciliary of New
York, but concluded that the disclosure requirements are to be adhered
to when, at the time the will is prepared, it is foreseeable that it
is to be probated in New York. Matter of Newell, NYLJ 6-6-02, 27:4
(Sur. Ct. Suffolk County).
See also § 18:207.5.
§ 18:141. REPRESENTATIVE'S COMMISSIONS MEASURED BY VALUE OF ASSETS
As noted above, the measure of a personal representative's commissions
is the value of assets "received" and "paid out."
This contrasts with the approach to legal fees, which are affected by
a number of factors, with the value of estate assets being only one of
them. See § 18:80.
Property that is not "received" is not part of the commission base.
§ 18:142. --GENERAL STATUTORY APPROACH
A reasonable interpretation of the SCPA 2307 is that it intends to fix
reasonable compensation in a particular estate by application of the
statutory rates to the body of property that the personal
representative must take under administration, and with respect to
which he/she assumes a risk of personal responsibility. In re Tucker's
Estate, 75 Misc. 2d 318, 347 N.Y.S.2d 845 (Sur. Ct. 1973); 29 Carmody-
Wait 2d § 168:29.
Thus, all property that the fiduciary is responsible for administering
will be considered "received" and will be subject to commissions.
Practice Tip: The statute speaks of "all sums of money," defined as
"property." Of course, there can be no exclusive list. As a practical
guide, assets listed in the gross estate schedules of the federal
estate tax return (Schedules A through F) are a starting point. Some
may have to be eliminated from consideration (see below). The list
remaining will be "commissionable." These assets are also those listed
in Schedule A of the personal representative's accounting. See Chapter
17, Accounting and Accounting Proceedings, §§ 17:35 et seq.
§ 18:143. --PERSONAL PROPERTY COLLECTED
Assets collected are subject to commission. These include cash,
stocks, bonds, undivided interests in property -- in short, whatever
the fiduciary is responsible for collecting and distributing.
Most of the reported cases have dealt with rules determining what is
excluded from commissions. However, some unusual assets have been
affirmatively held to be subject to commissions.
The presumption should be that the fiduciary will be entitled to
commissions unless some specific rule bars them.
§ 18:144. ----BANK ACCOUNTS
Balances in the decedent's bank accounts are subject to commissions.
In re Biskur, 184 Misc. 239, 55 N.Y.S.2d 662 (Sup. Ct. 1944).
§ 18:145. ----INSURANCE PROCEEDS
Insurance proceeds collected by the personal representative (as
opposed to proceeds received by a beneficiary other than the estate)
are subject to commissions. In re Woodin's Estate, 186 Misc. 857, 65
N.Y.S.2d 630 (Sur. Ct. 1945), aff'd, 272 A.D. 998, 73 N.Y.S.2d 836
(1st Dep't 1947).
§ 18:146. ----BOND AND MORTGAGE
A note or bond held by a decedent and secured by a mortgage is subject
to commissions. In re Woods' Estate, 251 A.D. 141, 295 N.Y.S. 718 (4th
Dep't 1937); In re Tolosky's Estate, 102 Misc. 2d 582, 424 N.Y.S.2d 79
(Sur. Ct. 1979); see 29 Carmody-Wait 2d § 168:34.
§ 18:147. ----WITHHOLDING TAXES
Whenever any portion of dividends, interest or rent payable to a
fiduciary (other than a trustee) is required by law to be withheld by
the person paying it for income tax purposes, the amount withheld will
nevertheless be deemed to have been received and paid out and will be
subject to commissions. SCPA 2307(2).
§ 18:148. ----BUSINESSES: NET INCOME ONLY
A fiduciary who continues the decedent's business under authority
granted by the will is not allowed commissions on moneys received and
paid out in the operations of the business. Beard v. Beard, 140 N.Y.
260, 35 N.E. 488 (1893); In re Bothner's Will, 157 N.Y.S.2d 257 (Sur.
Ct. 1956).
Commissions are computed only on the net income of the business. In re
Newins' Estate, 33 Misc. 2d 72, 224 N.Y.S.2d 888 (Sur. Ct. 1962); In
re Sidenberg's Estate, 204 A.D. 255, 197 N.Y.S. 767 (1st Dep't 1923).
The same rule applies when the business is continued by order of the
court. SCPA 2108.
When the continuance of the business is not authorized, a claim for
commissions will not be allowed. In re Peck, 79 A.D. 296, 80 N.Y.S. 76
(3d Dep't 1903), aff'd, 177 N.Y. 538, 69 N.E. 1129 (1903).
Practice Tip: If a business interest is among a testator's assets --
whether a sole proprietorship, corporation or partnership -- the best
approach is full and detailed consideration of that business in the
will as an aid to administration after death. Advance planning and
specific attention to the problems of management, compensation,
liability and distribution are essential. By and large, the powers and
discretion of New York fiduciaries handling business interests in an
estate, as granted by case law and statute, are grossly inadequate.
§ 18:149. ----RECEIPTS FROM BENEFICIARIES
The personal representative often receives funds to pay and discharge
estate taxes or other obligations from beneficiaries of
noncommissionable assets. For example, under EPTL 2-1.8 estate taxes
may be apportionable against persons interested in the taxable estate.
The sums apportioned, if paid to the personal representative for use
in paying taxes, are subject to commissions as property received and
paid out. Matter of Zahoudanis, 205 A.D.2d 547, 612 N.Y.S.2d 667 (2d
Dep't 1994).
Moreover, when funds are appointed to the estate and require
administration, commissions will be allowed. In re Grabfelder's
Estate, 108 N.Y.S.2d 529 (Sur. Ct. 1951).
However, funds appointed or paid directly to a taxing authority (e.g.
by a trustee of a trust subject to estate tax) do not pass through the
personal representative's hands. The representative's liability is
reduced to that extent, and such amounts are not deemed received and
paid out by the representative in a manner that would entitle the
representative to commissions. In re Searles' Will, 82 N.Y.S.2d 219
(Sur. Ct. 1948).
§ 18:150. ----WRONGFUL DEATH ACTION DAMAGES
The commissions of the personal representative who has concluded a
wrongful death action are fixed by the Surrogate on the basis of the
residue remaining after deduction of described expenses. EPTL 5-4.4(2)
(b); SCPA 2204.
§ 18:151. ------PERSONAL INJURY DAMAGES SUBJECT TO FULL COMMISSIONS
Damages recovered in personal injury or other actions are general
assets of the estate subject to full commissions. 29 Carmody-Wait 2d §
168:19.
§ 18:152. --NO COMMISSIONS ON REAL ESTATE NOT SOLD
The general rule regarding real estate is that no commissions are
allowed to a personal representative on the value of real estate
devised by a will unless that real estate is sold.
The rationale is that title vests in the devisees by operation of law
without any action on the part of the personal representative, who
therefore has never "received, distributed or delivered" it. Matter of
Salomon's Ex'rs, 252 N.Y. 381, 169 N.E. 616 (1930); Matter of
Schaich's Estate, 55 A.D.2d 914, 391 N.Y.S.2d 135 (2d Dep't 1977);
Matter of McClure, NYLJ 1/11/82, 15:5 (Sur. Ct. Nassau County); Matter
of Carpenter, NYLJ 4/11/84, 16:4 (Sur. Ct. Suffolk County); In re
Saphir's Estate, 73 Misc. 2d 907, 343 N.Y.S.2d 20 (Sur. Ct. 1973); see
also In re Alcott's Estate, 36 Misc. 2d 264, 232 N.Y.S.2d 371 (Sur.
Ct. 1962); In re Woods' Estate, 251 A.D. 141, 295 N.Y.S. 718 (4th
Dep't 1937).
§ 18:153. ----SALE OF REAL ESTATE YIELDS COMMISSION
If it is necessary to sell the real property to pay debts, then
commissions are allowable. Matter of Nigro, NYLJ 1/25/95, 32:5 (Sur.
Ct. Westchester County); In re Ryan's Will, 45 N.Y.S.2d 227 (Sur. Ct.
1943).
§ 18:154. ------ESTABLISHING VALUE FOR PURPOSES OF COMMISSION
Commissions are to be based on the net equity received after payment
of encumbrances, In re Pritchard's Estate, 172 Misc. 385, 15 N.Y.S.2d
443 (Sur. Ct. 1939), taxes, assessments and water charges, In re
Wainwright's Estate, 55 N.Y.S.2d 303 (Sur. Ct. 1945).
Net proceeds of sale are also reduced by deduction of all expenses and
adjustments associated with the sale. Matter of Caravetto, NYLJ
4/1/88, 6:5 (Sur. Ct. Suffolk County); Matter of Del Sordo, NYLJ
6/13/78, 12:6 (Sur. Ct. Queens County).
The proceeds of sale of real estate to an estate beneficiary may still
be part of the commission base. See In re Robord's Estate, 69 Misc. 2d
1026, 332 N.Y.S.2d 698 (Sur. Ct. 1972).
§ 18:155. ----COMMISSIONS WHEN NO SALE MADE
Several cases have allowed commissions to be claimed on the value of
real estate despite the absence of a sale when the court has found
that the personal representative performed necessary duties with
respect to the property, or where an equitable conversion has
occurred.
Examples:
• The executors chose to convey the real property to separate trusts
under the will in unequal, undivided shares rather than sell it and
distribute cash. The Surrogate allowed commissions on the value of the
unsold property based on the executorial duties that had been assumed.
In re Tucker's Estate, 75 Misc. 2d 318, 347 N.Y.S.2d 845 (Sur. Ct.
1973); see also In re Kennedy's Will, 133 Misc. 904, 234 N.Y.S. 734
(Sur. Ct. 1929); Matter of Robinson, NYLJ 6/30/78, 19:3 (Sur. Ct.
Westchester County).
• However, in another case the Appellate Division held that a
temporary administrator had not performed sufficient services with
respect to the real estate to permit deviation from the rule that
commissions were not payable on real property unless it is sold, or
unless an equitable conversion occurs. Matter of Estate of Passuello,
184 A.D.2d 108, 591 N.Y.S.2d 542 (3d Dep't 1992).
§ 18:156. ------EQUITABLE CONVERSION OF REAL TO PERSONAL PROPERTY
Conversion to personal property can occur in several circumstances.
Examples:
• A coexecutor of a deceased partner takes over partnership real
estate. The value of the property is then subject to commissions.
Estate of Rubin, 147 Misc. 2d 981, 559 N.Y.S.2d 99 (Sur. Ct. 1990),
order aff'd, 172 A.D.2d 841, 570 N.Y.S.2d 996 (2d Dep't 1991).
• A sole beneficiary under the decedent's will receives real estate,
and the personal representative was not entitled to commission on its
value. However, the beneficiary obtained a $97,000 mortgage on the
property and paid that sum to the personal representative to pay
claims against the estate. The personal representative was entitled to
commissions on the $97,000 so received. Matter of Zahoudanis, 205 A.D.
2d 547, 612 N.Y.S.2d 667 (2d Dep't 1994).
• However, a mere power of sale that is never exercised does not
effect an equitable conversion so as to entitle a fiduciary to
commissions. In re Phelps Estate, 79 Misc. 2d 99, 359 N.Y.S.2d 614
(Sur. Ct. 1974); see also 29 Carmody-Wait 2d § 168:34.
§ 18:157. ----TWO COMMISSIONS POSSIBLE FOR PROPERTY MANAGEMENT
A fiduciary (other than a trustee) may be entitled to two commissions
on rents collected under the unique provisions of SCPA 2307(6).
The fiduciary is entitled to the usual receiving and paying commission
provided under SCPA 2307(1).
In addition, the fiduciary may receive 5% on gross rents if the
fiduciary is entitled or required to collect the rents and manage the
rental real property.
This additional management commission is intended to compensate the
fiduciary for the management of the property. In re Brennan's Will,
251 N.Y. 39, 166 N.E. 797 (1929); In re Schinasi's Will, 252 A.D. 82,
297 N.Y.S. 243 (1st Dep't 1937), order modified on other grounds, 277
N.Y. 252, 14 N.E.2d 58 (1938), reargument denied, 278 N.Y. 624, 16 N.E.
2d 128 (1938).
§ 18:158. ------ACTUAL MANAGEMENT REQUIRED
The fiduciary must actually manage the real property to become
entitled to those commissions. In re Smathers' Will, 309 N.Y. 487, 131
N.E.2d 896 (1956).
Thus, if rents are collected under a net lease, the fiduciary is not
entitled to the additional commission. Matter of Smathers, supra; cf.
In re Kahn's Estate, 13 Misc. 2d 76, 177 N.Y.S.2d 199 (Sur. Ct. 1958).
If the fiduciary pays an agent to collect the rents and to manage the
property, that cost will be offset against the 5% management
commission. In re Ritzheimer's Estate, 25 Misc. 2d 515, 204 N.Y.S.2d
301 (Sur. Ct. 1960).
However, the management commission is not reduced by payment of a
broker's commission. In re Schinasi's Will, 252 A.D. 82, 297 N.Y.S.
243 (1st Dep't 1937), order modified on other grounds, 277 N.Y. 252,
14 N.E.2d 58 (1938), reargument denied, 278 N.Y. 624, 16 N.E.2d 128
(1938).
§ 18:159. ------ONLY ONE FIDUCIARY MAY COLLECT COMMISSION
Only one additional management commission can be paid under SCPA
2307(6), regardless of the number of fiduciaries or the size of the
fund.
The fee is to be apportioned among multiple fiduciaries based on
services rendered by each, or as they shall agree in writing to a
different apportionment. But see In re Burrows' Will, 139 N.Y.S.2d 135
(Sur. Ct. 1954), decree modified on other grounds, 286 A.D. 1092, 145
N.Y.S.2d 585 (2d Dep't 1955), order aff'd, 3 N.Y.2d 869, 166 N.Y.S.2d
312, 145 N.E.2d 26 (1957).
If one of several fiduciaries waives her/his share of the commission,
the waived amount inures to the benefit of the fund, not to the other
fiduciaries.
§ 18:160. --NO COMMISSIONS PAID ON MOST SPECIFIC LEGACIES
In general, receiving and distributing specific legacies are not
commissionable. SCPA 2307(2) denies commissions on the value of
property that is the subject of a specific disposition, referred to in
the statute as a "specific legacy or devise."
A "specific disposition" is defined as a "disposition of a specified
or identified item of the testator's property." EPTL 1-2.17. Other
relevant definitions are:
• "Bequest or legacy" SCPA 103(9).
• "Disposition" EPTL 1-2.4.
• "General disposition" EPTL 1-2.8.
• "Demonstrative disposition" EPTL 1-2.3.
The types of property commonly made subjects of specific dispositions
are personal effects such as jewelry, furniture and other tangible
personal effects, identified stocks and bonds, a particular piece of
real or personal property or a specified bank or other account. See
generally 30 CARMODY-WAIT 2D § 169:72 (See Chapter 17, Accounting And
Accounting Proceedings, § 17:64)
As with real property, however, there are exceptions.
§ 18:161. ----COMMISSIONS WHEN FIDUCIARY REQUIRED TO DO MORE
Exceptions to the general rule barring commissions when specific
dispositions are made exist when the fiduciary is required to do
something more than deliver a particular item to a particular person.
When the will imposes active duties on the fiduciary with respect to
assets specifically bequeathed, commissions are allowed. Matter of
Lowenthal, NYLJ 11/27/92, 25:1 (Sur. Ct. N.Y. County); Matter of
Robbins, NYLJ 9/23/92, 23:1 (Sur. Ct. N.Y. County); Matter of Estate
of Mittman, 123 A.D.2d 631, 506 N.Y.S.2d 899 (2d Dep't 1986), on
remand to, 145 A.D.2d 635, 536 N.Y.S.2d 160 (2d Dep't 1988); see also
In re Lane's Estate, 55 Misc. 2d 88, 284 N.Y.S.2d 371 (Sur. Ct. 1967);
In re Roth's Estate, 53 Misc. 2d 1066, 281 N.Y.S.2d 225 (Sur. Ct.
1967); In re Kuker's Estate, 22 Misc. 2d 63, 192 N.Y.S.2d 1014 (Sur.
Ct. 1959); In re Brooks' Estate, 119 Misc. 738, 197 N.Y.S. 637 (Sur.
Ct. 1922), aff'd, 212 A.D. 868, 208 N.Y.S. 837 (1st Dep't 1925); see
also In re Povlsen's Estate, 62 Misc. 2d 239, 308 N.Y.S.2d 168 (Sur.
Ct. 1970); Matter of Volckening, NYLJ 8/13/73, 11:4 (Sur. Ct. Kings
County).
The necessity to perform executorial duties may be found even if it is
limited to a decision whether to sell the property or to distribute it
in kind, Matter of Doehla's Will, 104 Misc. 2d 176, 427 N.Y.S.2d 718
(Sur. Ct. 1980), or to divide it, In re Berwind's Estate, 181 Misc.
559, 42 N.Y.S.2d 58 (Sur. Ct. 1943).
Practice Tip: Dealing with property specifically bequeathed or devised
can pose considerable difficulties for a personal representative, who
must be aware of the potential problems. First, reducing the property
to possession as against the rights of a specific legatee,
particularly during the period prior to probate, presents many murky
legal questions. See In re Roth's Estate, 53 Misc. 2d 1066, 281 N.Y.S.
2d 225 (Sur. Ct. 1967). On the other hand, failure to preserve and
protect the property can pose liability issues for the representative.
Matter of Estate of Donner, 82 N.Y.2d 574, 606 N.Y.S.2d 137, 626 N.E.
2d 922 (1993). Second, the value of the property will have to be
determined, because it will be includible in the estate tax returns of
the estate and the representative will be primarily responsible for
the estate tax. Third, the costs of insuring, maintaining, storing and
ultimately delivering such property to the intended beneficiary are
not chargeable to the estate. In re Morawetz' Will, 35 Misc. 2d 762,
231 N.Y.S.2d 1000 (Sur. Ct. 1962). Fourth, the personal representative
may not be paid for all this trouble!
Example: Surrogate Riordan allowed executor's commissions on specific
bequests of shares of stock because they were required to administer
the stock in an active capacity. The executors caused the sale of the
stock and divided the shares for distribution, which were sufficient
reasons for including the value of the stock in the commission base.
Matter of Lucia, NYLJ 12/4/2003, 24:3 (Sur. Ct. Nassau County).
§ 18:162. --COMMISSIONS ON COMMISSIONS PAID TO FIDUCIARY
The statute provides for commissions to be received based on the act
of "paying sums of money." SCPA 2307. See §§ 18:142 et seq.
Interestingly, this includes the act of paying commissions to the
fiduciary. Thus, amounts paid out in the form of commissions are
themselves includible in the commission base for calculating
commissions. In re Bloomingdale's Estate, 163 Misc. 608, 297 N.Y.S.
620 (Sur. Ct. 1937); In re Speranza's Will, 140 N.Y.S.2d 551 (Sur. Ct.
1955).
§ 18:163. ASSETS NOT SUBJECT TO COMMISSIONS
Commission rates established by SCPA 2307 are applied to the acts of
receiving and paying property, not on the basis of quantum meruit or
on the difficulty (or lack thereof) of the acts of receiving or
paying.
In an old case that illustrates that human nature does not change
much, the Court of Appeals noted that the compensation statute was
based on the automatic measure of value to prevent "make work"
services merely for the sake of generating compensation. Collier v.
Munn, 41 N.Y. 143, 7 Abb. Pr. N.S. 193, 1869 WL 6555 (1869).
It is critical, then, to understand what "property," if any, is not
subject to commissions. Numerous items of property, absent special
arrangements such as a will provision, are not commissionable despite
the fact that the fiduciary has some responsibility for dealing with
them.
For convenience, some assets that often are not subject to commissions
(real estate, specific legacy, etc.) have been considered above under
commissionable assets. The reason is that modern exceptions seem to
have been engrafted on to old rules; it is usually not difficult to
point to some new rule that will reverse the old prohibition.
However, major categories exist in which no commissions are allowed.
§ 18:164. --NO COMMISSIONS ON NONTESTAMENTARY PROPERTY
The distinction between "testamentary" and "nontestamentary" property
has been considered above in the context of attorneys' fees. (See §§
18:99 et seq.)
Because nontestamentary property by its nature passes outside a will,
the representative does not "receive" it or "pay it out." It is
excluded from the base for determining commissions, despite the fact
that the representative has duties and liabilities (for taxes, for
example) with respect to that property.
For example, life insurance payable to the estate, joint property, and
property subject to a general power of appointment are all includible
in a decedent's taxable estate. (See Chapter 15, Federal Estate
Taxation, § 15:52) The representative is primarily obligated to pay
estate taxes on such property, subject to being reimbursed by
recipients if the taxable benefits of estate taxes are apportioned
EPTL 2-1.8, See Chapter 12, Management of Assets and Payment of
Claims, § 12:57.
Nevertheless, the value of the asset is not ordinarily subject to
commissions. Further, and unlike the case of real estate or specific
legacies, see § 18:153 and 18:161, the necessity to perform "duties"
with regard to the property does not give rise to commissions.
Practice Tip: It bears repeating that the representative should make
every effort to insure that funds to pay estate taxes on
nontestamentary assets should be obtained and set aside early. No
evidence of ownership -- such as estate tax waivers, passbooks or
policies -- should be released to a nontestamentary beneficiary unless
payment of the estate tax is assured by deposit, payment, or escrow,
unless other funds that are in hand but will eventually pass to the
beneficiary are sufficient to cover the taxes. For example, if a
general legacy or income passes under a will to a beneficiary of a
life insurance policy, and if the funds to pay the legacy in the
representative's control will be sufficient to cover the estate taxes
apportionable against the legatee on both the policy proceeds and the
legacy, the representative can offset the apportioned share of estate
taxes against the legacy.
§ 18:165. ----JOINT PROPERTY
The value of jointly owned property passing to surviving joint owners
is not subject to commissions. Estate of McEntee, 82 Misc. 2d 580, 372
N.Y.S.2d 532 (Sur. Ct. 1975), adhered to, 83 Misc. 2d 975, 374 N.Y.S.
2d 96 (Sur. Ct. 1975); In re Rosenblum's Estate, 10 Misc. 2d 1014, 171
N.Y.S.2d 619 (Sur. Ct. 1958).
§ 18:166. ----INTER VIVOS TRUSTS
Property transferred by the decedent in her/his lifetime in trust,
e.g., a Grantor Retained Income Trust, or revocable Living Trust, is
not part of the testamentary estate, and thus not commissionable.
However, if the instrument provides for a "pour-over" of assets to the
decedent's estate, or if assets are paid to the estate by the terms of
the trust or otherwise to pay claims, expenses, taxes, or other estate
charges, those assets will be deemed "received." They will be subject
to receiving and paying commissions. Matter of Will of Parkinson, 138
Misc. 2d 1069, 526 N.Y.S.2d 379 (Sur. Ct. 1988); see also Matter of
Estate of Chrestensen, 175 A.D.2d 641, 573 N.Y.S.2d 797 (4th Dep't
1991), related reference, 175 A.D.2d 642, 573 N.Y.S.2d 956 (4th Dep't
1991).
§ 18:167. ----TOTTEN TRUST ACCOUNTS
The value of a Totten Trust bank account, see EPTL Article 7, Part 5,
passing to the surviving beneficiary is not subject to commissions.
Matter of Reich, 94 Misc. 2d 319, 404 N.Y.S.2d 781 (Sup. Ct. 1978); In
re Ryan's Will, 52 N.Y.S.2d 502 (Sur. Ct. 1944).
§ 18:168. ----RECEIVABLES
Commissions are not payable on uncollected promissory notes or other
uncollected receivables. Estate of Bernstein, 94 Misc. 2d 898, 405
N.Y.S.2d 958 (Sur. Ct. 1978); In re Ryan's Estate, 201 Misc. 632, 107
N.Y.S.2d 641 (Sur. Ct. 1951), decree modified on other grounds, 280
A.D. 410, 114 N.Y.S.2d 1 (1st Dep't 1952); see Matter of Olander, NYLJ
9/11/89, 28:1 (Sur. Ct. Suffolk County); Matter of Bonfig, NYLJ
11/2/67, 19:8 (Sur. Ct. N.Y. County); In re Onorato's Will, 261 A.D.
997, 26 N.Y.S.2d 648 (2d Dep't 1941).
§ 18:169. ------REMAINDER INTERESTS
Commissions are not payable on the value of a decedent's vested
remainder interest unless and until the remainder vests in possession.
Estate of Bernstein, 94 Misc. 2d 898, 405 N.Y.S.2d 958 (Sur. Ct.
1978).
When property does not vest until after the date of death, commissions
are computed on the value of the property on the date actually
received, not on its date-of-death value. In re Brann's Will, 148
Misc. 310, 265 N.Y.S. 362 (Sur. Ct. 1933).
§ 18:170. ------DECEDENT'S DEBT TO OWN BUSINESS
Commissions are not payable on the amount of the decedent's own debt
to a corporation of which he/she was the majority shareholder, i.e.,
the amount of the debt would not be considered part of the value of
the stock received by the estate. In re Enders' Estate, 41 Misc. 2d
780, 246 N.Y.S.2d 362 (Sur. Ct. 1964); In re Schmoll's Estate, 193
Misc. 203, 83 N.Y.S.2d 743 (Sur. Ct. 1948).
The rule is similar with respect to evaluating a partnership interest.
In re Lilienthal's Estate, 83 N.Y.S.2d 742 (Sur. Ct. 1943); In re
Dunigan's Will, 177 Misc. 212, 30 N.Y.S.2d 38 (Sur. Ct. 1941).
§ 18:171. ----PLEDGED PROPERTY
When property of a decedent is subject to a pledge, commissions are
payable only on the proceeds that come into the fiduciary's
possession. Matter of Marine Midland Bank, N.A. of Buffalo, N.Y., 117
Misc. 2d 229, 457 N.Y.S.2d 720 (Sup. Ct. 1982); In re Mattis' Estate,
55 Misc. 2d 511, 285 N.Y.S.2d 551 (Sur. Ct. 1967); In re Mercantile
Trust Co., 210 N.Y. 83, 103 N.E. 884 (1913); Estate of McEntee, 82
Misc. 2d 580, 372 N.Y.S.2d 532 (Sur. Ct. 1975), adhered to, 83 Misc.
2d 975, 374 N.Y.S.2d 96 (Sur. Ct. 1975).
In cases where the personal representative has actually taken control
of all property, such as when a personal representative (a bank) was
also the pledgee and worked out the loan balance with the concurrence
of the beneficiaries, the court has allowed commissions on the full
amount of property regardless of the pledge amount. See In re Oberg's
Estate, 148 Misc. 400, 266 N.Y.S. 641 (Sur. Ct. 1933); In re Post's
Estate, 20 Misc. 2d 745, 193 N.Y.S.2d 200 (Sur. Ct. 1959).
§ 18:172. ------RULE ON PROPERTY PLEDGED AS COLLATERAL
A Uniform Surrogate's Court Rule directs that if any personal property
listed as an asset of the decedent at death was pledged as collateral
for any unpaid obligation of the decedent, certain information must be
disclosed in the schedule of commissions claimed by the fiduciary. 22
NYCRR § 207.40(e).
This includes, in addition to a description of the property and its
value, information about the amount due, the equity in the property
and, if the fiduciary has claimed commissions with respect thereto, a
statement of the capital value on which the commissions are claimed.
§ 18:173. --LOANS BY FIDUCIARY TO THE ESTATE NOT COMMISSIONABLE
If the personal representative advances funds to the estate, such
loans and repayments are not subject to commissions. Matter of Bera,
NYLJ 1/26/94, 25:4 (Sur. Ct. Suffolk County).
§ 18:174. WILL OR AGREEMENT LIMITING COMMISSIONS
Whether a will or the terms of an agreement between the decedent and
the fiduciary fix, limit or increase the commission payable is to be
determined by the interplay of the statutes and the instruments. A
construction proceeding may be necessary.
It is also possible that questions may be raised on the estate tax
audit about the deductibility of commissions in excess of statutory
allowances.
§ 18:175. --COMPENSATION PROVIDED IN WILL
When the will provides specific compensation to a fiduciary (other
than a trustee), the fiduciary is not entitled to any allowance under
SCPA 2307 unless, within four months from the date letters are issued,
the fiduciary files an instrument with the court renouncing the
specific compensation. SCPA 2307(5). See Matter of Hillman,NYLJ
2/28/96, 29:1 (Sur. Ct. Kings County).
When the will speaks of a legacy and contains a provision that the
fiduciary act without compensation, the situation is less clear.
§ 18:176. ----BEQUEST IN LIEU OF COMPENSATION
If a bequest to the fiduciary is stated to be in lieu of other
compensation, no other compensation may be received. Matter of Will of
Carlisle, 142 Misc. 2d 657, 538 N.Y.S.2d 169 (Sur. Ct. 1989), aff'd,
159 A.D.2d 379, 552 N.Y.S.2d 946 (1st Dep't 1990); Estate of Engel,
106 Misc. 2d 733, 435 N.Y.S.2d 255 (Sur. Ct. 1981); In re Cornell's
Will, 63 Misc. 2d 234, 311 N.Y.S.2d 49 (Sur. Ct. 1970).
In that case, the executor has the choice to act without compensation
or to refuse the appointment. In re Peterkin's Estate, 32 Misc. 2d
981, 222 N.Y.S.2d 448 (Sur. Ct. 1961).
§ 18:177. ------LANGUAGE MUST BE CLEAR
Before a bequest can be held to be made as compensation for service,
there must be language in the will from which that intention can be
clearly inferred. In re Daly's Will, 1 N.Y.2d 100, 150 N.Y.S.2d 785,
134 N.E.2d 58 (1956).
§ 18:178. ------IF LANGUAGE NOT CLEAR
If the will does not clearly provide that the bequest is in lieu of
commissions, or if the will is silent, the fiduciary may take both the
legacy and the commissions. In re Clyve's Estate, 13 Misc. 2d 949, 177
N.Y.S.2d 70 (Sur. Ct. 1958); In re Klarsfeld's Estate, 13 Misc. 2d
353, 176 N.Y.S.2d 686 (Sur. Ct. 1958); In re Cohen's Will, 128 Misc.
906, 220 N.Y.S. 509 (Sur. Ct. 1927).
Practice Tip: It should be noted that a bequest in lieu of commissions
is not deductible on the estate tax returns as an expense. Treas Reg §
20.2053-3(b)(3). Nor is it income to the beneficiary. IRC § 102(a).
Conversely, the payment of commissions is deductible for estate tax
purposes, and the receipt of commissions by the fiduciary is treated
as income. IRC § 61(1).
§ 18:179. ----REQUEST TO ACT WITHOUT COMPENSATION
A request that the fiduciary act without compensation will not deprive
the fiduciary of commissions. In re Klarsfeld's Estate, 13 Misc. 2d
353, 176 N.Y.S.2d 686 (Sur. Ct. 1958).
§ 18:180. ----BAR IN ONE CAPACITY NOT BAR IN ANOTHER
A will that denies commissions to the named fiduciaries does bar them
from receiving commissions as temporary administrators, In re McVoy's
Estate, 203 Misc. 33, 114 N.Y.S.2d 230 (Sur. Ct. 1952), or as
preliminary executors, Matter of Di Jurico, NYLJ 1/9/87, 19:2 (Sur.
Ct. Nassau County).
§ 18:181. --AGREEMENT
A fiduciary may by agreement consent to accept less than statutory
commissions and is bound thereby. Matter of Estate of Chrestensen, 175
A.D.2d 641, 573 N.Y.S.2d 797 (4th Dep't 1991), related reference, 175
A.D.2d 642, 573 N.Y.S.2d 956 (4th Dep't 1991); In re Schinasi's
Estate, 3 N.Y.2d 22, 163 N.Y.S.2d 644, 143 N.E.2d 369 (1957).
However, interested persons, e.g., beneficiaries, may agree to pay
increased compensation, provided they do so individually and the
estate is not charged. Matter of Baehm, 110 Misc. 2d 499, 442 N.Y.S.2d
755 (Sur. Ct. 1981).
§ 18:182. ----WAIVER OF COMPENSATION
There are many reasons why a fiduciary may elect to waive any or all
compensation otherwise receivable.
In a family setting, for example, a relative may wish to act at
reduced or no compensation. An agreement to waive commission is valid.
In re Flagg's Will, 192 Misc. 397, 81 N.Y.S.2d 514 (Sur. Ct. 1948),
decree modified on other grounds, 275 A.D. 848, 88 N.Y.S.2d 703 (2d
Dep't 1949).
A waiver may be inferred from acts inconsistent with claiming rights
to commissions. In re Appenzellar's Will, 52 Misc. 2d 173, 274 N.Y.S.
2d 453 (Sur. Ct. 1966); In re Hayden's Estate, 172 Misc. 669, 16 N.Y.S.
2d 119 (Sur. Ct. 1939); see generally 29 Carmody-Wait 2d §§ 168:9 and
168:10.
An executor is not under a duty to renounce a decedent's interest in a
prior estate to avoid the payment of commissions on two estates. The
issue arose when a wife died and left her property to her husband, who
died shortly thereafter. The beneficiaries of the husband's will, who
were also the alternate beneficiaries under the wife's will, asked the
executor of the husband's estate to disclaim the husband's interest in
his wife's estate so that commissions would be payable only to the
executor of the wife's estate. Matter of Estate of Piltch, 175 Misc.
2d 56, 667 N.Y.S.2d 668 (Sur. Ct. 1997).
A trustee is not be deemed to have waived any commissions by reason of
failure to retain them at the time he, she or it becomes entitled to
them. But commissions from income for any given year must be paid only
from income derived from the trust during that year and not from
income on hand in respect of any other trust year. SCPA 2308(4); SCPA
2309(4); Matter of Brownstone, N.Y.L.J. 3/16/00, 31:3 (Sur. Ct. N.Y.
County).
Practice Tip: A waiver presents income tax concerns. If compensation
is waived after it might be deemed to have been earned, the fiduciary
who executed the waiver may be taxable on the commissions anyway on a
"constructive receipt" theory. Rev Rul 66-167, 1966-1 Cum Bul 200. Any
formal waiver should be made in writing and at a time before
commissions can be considered to have been earned.
§ 18:183. INCREASED COMMISSIONS AND REIMBURSEMENT FOR EXPENSES
On occasion, a personal representative will be eligible to receive
additional compensation for services rendered.
This is to be distinguished from reimbursement of expenses necessarily
incurred, which also may be accounted for.
§ 18:184. ----EXPENSES, GENERALLY
SCPA 2307(1) authorizes allowance to a personal representative of
"reasonable and necessary expenses actually paid." Cases on the
subject have produced mixed results.
It is "also well settled that the routine and incidental expenses that
are incurred by a fiduciary such as local travel, meals, postage,
telephone charges and the like are usually deemed to be absorbed by
statutory commissions. Matter of Livingston, NYLJ June 7, 1999, p. 33,
col. 6; Matter of Bozzi, NYLJ March 30, 1999, permitted? p. 36, co.6.
As above indicated. . . . in the discussion of [Matter of Corwith,
NYLJ May 3, 1995, p. 35, col. 2], long distance telephone charges and
express delivery will be permitted." Matter of Kelly, NYLJ 4/24/01,
25:1 (Sur. Ct. Suffolk County). See also § 23:92.
§ 18:185. ------TRAVEL EXPENSES
When travel is required because of the location of estate assets, or
when it can be inferred that the testator knew that travel by the
representative to the place of administration would be required,
reimbursement of travel expenses is permissible. Estate of Picker, 103
Misc. 2d 594, 426 N.Y.S.2d 688 (Sur. Ct. 1980)>; In re Schneider's
Estate, 198 Misc. 1017, 96 N.Y.S.2d 652 (Sur. Ct. 1950), opinion
adhered to on reargument, 198 Misc. 1017, 100 N.Y.S.2d 371 (Sur. Ct.
1950).
The cost of fiduciary's travel and lodging in connection with the
performance of estate duties is allowable if fiduciary's residence is
far from the situs of the estate and matters require the fiduciary's
presence, so long as such circumstance was known to the decedent when
he designated the fiduciary. However, where travel expenses were
incurred in part due to fiduciary's personal needs, the costs relating
to such part were disallowed. Further, the cost of performing "routine
fiduciary duties (such as local travel, meals, stationery, postage,
telephone, etc.) are usually deemed to be absorbed by statutory
commissions whether the fiduciary is a resident or non-resident.
Matter of Slagle, NYLJ 7/13/98, 29:5 (Sur. Ct. N.Y. County); see also
Matter of Bozzi, NYLJ 3/30/99, 36:6 (Sur. Ct. Nassau County).
The fiduciary may be reimbursed for reasonable costs of travel and
related expenses as an incident of the proper discharge of fiduciary
duties. Matter of Kelly, NYLJ 4/24/01, 25:1 (Sur. Ct. Nassau County).
Example: The order appointing a guardian directed that the guardian's
compensation be the same as that received by fiduciaries other than
trustees under SCPA 2307, but as modified by Mental Hygiene Law §
81.28. The guardian relied on language that the court must allow the
fiduciary "reasonable and necessary expenses." The court held that
routine and incidental expenses incurred by the fiduciary are absorbed
by the statutory commission, citing the Bozzi decision. Further, the
court said, the term "reasonable and necessary expenses" does not
encompass general administration fees, but refers to actual
expenditures by the fiduciary that were necessary to collect and
preserve estate property. Based on prior decisions interpreting SCPA
2307, the court found that the expenses incurred by the guardian
(including disbursements for photocopying, faxing, local travel and
telephone) were routine incidental costs intended to be absorbed by
the statutory commission. Matter of Livingston, NYLJ 6/7/99, 33:6
(Sup. Ct. Queens County).
Example: The executor was a resident of Texas when decedent executed
his will. The court concluded that the decedent realized that some
travel expenses would be required of the executor while administering
the estate. The executor was directed to supply proof of the expenses
and proof of the necessity of the estate business. Matter of Kern,
NYLJ 4-1-02, 25:4 (Sur. Ct. Nassau County).
Example: Decedent was aware that her brother was a Florida resident
when she designated him to be executor. Costs of travel between
Florida and New York, including airfare and transportation to and from
the airports were allowed, but not car rental expenses while in New
York. Matter of Erlich, NYLJ 7-6-01, 23:3 (Sur. Ct. Kings County).
However, routine travel must be absorbed as a cost chargeable against
commissions. Matter of Mohr, NYLJ 2/6/89, 29:1 (Sur. Ct. Suffolk
County); see also 29 Carmody-Wait 2d § 166:93.
§ 18:186. ----FEES FOR ACCOUNTANTS AND OTHER PROFESSIONALS
Unless a special need for an accountant's services can be shown to
arise, for example, from difficult valuation or tax problems or the
necessity to operate a business, the fees of that accountant must be
absorbed by the personal representative, Matter of Wolf, 147 A.D.2d
487, 537 N.Y.S.2d 585 (2d Dep't 1989), or by the attorney for the
estate, In re Badenhausen's Estate, 38 Misc. 2d 698, 237 N.Y.S.2d 928
(Sur. Ct. 1963). See § 18:106.
A similar approach is taken for other professionals whose services may
be needed.
Circumstances may warrant use of an agent to perform specific
ministerial functions. However, such delegation should not involve the
estate in duplication of expenses. Reimbursement was allowed for
certain local transportation, cost of locksmith, death certificate but
not for lodging, meals or liquor nor for unsubstantiated long distance
telephone calls or "miscellaneous" (not specified). Matter of Slagle,
NYLJ 7/13/98, 29:5 (Sur. Ct. N.Y. County).
§ 18:187. ------INVESTMENT COUNSEL
The rule is similar with respect to charges for investment counsel.
Providing investment advice is a duty of the fiduciary for which
commissions already are paid. Therefore no separate charge for such
advice can be made in addition to commissions, except under certain
conditions.
§ 18:188. ------PERMISSION IN THE WILL
In some instances the will itself permits the separate hiring of
professionals whose services could be needed by the estate. It may
expressly authorize such a charge, in addition to commissions. Matter
of Goldstick, 177 A.D.2d 225, 581 N.Y.S.2d 165 (1st Dep't 1992),
opinion modified on reargument on other grounds, 183 A.D.2d 684, 586
N.Y.S.2d 490 (1st Dep't 1992).
In such cases the fiduciary does not have to absorb the cost. See In
re Morris' Will, 8 Misc. 2d 915, 168 N.Y.S.2d 195 (Sur. Ct. 1957); In
re Gutman's Estate, 171 Misc. 680, 14 N.Y.S.2d 473 (Sur. Ct. 1937); In
re Greata's Will, 172 Misc. 955, 17 N.Y.S.2d 776 (Sur. Ct. 1939).
§ 18:189. ------PERMISSION MAY BE IMPLIED
Permission to hire professionals such as investment advisors at the
estate's expense may be read into a will, especially if the assets are
large and/or complex and the intent of the testator to make use of
such professionals can fairly be implied. Will of Axe, 132 Misc. 2d
137, 502 N.Y.S.2d 943 (Sur. Ct. 1986).
§ 18:190. ----PAYMENT FOR DELEGATED DUTIES
If a personal representative delegates her/his/its executorial duties,
the cost generally must be absorbed out of the commissions. In re
Grace's Estate, 62 Misc. 2d 51, 308 N.Y.S.2d 33 (Sur. Ct. 1970), order
aff'd, 35 A.D.2d 783, 315 N.Y.S.2d 816 (2d Dep't 1970).
§ 18:191. --EXTRA COMPENSATION
A fiduciary ordinarily is limited to statutory commissions for
compensation for services. In re Gardini's Estate, 5 Misc. 2d 335, 164
N.Y.S.2d 262 (Sur. Ct. 1957).
This is true no matter how meritorious the services may be. In re
Krisfeldt's Estate, 49 Misc. 26, 97 N.Y.S. 877 (Sur. Ct. 1905).
However, under special circumstances, commissions in excess of
statutory rates are allowed.
Statutory commissions constitute full compensation and are the only
compensation that may be paid to a fiduciary, such as an executor or
administrator, for the performance of the duties of his office. Matter
of Mansour, NYLJ 4-15-02, 27:6 (Sur. Ct. Kings County), citing In re
Phelps Estate, 79 Misc. 2d 99, 359 N.Y.S.2d 614 (Sur. Ct. 1974); In re
Roth's Estate, 53 Misc. 2d 1066, 281 N.Y.S.2d 225 (Sur. Ct. 1967); In
re Sturges' Estate, 36 N.Y.S.2d 141 (Sur. Ct. 1942).
Example: Additional fees were denied for the preparation of annual tax
summary letters where the trustee had been paid full statutory
commissions. The Surrogate stated that the trustee is obligated to
furnish information to beneficiaries annually without additional
charge in sufficient detail to enable them to include information
about the trust's taxable income on their returns. Matter of Mollath,
NYLJ 5/4/88, 15:5 (Sur. Ct. Westchester County); see also Matter of
Shami, NYLJ 5/29/86, 16:3 (Sur. Ct. Westchester County).
§ 18:192. ----AGREEMENT OR WILL PROVISION, GENERALLY
Commissions in excess of (or otherwise different from) statutory rates
can be fixed by the will or by agreement of the interested parties.
Example: A will granted each executor (corporation and individual)
commissions on tangible personal property that would not have been
subject to commissions under the literal terms of SCPA 2307. The court
allowed the commissions on the ground that a testator's wishes and
freedom to decide how to compensate his fiduciaries should be
respected absent fraud or under influence. Will of Grant, 155 Misc. 2d
819, 600 N.Y.S.2d 423 (Sur. Ct. 1993).
§ 18:193. ----AGREEMENT OR PROVISION MAY AFFECT CORPORATE EXECUTOR
If a will makes provision for specific rates or amounts of commissions
for a corporate executor, the specified rates apply. Similarly, if a
corporate executor has agreed to accept specific rates or amounts of
commissions, or, if the will provides that a corporate executor is to
receive commissions as provided in its published schedule of fees in
effect when such commissions become payable, including a stipulated
minimum commission and asset base, the agreed upon rates and
commissions apply. The fee schedules and other provisions referred to
in the will need not be included in any formally executed or attested
instrument. SCPA 2307(1)(f).
Practice Tip: It is at least arguable that if a will provides for
commissions by adopting an executor's fee schedule, those commissions
are being determined outside the will by an instrument not subject to
the requirements of the EPTL. SCPA 2307(1)(f) was enacted to overturn
the precedent set in an appellate case in which this argument caused a
corporate fiduciary to be limited to the statutory commissions; its
more generous fee schedule was not allowed to govern because it was
not a testamentary instrument. Matter of Philip, 192 A.D.2d 610, 596
N.Y.S.2d 146 (2d Dep't 1993); but see Will of Grant, 155 Misc. 2d 819,
600 N.Y.S.2d 423 (Sur. Ct. 1993). Typically, published fee schedules
of corporate executors provide for rates in excess of those contained
in SCPA 2307. They either specify rates or provide a means for fixing
them from time to time. Corporate executors often request a minimum
commission applicable regardless of the value of the estate. And, most
importantly, they provide that assets not ordinarily subject to
commissions can be included in the commission base. The statute does
not give noncorporate fiduciaries permission to do this. It is
doubtful whether a will can incorporate a nontestamentary instrument
to fix the fee of an individual (noncorporate) executor, because SCPA
2307(1)(f) left the principles of Philip untouched as they respect an
individual executor. Indeed, the case appears to be very much alive
and the exception provided for in the statute is not read broadly. One
court ruled that the statute did not apply to incorporation by
reference of a corporate trustee's schedule of trust commission rates
in connection with inter vivos trusts. The subject schedules were not
set forth in the trust instruments, and the court held that Philip "is
still controlling with regard to trustee's commissions." Matter of
Jakobson, NYLJ 12/19/95, 31:1 (Sur. Ct. Nassau County).
§ 18:194. ----MAY BE BASED ON SERVICES BEYOND SCOPE OF APPOINTMENT
Additional compensation for executorial services, if not based on a
will, agreement or statute, is awarded only if the services are over
and beyond what is required in the usual performance of the fiduciary
duties.
When an executor performs services that are not properly part of the
executorial responsibility, he/she thus may be compensated for those
services. The services must be those not ordinarily required to be
performed by an executor. In re Tuttle's Estate, 4 N.Y.2d 159, 173
N.Y.S.2d 279, 149 N.E.2d 715, 65 A.L.R.2d 831 (1958).
Example: The fiduciary, a trustee who was a C.P.A., was not entitled
to extra commissions for doing uncomplicated bookkeeping, but he was
entitled to extra compensation for preparation of federal and state
fiduciary income tax returns, because those services were not
ordinarily required of an executor. Matter of Abel, NYLJ 10/23/92,
26:4 (Sur. Ct. Nassau County); see also Matter of Miller, 99 A.D.2d
780, 471 N.Y.S.2d 877 (2d Dep't 1984), related reference, 116 A.D.2d
580, 497 N.Y.S.2d 438 (2d Dep't 1986); cf. In re Badenhausen's Estate,
38 Misc. 2d 698, 237 N.Y.S.2d 928 (Sur. Ct. 1963).
§ 18:195. ------"EXTRAORDINARY" SERVICES
Another way of expressing the rule is that a fiduciary may receive
compensation for services in excess of statutory commissions if the
services are extraordinary and, again, beyond the scope of official
duties. Lent v. Howard, 89 N.Y. 169, 1882 WL 12673 (1882); In re
Ridosh's Estate, 5 A.D.2d 67, 169 N.Y.S.2d 54 (3d Dep't 1957), decree
modified, 7 A.D.2d 534, 185 N.Y.S.2d 80 (3d Dep't 1959); Russell v.
Hilton, 37 Misc. 642, 76 N.Y.S. 233 (Sup. Ct. 1902), aff'd as
modified, 80 A.D. 178, 80 N.Y.S. 563 (1st Dep't 1903), aff'd, 175 N.Y.
525, 67 N.E. 1089 (1903), reargument denied, 176 N.Y. 560, 68 N.E.
1124 (1903); see Matter of Piano, NYLJ 2/15/94, 27:6 (Sur. Ct. Nassau
County).
Generally, statutory commissions constitute the only compensation that
may be paid to a fiduciary for the performance of the duties of the
office. Additional compensation in excess of commissions cannot be
awarded except for services entirely beyond the scope of the duties of
the fiduciary's office. The payment of additional compensation for
extra services is discouraged by the Courts, and the right to such
compensation is subject to strict judicial scrutiny. Matter of
O'Neill, NYLJ 1/21/97, 32:1 (Sur. Ct. Queens County), citing In re
Froelich's Estate, 122 A.D. 440, 107 N.Y.S. 173 (2d Dep't 1907),
aff'd, 192 N.Y. 566, 85 N.E. 1110 (1908), and In re Popp, 123 A.D. 2,
107 N.Y.S. 277 (2d Dep't 1907) See § 18:119.
Statutory commissions constitute the only compensation allowed to a
fiduciary for performance of the duties of the office. Additional
compensation cannot be awarded out of the estate except for services
entirely beyond the scope of those duties. The payment of additional
compensation for extra services rendered by all executors and trustees
is discouraged by the courts, and the right to such compensation is
subjected to judicial scrutiny. Matter of Kelly, NYLJ 4/24/01, 25:1
(Sur. Ct. Nassau County).
A salary paid to executor for compensation as employee of the estate
corporation while serving as executor and receiving commissions is not
subject to surcharge as a matter of law. Matter of Reichbert, NYLJ
7/31/2002, 21:5 (Sur. Ct. Westchester County).
§ 18:196. ------PAY ALLOWED AS EMPLOYEE IN DECEDENT'S BUSINESS
An executor who is an employee in the decedent's business may be paid
a salary for working in the business. In re Ridosh's Estate, 5 A.D.2d
67, 169 N.Y.S.2d 54 (3d Dep't 1957), decree modified, 7 A.D.2d 534,
185 N.Y.S.2d 80 (3d Dep't 1959).
In general, however, extra compensation is denied simply for the
operation of a business. In re Rosenberg's Will, 251 N.Y. 115, 167
N.E. 190 (1929); In re Aboff's Will, 134 N.Y.S.2d 727 (Sur. Ct. 1954).
§ 18:197. ------GENERALLY DISCOURAGED
Notwithstanding the examples noted above, it is still generally true
that the payment of extra compensation to an executor is subject to
strict judicial scrutiny and is discouraged. In re Phelps Estate, 79
Misc. 2d 99, 359 N.Y.S.2d 614 (Sur. Ct. 1974).
§ 18:198. EFFECT OF FAILURE TO COMPLETE DUTIES OF OFFICE
Commissions under SCPA 2307 are allowed for complete performance by
the fiduciary of the office for which they are payable. Thus, if there
is an interruption in service, e.g., termination of office as
temporary administrator or preliminary executor and issuance of
complete letters to the same fiduciary, or death, resignation or
removal of the fiduciary, special rules apply.
§ 18:199. --COMMISSIONS FOR ONE CAPACITY
When successive or different letters are issued to the same person on
the estate of the same decedent, including a case where letters of
administration are issued to a former temporary administrator or
former preliminary executor, the fiduciary is entitled to total
compensation equal to that allowable for the full administration of
the estate by a fiduciary acting in a single capacity only.
Such compensation is allowable as the court directs. Paying
commissions are allowed only on amounts actually paid out for debts,
administration expenses and distributions. The fiduciary does not
receive a paying commission for turning assets over to himself or
herself in a successor capacity. SCPA 2307(5)(b); SCPA 1412(7).
§ 18:200. ----DIFFERENT SUCCESSOR FIDUCIARIES
SCPA 2307(5)(b) does not apply:
• when a successor to the temporary administrator is a different
person, In re Hurst's Estate, 111 A.D. 460, 97 N.Y.S. 697 (2d Dep't
1906).
• to a person who is both an ancillary and domiciliary executor, In re
Mills' Estate, 149 Misc. 389, 266 N.Y.S. 702 (Sur. Ct. 1932), aff'd,
239 A.D. 817, 263 N.Y.S. 982 (1st Dep't 1933), aff'd, 263 N.Y. 574,
189 N.E. 703 (1933).
• to a person who is temporary administrator in New York and executor
elsewhere, In re Joseloff's Estate, 15 Misc. 2d 324, 181 N.Y.S.2d 420
(Sur. Ct. 1958). In such cases, each separate fiduciary will be deemed
to be entitled to the benefit of the statute.
However, where successive or different letters are issued to the same
person on the estate of the same decedent, including where letters of
administration are issued to a person who has previously been
appointed a temporary administrator, such person is entitled to total
compensation equal to compensation allowed for a full administration
of the estate by a fiduciary acting in a single capacity only. SCPA(5)
(b).
§ 18:201. --DEATH, RESIGNATION, OR REMOVAL WITHOUT CAUSE
Commissions as such are not allowed to the estate of a deceased
personal representative, nor to one who has resigned or been removed
without cause.
In such cases, the court has the discretion to award reasonable
compensation based on the facts of each case, provided the amount
fixed does not exceed statutory limits for full commissions. In re
Baltz' Estate, 17 Misc. 2d 890, 187 N.Y.S.2d 423 (Sur. Ct. 1959). See
also Matter of Sinclair, N.Y.L.J. 7/23/99, 34:2 (Sur. Ct. Westchester
County), citing this section.
§ 18:202. ----EQUIVALENT OF FULL AMOUNT FOR SUBSTANTIAL COMPLETION
Where a deceased executor had substantially completed administration,
the executor's estate may be allowed the equivalent of full
commissions. In re Vigeant's Will, 29 Misc. 2d 569, 215 N.Y.S.2d 187
(Sur. Ct. 1961).
§ 18:203. ------IN OTHER CASES, EQUIVALENT OF REGULAR COMMISSIONS
In other cases of death, resignation or removal without cause, the
courts usually allow regular statutory commissions on all amounts
actually received and paid out by the fiduciary. In re McGrath's
Estate, 74 Misc. 2d 92, 344 N.Y.S.2d 688 (Sur. Ct. 1973); In re
Bourne's Will, 55 Misc. 2d 364, 285 N.Y.S.2d 182 (Sur. Ct. 1967); In
re Baltz' Estate, 17 Misc. 2d 890, 187 N.Y.S.2d 423 (Sur. Ct. 1959).
§ 18:204. ----FIDUCIARY OF DECEASED FIDUCIARY
In cases where the fiduciary of a deceased fiduciary renders services
to the estate, e.g., to complete administration, the court may allow
reasonable compensation.
The compensation allowed, with any commissions retained by the
deceased fiduciary or payable to her/his estate, cannot exceed a full
commission. SCPA 2207(6).
§ 18:205. DENIAL OR REDUCTION OF COMMISSIONS FOR WRONGDOING
Despite the apparently mandatory direction in the commission statute
that the court "must" allow commissions, the Surrogate may deny or
reduce commissions because of the misconduct of the fiduciary. In re
Rutledge, 162 N.Y. 31, 56 N.E. 511 (1900); In re Flood's Estate, 133
Misc. 72, 230 N.Y.S. 774 (Sur. Ct. 1928), decision supplemented, 133
Misc. 77, 230 N.Y.S. 781 (Sur. Ct. 1928); Matter of Ganns, NYLJ
1/23/85, 13:4 (Sur. Ct. Bronx County); see also 29 Carmody-Wait 2d §§
168:4, 168:5.
Commissions may be denied not only to an executor guilty of
wrongdoing, but also to any executor who passively observes the
actions of guilty coexecutors without taking action. Matter of
Rothko's Estate, 43 N.Y.2d 305, 401 N.Y.S.2d 449, 372 N.E.2d 291
(1977), on remand to, 95 Misc. 2d 492, 407 N.Y.S.2d 954 (Sur. Ct.
1978).
§ 18:206. ----GROUNDS FOR DENIAL OR REDUCTION UNDER DECISIONAL LAW
There are numerous grounds for which courts have denied or reduced
commissions, including the following:
• intentional dereliction of duty, Matter of Rothko's Estate, 43 N.Y.
2d 305, 401 N.Y.S.2d 449, 372 N.E.2d 291 (1977), on remand to, 95
Misc. 2d 492, 407 N.Y.S.2d 954 (Sur. Ct. 1978); Matter of Estate of
Donner, 82 N.Y.2d 574, 606 N.Y.S.2d 137, 626 N.E.2d 922 (1993); Matter
of Garcia, NYLJ 2/22/88, 15:3 (Sur. Ct. Bronx County); In re
Bloomingdale's Estate, 172 Misc. 218, 14 N.Y.S.2d 845 (Sur. Ct.
1939).
• failure to collect estate assets In re Clift's Estate, 135 Misc.
417, 239 N.Y.S. 375 (Sur. Ct. 1929), rev'd on other grounds, 231 A.D.
634, 248 N.Y.S. 473 (1st Dep't 1931), motion granted, 256 N.Y. 680,
177 N.E. 191 (1931).
• retention of funds in account that did not pay interest In re Taft's
Will, 144 Misc. 896, 259 N.Y.S. 887 (Sur. Ct. 1932), on reh'g, 145
Misc. 435, 260 N.Y.S. 294 (Sur. Ct. 1932); Matter of Smith's Estate,
91 A.D.2d 789, 458 N.Y.S.2d 72 (3d Dep't 1982).
• failure to account within a reasonable time Matter of Taft, supra;
In re Brush's Estates, 46 Misc. 2d 277, 259 N.Y.S.2d 390 (Sur. Ct.
1965).
• unreasonable delay in administration Matter of Kunstler, NYLJ
11/3/88, 29:6 (Sur. Ct. Westchester County).
• diversion of estate funds In re Penzato's Will, 200 Misc. 751, 106
N.Y.S.2d 74 (Sur. Ct. 1951).
• failure to keep records In re Welling's Estate, 26 Misc. 2d 182, 203
N.Y.S.2d 98 (Sur. Ct. 1960).
• fraud In re Limberg's Estate, 281 N.Y. 463, 24 N.E.2d 127 (1939).
• indifference to duties and chronic delay In re Israel's Estate, 64
Misc. 2d 1035, 315 N.Y.S.2d 453 (Sur. Ct. 1970); Matter of Schaich's
Estate, 55 A.D.2d 914, 391 N.Y.S.2d 135 (2d Dep't 1977). Matter of
Estate of Drier, 245 A.D.2d 787, 666 N.Y.S.2d 758 (3d Dep't 1997),
leave to appeal denied, 91 N.Y.2d 812, 674 N.Y.S.2d 278, 697 N.E.2d
179 (1998).
• neglect and maladministration In re Ducas' Estate, 109 N.Y.S.2d 17
(Sur. Ct. 1950), decree aff'd by, 279 A.D. 730, 108 N.Y.S.2d 1016 (1st
Dep't 1951). Matter of Palcic, NYLJ 5-18-01, 21:1 (Sur Court Richmond
County); Matter of Bozzi, NYLJ 3-31-99, 36:6 (Sur. Ct. Nassau
County).
• retention of stock through long period of decline Matter of Estate
of Janes, 90 N.Y.2d 41, 659 N.Y.S.2d 165, 681 N.E.2d 332 (1997),
reargument denied, 90 N.Y.2d 885, 661 N.Y.S.2d 827, 684 N.E.2d 277
(1997); In re Junkersfeld's Estate, 244 A.D. 260, 279 N.Y.S. 481 (2d
Dep't 1935), motion denied, 248 A.D. 886, 291 N.Y.S. 159 (2d Dep't
1936).
• deliberate decision to delay filing accounting and failure to make
significant voluntary advance distributions Matter of Rosaf, NYLJ
7/15/2003, 27:6 (Sur. Ct. Nassau County).
• extensive delay in selling real properties that constituted the
estate In re Quattrocchi, 293 A.D.2d 481, 739 N.Y.S.2d 642 (2d Dep't
2002).
§ 18:207. --GROUNDS FOR DENIAL OR REDUCTION
Although rare, certain statutes and rules authorize reduction or
denial of commissions. These include:
• SCPA 711, 719, 720 -- These statutes detail the grounds for and
procedures to effect suspension, modification or revocation of
letters. In appropriate cases, commission will be affected.
• SCPA 2307-a -- The court will reduce commissions of an attorney/
fiduciary in cases where the required disclosure as to dual
compensation was not made.
• Uniform Rule § 207.20(d) -- In the event of failure by a fiduciary
or her/his/its attorney to file the inventory required by this rule,
the court may disallow commissions or legal fees. 22 NYCRR §
207.20(d).
• Uniform Rule § 207.42 -- The court may consider failure to file a
Report of Estate Not Fully Distributed in fixing fees or allowing
commissions. 22 NYCRR § 207.42.
§ 18:207.5. ----DECISIONS ON FAILURE TO COMPLY WITH SCPA 2307-A(2)
A reduction in commissions to one-half the statutory amount is
mandated under SCPA 2307-a(5) for failure to comply with the
acknowledgment required by SCPA 2307-a(2). Courts have entertained
arguments that the circumstances of particular cases should warrant
exceptions, but few exceptions have been allowed. The arguments that
have succeeded generally involved situations in which the court
concluded that the need for the acknowledgment could be waived or the
beneficiaries have consented. See Marcus, below, and cases in §
18:140.5.
Commissions were limited to one-half the statutory rate for an estate
administered under a 1979 will in which the primary executor had
predeceased the testator. The attorney/executor said it would have
been a "monumental task" to review files after enactment of SCPA 2307-
a to identify wills in which he had been nominated so that any
appropriate disclosures could be made. The court found that this
"economic decision" by the attorney was not an adequate basis to waive
the disclosure requirement. Matter of Estate of DeMontagut, 178 Misc.
2d 521, 679 N.Y.S.2d 273 (Sur. Ct. 1998).
In an estate administered under a will prepared after the enactment of
SCPA 2037-a, full commissions were denied to an attorney/drafter/
executor who said she had not known about the requirement, but argued
that it should not apply because as executor she had retained separate
counsel not affiliated with her and therefore she was not rendering
legal services. The surrogate held that the attorney's statement
"obviously amounts to an attempted circumvention of the statute and
the potential abuses it was designed to address." In re Estate of
McDonnell, 179 Misc. 2d 286, 682 N.Y.S.2d 569 (Sur. Ct. 1998), decree
aff'd by, 265 A.D.2d 557, 698 N.Y.S.2d 493 (2d Dep't 1999); citing
this section, Harris 5th, New York Estate Probate Admin & Litigation;
Carp and Schlesinger, Disclosure Requirements for Attorney Serving as
Executor, NYLJ 9/14/95, 1:1; and Rubenstein, Compensation of Attorney/
Executors, NYLJ 4/29/96, 9:1.
In another case, however, the use of separate counsel was found
acceptable when a will prepared by an attorney/fiduciary/draftsman/
beneficiary was admitted to probate, although the court said it would
hold in abeyance a final determination on whether the requirements of
SCPA 2307-a should be excused pending either the filing of an
accounting or the submission of the necessary receipt and releases.
Matter of Mullen, NYLJ 3/8/99, 32:1 (Sur. Ct. Suffolk County). Without
describing the factual information submitted in support of the
proceeding, the court in Mullen said it was satisfied that the
instrument was a product of the decedent's wishes. It found no
indication of overreaching or undue influence requiring that the
bequest to the attorney/draftsman be disturbed.
Beneficiaries of an estate may consent to an award of full commissions
by executing affidavits waiving the provisions of SCPA 2307-a(5).
Matter of Marcus, NYLJ 6/23/99, 33:3 (Sur. Ct. Nassau County). In
Marcus, the court said it would allow non-compliance with the statute
if all interested parties consented. See also § 18:140.5.
Criteria are evolving for determining whether to allow an attorney/
draftsman to receive full commissions. Estate of Powers, NYLJ 6/4/99,
34:4 (Sur. Ct. Westchester County). In Powers, Surrogate Emanuelli
said commissions could be awarded by the courts if: (1) the testator
has acknowledged in a writing substantively conforming to SCPA 2307-
a(2), or (2) the attorney can show good cause why a disclosure could
not be obtained. In Powers, the surrogate denied full commissions when
correspondence with the decedent failed to demonstrate that the
attorney had disclosed that he would be entitled to both commissions
and attorneys fees, and that other persons could serve as fiduciary.
See also §§ 1:81, 18:21, 18:140 and 18:140.5.
Examples:
• As proof that the decedent understood the financial ramifications of
appointing him as petitioner, the petitioner submitted a letter from
the decedent that did not set forth her acknowledgment that he had
disclosed he would be entitled to both counsel fees and executor's
fees, nor did it state that other eligible adults could serve as
fiduciary. The court found that none of the statutory requirements
permitting full executor's commissions had been established, that the
letter did not "substantially comply" with the SCPA 2307-a disclosure
requirement, and that "good cause" was not shown to excuse the absence
of the acknowledgment. No waiver was granted. The court approved
$1,625 in commissions and $4,300 in legal fees on a estate with
approximately $60,000 in assets. Matter of Powers, N.Y.L.J. 6/4/99,
34:4 (Sur. Ct. Westchester County).
• Attorney/fiduciary commissions were reduced to one-half where the
court found that a codicil executed February 10, 1996, to a will
originally executed on January 20, 1992, had the effect of
republishing the will and placing it within the post-January 1, 1996,
period covered by SCPA 2307- a. Matter of Castelnuovo, N.Y.L.J.
6/23/99, 33:3 (Sur. Ct. Nassau County).
• A waiver of SCPA 2307-a requirements was granted when the three sole
distributees executed affidavits waiving the statutory provisions and
consenting that the nominated executor be allowed full executor's
commissions and any appropriate legal fees. Matter of Marcus, N.Y.L.J.
6/23/99, 33:3 (Sur. Ct. Nassau County).
§ 18:208. --COMMISSIONS MAY BE AWARDED DESPITE FIDUCIARY FAILURES
The cases indicate that if misconduct or maladministration exists, the
Surrogate may refuse or reduce commissions but will not necessarily do
so.
In general, a commission is likely to be granted notwithstanding an
objection when the court finds that the good faith of the fiduciary
was demonstrated, and there was no conduct evincing deliberate wrong,
extreme carelessness or neglect of duty. See, e.g., In re Kramer's
Estate, 78 Misc. 2d 662, 356 N.Y.S.2d 984 (Sur. Ct. 1974); see also
Matter of Piano, NYLJ 2/15/94, 27:6 (Sur. Ct. Nassau County).
§ 18:209. ----COMMISSIONS GRANTED TO SATISFY SURCHARGES
In some cases commissions have been granted to a delinquent fiduciary,
but only so that they may be applied against a surcharge. See, e.g.,
In re Feinberg's Estate, 82 N.Y.S.2d 879 (Sur. Ct. 1948), order aff'd,
275 A.D. 925, 90 N.Y.S.2d 690 (1st Dep't 1949), reargument denied, 275
A.D. 1035, 92 N.Y.S.2d 308 (1st Dep't 1949); In re Henke's Estate, 39
Misc. 2d 705, 241 N.Y.S.2d 788 (Sur. Ct. 1963); In re Fewer's Estate,
177 Misc. 788, 31 N.Y.S.2d 810 (Sur. Ct. 1941).